Commodity Futures Trading Commission (CFTC) chief has suggested more stringent rules for retail investors and millionaires.
According to CFTC commissioner Christy Goldsmith Romero, “the average crypto investor should get different protection from professional and high-net-worth individuals.” The remarks followed a conference in Singapore where the commissioner said the definition of a ‘retail investor’ under the current regime is “too broad, covering everything from average households to millionaires and hedge funds.”
In Christy’s opinion, the CFTC should have two classes of retail customers so that extra layers of protection can be focused on each group. In her words:
“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.”
Commissioner Christy also clarified that she was not looking to block the average investor’s access to the markets entirely but would seek the public’s input regarding the kinds of ‘additional protections’ these users should get. As part of the ideas at her fingertips, Christy proposed “easy-to-understand disclosures and limitations on leverage.”
However, Christy was keen on the shift towards users having direct access to the markets through trading apps. In this regard, she emphasized that a broker traditionally adds an extra layer of protection for the customer. An excerpt from her remarks reads:
“I caution against market structures that remove a broker’s duties to retail customers without fully assessing what will be lost.”
CFTC Calls for Tighter Scrutiny Of Crypto Exchanges
Commissioner Christy Romero also advocated for tighter scrutiny of cryptocurrency exchanges, encouraging her agency, the CFTC, to invoke “heightened supervision” and disclosing that she had been pushing for such a move internally for months.
In her remarks, Christy appeared to be criticizing the CFTC and blaming it for the collapse of FTX, citing the commission’s inaction.
“Despite my multiple requests, the CFTC has not implemented heightened supervision. My proposal should take on urgency in light of recent events.”
The Commodity Futures Trading Commission (CFTC), which oversees the crypto industry alongside the Securities and Exchange Commission (SEC), stands among the agencies that have been attacked in the wake of the collapse of the crypto exchange FTX. According to the critics, regulators should have done more to prevent the disaster from happening in the first place.
At an event at Princeton University, CFTC chair Rostin Behnam proposed more regulation. It blamed lawmakers for not acting, absolving his agency from any role in the FTX saga, citing limited resources, and urging lawmakers and policymakers to move as fast as possible.
Noteworthy, former CEO of FTX Sam Bankman-Fried (aka SBF) was also scheduled to speak during the event; instead, his time slot was replaced with a panel titled “The Demise of FTX and Other Crypto Entities: Lessons Learned.”
For his part, however, SBF seems to support Behnam’s stance as himself, during a recent interview, said, “Regulation could have protected FTX from collapse.” In the interview, SBF said, “I wish I had more reporting and transparency to outside parties.”
Behnam insisted on the dangers of an unregulated crypto market and the need for legislation. However, his sentiments do not overshadow concerns over the “tens of thousands” of hours, according to disclosures by SBF, that his fallen crypto firm spent with the commission. According to SBF, FTX and the CFTC spent much time discussing a controversial proposal to allow users to make trades with money borrowed directly through FTX rather than a broker.
The CFTC chair started the month with an appearance in front of the Senate Agriculture Committee. This was part of a hearing to determine whether action by Congress is needed in the wake of the FTX catastrophe.
