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 at a digital property convention at Duke College on Jan. 21, Johnson proposed a variety of amendments that may allow the CFTC to conduct “efficient due diligence” on companies, together with crypto companies, that need to purchase CFTC-regulated entities.
The commissioner additionally desires expanded powers for the commodities regulator to boost buyer safety, stop liquidity crises and mitigate conflicts of curiosity.
One among these potential adjustments could be to provide the commodities regulator new powers to analyze any enterprise that wishes to buy 10% or extra of a CFTC-registered trade or clearinghouse.
Johnson highlighted the instance of derivatives trade LedgerX, which turned a subsidiary of FTX on Aug. 31, 2021, and is now wrapped up within the crypto trade’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 trade goes via 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 danger administration procedures, pointing to the contagion that has continued to unfold after main crypto firm collapses, reminiscent of FTX:
“Interconnectedness amongst crypto-firms amplified by fragile or non-existent danger administration, company governance failures, and conflicts of pursuits at particular person companies fuels the chance of crises.”
The commissioner argued that present “frameworks reminiscent of anti-trust legislation and regulation could show too restricted in scope” in more and more numerous markets, and as a substitute advocated for “tailor-made and efficient governance, and danger administration controls.”