Particularly, there is no government regulatory control of the spot crypto market at the moment. The CFTC’s jurisdiction only extends to suspected fraud in the underlying commodities markets and derivatives platforms. The SEC and CFTC jointly— they quarrel over jurisdiction — regulate the Crypto sector as of now.
Commissioner Kristin Johnson said on Thursday that the US Commodity Futures Trading Commission (CFTC) should begin using its existing authority to strengthen requirements for safeguarding customers’ assets while it waits for legislation to establish its place in crypto oversight.
A coincident or not, on the same day, CFTC chair Rostin Behnam appeared before the Senate Agriculture Committee where he implied that existing laws are not enough and that due to such restrictions, his organization could only access the affiliate that was formerly known as LedgerX, collapsed crypto exchange FTX’s derivatives trading arm.
While stating to lawmakers that he was unable to comment on any potential enforcement measures against FTX, Behnam added that “enforcement cases take time, but we’re moving expeditiously.” His enforcement staff is “laser-focused on this right now,” he added.
Coming back to Johnson, she referred to her remarks as a “call to action” against the theft of digital assets. Johnson cited the drama in the cryptocurrency business caused by the collapse of the FTX exchange and called for the CFTC to use its existing jurisdiction to further reduce possible risks to all consumer assets. She is worried about spillovers of the aftershocks of such incidents to the traditional financial system.
According to Johnson, the ecosystem for digital assets has been “roiled” by liquidity issues and a lack of responsible governance at well-known cryptocurrency exchanges and facilitators .
Johnson made the remarks as the CFTC fined another member of the cryptocurrency sector, Jeremy Spence, also known as “Coin Signals,” who was found guilty of scamming investors out of $5 million and sentenced to 42 months in jail earlier this year.
However, any agency rule-making will only apply to businesses that are already subject to regulation or that are applying for registration.
Johnson also anticipated a wave of crypto mergers and acquisitions in her statement.
“As we unravel the tangled web of interconnected financial transactions and relationships among cryptocurrency trading platforms facing liquidity crises, we should anticipate a season of mergers, acquisitions, and consolidation.”
She concluded by stating that the CFTC should look into ways to make sure that these regulations also apply to any alternative market structures that may be considered. According to her, these initiatives would eliminate a regulatory gap and guarantee that a parallel standard is applied to the segregation of client assets or property that is kept in trust in all circumstances.
She also expresses optimism that Congress will adopt a whole-of-government strategy, as directed by an executive order signed by President Joe Biden, to ensure that enforcement bodies like CFTC themselves, could prevent activities that misuse regulatory loopholes or exploit the regulatory gap that currently restricts their visibility when it comes to the crypto industry and “stymies” their ability to adopt the rules necessary to carry out their mission in these markets. According to her, the key is to safeguard consumers, uphold market integrity, and promote regulated, equitable, and open markets.