New legislation needed to close gap in oversight of crypto spot markets, says CFTC Commissioner Johnson.
Commodity Futures Trading Commission Commissioner Kristin Johnson has urged Congress to adopt legislation that “closes the current gap in the oversight of crypto spot markets.”a number of amendments that would enable the CFTC to conduct “effective due diligence” on businesses, including crypto firms, that want to acquire CFTC-regulated entities.
The commissioner also wants expanded powers for the commodities regulator to enhance customer protection, prevent liquidity crises and mitigate conflicts of interest.One of these potential changes would be to give the commodities regulator new powers to investigate any business that wants to purchase 10% or more of a CFTC-registered exchange or clearinghouse.
Johnson highlighted the example of derivatives exchange LedgerX, which became a subsidiary of FTX on Aug. 31, 2021, and is nowThe commissioner notes that the regulator currently has no ability to conduct due diligence on whichever firm buys the business and is merely a passenger as the exchange goes through the sales process.
“Interconnectedness among crypto-firms amplified by fragile or non-existent risk management, corporate governance failures, and conflicts of interests at individual firms fuels the likelihood of crises.” The commissioner argued that current “frameworks such as anti-trust law and regulation may prove too limited in scope” in increasingly diverse markets, and instead advocated for “tailored and effective governance, and risk management controls.”
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