Commodity Futures Buying and selling Fee (CFTC) Commissioner Kristin Johnson has urged Congress to undertake laws that “closes the present hole within the oversight of crypto spot markets.”
Throughout a speech on the digital property convention at Duke College on Jan. 21, Johnson suggestd quite a lot of amendments that will allow the CFTC to conduct “efficient due diligence” on companies, together with crypto companies, that wish to purchase CFTC-regulated entities.
The Commissioner additionally desires expanded powers for the commodities regulator to boost buyer safety, forestall liquidity crises, and mitigate conflicts of curiosity.
One in every of these potential modifications can be to present the commodities regulator new powers to analyze any enterprise that desires to buy 10% or extra of a CFTC-registered change or clearinghouse.
Johnson highlighted the instance of derivatives change LedgerX, which grew to become a subsidiary of FTX on Aug. 31, 2021 — and is now wrapped up within the crypto change’s collapse.
The Commissioner notes that the regulator at the moment has no means to conduct due diligence on whichever agency buys the enterprise, and is merely a passenger because the change goes by way of the gross sales course of.
Johnson additionally addressed co-mingling of buyer funds, which was one of many extra egregious accusations levied at FTX following its collapse — calling for regulation that formalizes the duty of crypto companies to segregate buyer funds.
Associated: FTX VCs liable to ‘critical questions’ round due diligence — CFTC Commissioner
One other hole identified by Johnson was in threat administration procedures, pointing to the contagion that has continued to unfold after main crypto firm collapses, akin to FTX:
“Interconnectedness amongst crypto-firms amplified by fragile or non-existent threat administration, company governance failures, and conflicts of pursuits at particular person companies fuels the probability of crises.”
The Commissioner instructed that present “frameworks akin to anti-trust regulation and regulation might show too restricted in scope” in more and more numerous markets and is advocating for “tailor-made and efficient governance, and threat administration controls.”
