Jake Chervinsky, who serves as Executive Vice President and Head of Policy at Blockchain Association, Advisor at Variant Fund, and Board Member at DeFi Education Fund, recently posted a thread on Twitter in which he outlined the reasons why FTX.COM cannot be regulated in the United States.
Chervinsky began by stating that FTX is a non-US exchange with its headquarters located in the Bahamas. It was intentionally designed to have no consumers in the United States so that it would not be governed by US law in any way. It is impossible for Congress to create a legislation that would prohibit the collapse of an offshore company.
“I don’t think these facts are well understood in DC,” said the lawyer. He went on to say that SBF had carried out its lobbying activities under the guise of FTXUS, which was a completely other US company that had hired his DC policy team and was (at least for the time being) financially stable.
Chervinsky expresses his skepticism that Sam Bankman-Fried spent a significant amount of effort clarifying the distinction to officials. This comes after it was reported that the White House as well as United States authorities were keeping a close eye on the issue with FTX in an effort to find a method to safeguard investors in the United States.
US leaders have seen the devastation wrought by FTX and are understandably eager to do something, anything, to assist and prevent a repeat of what happened. However, penalizing US companies won’t solve the problem. Instead of decreasing activity at regulated onshore venues, it would increase it in uncontrolled offshore venues like FTX.
Chervinsky said: “Importantly, US firms are showing their maturity and resilience this week. Policymakers should be proud.”
FTX reaffirms, without a question, the need of giving new legislation for custodial platforms more thought, but it will take some time to get such regulations just right.
