Commodity Futures Trading Commission officials have called for regulations to regulate the cryptocurrency industry and stated that their organization must take warnings about cryptocurrencies seriously.
Over the past week, Democratic CFTC commissioners Christy Goldsmith Romero and Kristin Johnson have pushed the organization to release guidelines or rules to handle conflicts of interest in cryptocurrency and safeguard consumers.
FTX, Binance, Celsius, and Voyager’s failures highlight the necessity of separating and safeguarding consumer deposits in order to protect consumers, Johnson stated on Monday at the Federal Reserve Bank of Atlanta. Johnson stated that the CFTC should thus “immediately develop regulation” around asset custody and that regulations pertaining to cryptocurrencies may be released in the coming weeks.
“There is an immediate path for the CFTC to reinforce the protection of customer assets with segregation or separation of customer property rules,” Johnson stated to The Block. “These are rules that simply say you cannot commingle house money and the proprietary funds of your customers.”
For instance, LedgerX, a cryptocurrency derivatives platform that was once owned by FTX, is subject to CFTC regulation and reports to the agency regarding the segregation of client funds. One of the few components of FTX that was thought to be still liquid after it collapsed was LedgerX.
Congress has been asked to provide clarification on how to handle assets in the spot market by CFTC Chair Rostin Behnam. At the moment, the agency has regulatory authority only in terms of fraud and manipulation and enforcement authority when it comes to of derivatives agreements rather than open markets.
“Others have taken different perspectives about whether or not there is a lack of clarity,” Johnson stated. “I won’t comment on that, I’ll simply say for us in the context of certain assets in the spot market, it’s not clear.”
Possible rulemaking soon to come
Johnson also mentioned in her speech that in the coming weeks, the CFTC will implement “significant first steps introducing market structure reforms” in the voluntary carbon market and cryptocurrency markets.
“These critical reforms will establish customer property protections in non-intermediated clearing markets (a reform that is increasingly important as market participants seek to adopt this approach to offer leveraged, crypto-products to retail investors) and long-awaited guidance on voluntary carbon markets,” Johnson stated on Monday.
In a speech on Thursday at the Financial Services Conference of the Consumer Federation of America, Commissioner Romero repeated Johnson’s demand for regulation.
After the CFTC published a request for comments regarding altering a more conventional market structure that involves dividing up entities like an exchange or broker to a structure that would instead combine those, Romero noted that numerous commenters cautioned about the possible dangers.
“The CFTC should take these warnings seriously and issue guidance or rules related to this market structure, as well as coordinate with other regulators,” said the commissioner.