U.S. government could block Binance-FTX deal on national security grounds - Cowen

As investors are still digesting the consequences of yesterday’s events in the cryptocurrency market, some analysts are warning that the drama likely won’t end anytime soon. Cowen analyst Jaret Seiberg said investors should watch the situation “closely” as the U.S. government may intervene to block the deal.

“We already are hearing concerns in Washington that the Committee on Foreign Investment in the United States [CFIUS] could seek to review it on national security grounds with a focus on what it means for FTX's separate U.S. unit,” Seiberg said in a client note.

The analyst believes the ongoing drama is hurting the entire cryptocurrency market from the U.S. regulation point of view. The Congress may host more hearings next year with the focus on whether global crypto exchanges are threatening financial stability in the U.S.

“It does not matter that these are global exchanges. It feeds the narrative that crypto companies are taking excessive risks with no oversight,” Seiberg stated.

The biggest winner could be the U.S. Securities and Exchange Commission (SEC) given its Chair Gary Gensler has been pushing to increase the crypto regulation. It also makes it hard for the SEC to approve the spot Bitcoin ETF.

“We expect he will now point to the troubles at FTX to further prove his point. That means treating most tokens like securities and requiring trading platforms to register as exchanges.”

“We already had doubts if Congress next year could pass comprehensive crypto legislation. This controversy changes our view. We believe it is now even more challenging to pass bills like Lummis/Gillibrand. Yet it could open the door for bills that take a more onerous approach to regulation,” the Cowen analyst concluded.

At 04:15 EST (09:15 GMT), Bitcoin (BTC) price is down just over 2%.

By Senad Karaahmetovic

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