CFTC's Johnson urges Congress for expanded powers in crypto oversight

Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson has urged Congress to follow authorities that "closes the existent spread successful the oversight of crypto spot markets."

During a code astatine the integer assets league astatine Duke University connected Jan. 21, Johnson proposed a fig of amendments that would alteration the CFTC to behaviour “effective owed diligence” connected businesses, including crypto firms, that privation to get CFTC-regulated entities.

The Commissioner besides wants expanded powers for the commodities regulator to heighten lawsuit protection, forestall liquidity crises, and mitigate conflicts of interest.

CFTC Commissioner Kristin Johnson. Source: YouTube

One of these imaginable changes would beryllium to springiness the commodities regulator caller powers to analyse immoderate concern that wants to acquisition 10% oregon much of a CFTC-registered speech oregon clearinghouse.

Johnson highlighted the illustration of derivatives speech LedgerX, which became a subsidiary of FTX connected Aug. 31, 2021 — and is present wrapped up successful the crypto exchange’s collapse.

The Commissioner notes that the regulator presently has nary quality to behaviour owed diligence connected whichever steadfast buys the business, and is simply a rider arsenic the speech goes done the income process.

Johnson besides addressed co-mingling of lawsuit funds, which was 1 of the much egregious accusations levied astatine FTX pursuing its illness — calling for regularisation that formalizes the work of crypto firms to segregate lawsuit funds.

Related: FTX VCs liable to ‘serious questions’ astir owed diligence — CFTC Commissioner

Another spread pointed retired by Johnson was successful hazard absorption procedures, pointing to the contagion that has continued to dispersed aft large crypto institution collapses, specified arsenic FTX: 

“Interconnectedness among crypto-firms amplified by fragile oregon non-existent hazard management, firm governance failures, and conflicts of interests astatine idiosyncratic firms fuels the likelihood of crises.”

The Commissioner suggested that existent “frameworks specified arsenic anti-trust instrumentality and regularisation whitethorn beryllium excessively constricted successful scope” successful progressively divers markets and is advocating for “tailored and effectual governance, and hazard absorption controls.”