A commissioner from the Commodity Futures Trading Commission (CFTC) has known as on Congress to cease permitting cryptocurrency exchanges to “self-certify” and checklist tokens with out oversight.
CFTC commissioner Christy Goldsmith Romero advised an viewers at a Jan. 18 University of Pennsylvania occasion targeted on FTX that the present course of wasn’t enough to make sure correct oversight, saying:
“I urge Congress to avoid permitting newly-regulated crypto exchanges to self-certify products for listing, under the current process that limits CFTC oversight.”
“It is critical to institute guardrails against regulatory arbitrage, and that includes prohibiting the use of the self-certification process,” she added.
Currently, crypto exchanges can “self-certify” their product’s security earlier than itemizing except the CFTC blocks the itemizing inside 24 hours.
She said this process used to list products such as crypto futures isn’t adequate for that type of asset.
Goldsmith Romero added crypto businesses looking to issue tokens could use the CFTC’s crypto regulatory framework to circumvent registration with the Securities and Exchange Commission (SEC).
Proposals to give the CFTC an increased role in oversight of the crypto industry were introduced to Congress in 2022.
Crypto ‘gatekeepers’ need to ‘step up’
During her speech, the commissioner also called on lawyers, compliance professionals, celebrities, venture capital firms and pension fund investors to conduct better due diligence on crypto firms.
“Gatekeepers themselves also need to step up, and call for compliance, controls, and other governance, without allowing the promise of riches and the company’s marketing pitch to silence their objections to obvious deficiencies.”
Remarking on FTX, which declared bankruptcy in November 2022 after mishandling and misplacing customer funds, Goldsmith Romero said these entities “should have seriously questioned the operational environment at FTX in the lead-up to its meltdown.”
“If the digital asset industry wants to regain any amount of public trust, it has some work to do,” she added.
Some crypto industry observers have continued to argue that the circumstances behind FTX’s collapse should not be pegged to the digital asset space or a lack of regulation.
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SEBA Hong Kong’s managing director Ludovic Shum told Cointelegraph during an interview this week that the fall of FTX could have easily happened in any other industry.
“At the tip of the day, it goes again to the belief concerning the checks and balances […] It was simply unlucky that it occurred on this fast-growing space of the crypto world the place it might have simply occurred to banks, securities, homes, asset managers,” said Shum.
Meanwhile, Lachlan Feeney, Founder and CEO of blockchain development agency Labrys said the industry needs more oversight, not necessarily regulation to prevent another disaster.
“The FTX scandal didn’t occur due to a scarcity of regulation. FTX operated [allegedly] illegally; disregarding the prevailing laws fairly than capitalizing on an absence of regulation.”
“There ought to in all probability be extra oversight to cease unscrupulous gamers and exercise earlier than conditions escalate, however we don’t want lots of recent regulation and pink tape that deters innovation. We want readability on the prevailing laws,” he stated in a press release to Cointelegraph.
