CFTC’s Johnson urges Congress to expand commission’s crypto oversight powers

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 belongings convention at Duke College on Jan. 21, Johnson proposed a lot of amendments that may allow the CFTC to conduct “efficient due diligence” on companies, together with crypto corporations, 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.

CFTC Commissioner Kristin Johnson. Supply: YouTube

One among these potential adjustments could be to provide the commodities regulator new powers to research any enterprise that desires to buy 10% or extra of a CFTC-registered trade or clearinghouse.

Johnson highlighted the instance of derivatives trade LedgerX, which grew to become 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 presently has no skill to conduct due diligence on whichever agency buys the enterprise and is merely a passenger because the trade goes by means 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 corporations 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, similar to FTX: 

“Interconnectedness amongst crypto-firms amplified by fragile or non-existent threat administration, company governance failures, and conflicts of pursuits at particular person corporations fuels the probability of crises.”

The commissioner argued that present “frameworks similar to anti-trust regulation and regulation might show too restricted in scope” in more and more various markets, and as a substitute advocated for “tailor-made and efficient governance, and threat administration controls.”

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