In a Tuesday Senate Banking Committee hearing, members of Congress called for further regulation to protect investors and the U.S. financial system from failures related to the cryptocurrency industry.

In opening remarks, Committee Chair Sen. Sherrod Brown (D-OH) lambasted industry firms and asked for the Committee to find common ground in order to pass cohesive legislation for crypto.

"These crypto catastrophes have exposed what many of us already knew," Brown said. "Digital assets, cryptocurrencies, stablecoins, investment tokens are speculative products run by reckless companies ... that put Americans' hard earned money at risk."

Crypto's collapse last year put regulators and other industry firms on edge. Now, these parties are increasingly at odds.

A wave of actions from U.S. regulators in recent weeks has signaled that state and federal agencies are ramping up enforcement efforts. Already in 2023, the Securities and Exchange Commission has levied four different charges against crypto firms.

Industry insiders, on the other hand, repeatedly have argued that U.S. regulatory jurisdiction over cryptocurrencies and other digital assets remains murky, advocating a preference to be overseen by the Commodities and Futures Trading Commission (CFTC).

In the last week, both Paxos and Coinbase have said they will defend their businesses in court against the SEC, if needed.

Republican members of the Committee, Sens. Tim Scott (R-SC) and Thom Tillis (R-NC), placed blame on the SEC itself. Scott said the agency failed to take "meaningful preemptive action" before crypto's unwinding through the second half of last year.

"If they have the tools they need. Were they just asleep at the wheel? ... Why aren't they here to tell us what they need? We'd be happy to have chairman Gensler testify sooner, much sooner than later," Scott said.

Sen. Elizabeth Warren (D-MA) also drove home the illicit use of crypto, pointing to the more than $20 billion in illicit flows moved through the crypto market last year.

She took particular issue with decentralized finance, or DeFi, offerings, which are often more complicated to regulate than centralized firms.

"They want a giant loophole written into the law so they can launder money whenever a drug lord or a terrorist pays them to do so," Warren said.

"The rules should be simple. The same kind of transaction, same kind of risk needs the same kind of rules" Warren said, calling for more robust anti-money laundering requirements. Warren plans to reintroduce a bill with Sen. Roger Marshall (R-KS) to crack down on crypto money laundering.