Christy Goldsmith Romero, the commissioner of the Commodity Futures Trading Commission (CFTC), stated in remarks prepared for a conference in Singapore that the current administration’s definition of a “retail investor” is too broad, comprising everyone from common households to millionaires and hedge funds.
Romero argues that an average cryptocurrency investor should be provided different forms of safety from professional and high-net-worth persons. Romero suggested that the CFTC should divide retail customers into two groups in order to provide each category with additional protections.
She went on to say that while she was not aiming to completely bar the average investor from access to the markets, she would be asking public opinion on what further protections should be provided to them. Simple disclosures and leverage restrictions are some initial possibilities.
“What is safe and affordable for a millionaire or hedge fund is likely to be very different for regular people who want access to markets but cannot afford to lose everything,”
She disagreed with the trend of allowing individuals direct access to the markets through trading applications, arguing that a broker typically provides an additional level of security for the client.
Romero added that she had been advocating for such a step internally for months when she also demanded that her agency employ “heightened surveillance” of cryptocurrency exchanges.
“I caution against market structures that remove a broker’s duties to retail customers without a full assessment of what will be lost”
She appeared to criticize the CFTC and link its inaction to the failure of the cryptocurrency exchange FTX. She asserted that the CFTC ignored numerous requests for increased supervision and that this was the reason for FTX’s failure.
One of the organisations that have come under fire in the wake of FTX’s collapse is the CFTC, which oversees the cryptocurrency industry alongside the Securities and Exchange Commission (SEC). Detractors claim that regulators could have done more to avert the catastrophe.
While defending the position of his agency in the FTX controversy, Rostin Behnam, chair of the CFTC, called for increased regulation and blamed the lawmakers for the lack of proper laws for the sector.
Ironically, he was filling in for Sam Bankman-Fried, who was supposed to be the keynote speaker at the event at Princeton University.
Behnam is scheduled to testify before the Senate Agriculture Committee today as part of a hearing on whether or not the FTX situation calls for government action.
Prior to FTX’s collapse last month, the CFTC chairman had publicly given consideration to FTX’s plan to offer direct clearing of crypto futures. After the collapse, the application was withdrawn. Rostin held a roundtable where the former CEO of FTX Sam Bankman-Fried presented his proposal for crypto futures.
The Digital Commodities Consumer Protection Act, a bill backed by Bankman-Fried, was defended by the Agriculture Committee on the same day it released the announcement of the hearing. Industry participants are worried that the measure could hurt decentralised finance (DeFi) initiatives. The committee claimed that regulated companies covered by the FTX umbrella were able to withstand the collapse of the exchange.
On the other hand, Lisa Cook, the governor of the Federal Reserve System thinks that new regulations are unnecessary. She cites the example of an undamaged banking sector following the collapse of FTX as evidence that the failure of multiple prominent digital assets platforms has not had an influence on the larger financial system. She also uses it as evidence that the markets for crypto and stablecoins, among other digital asset sectors, have capabilities to prevent spillover from such problems.