This led to the eventual collapse of the project, and many customers could not withdraw their deposits. Similarly, the effect of FTX Collapse continues to spread across the entire cryptocurrency ecosystem.
On this premise, industry players want Congress to allow the CFTC to regulate the crypto industry. That is, congress should modify the duties of the Commodity Futures Trading Commission (CFTC).
The Commodity Futures Trading Commission (CFTC) is a regulatory body in the US. Its existing duty is to regulate commodities and derivatives trading. Similarly, the CFTC has taken the role of regulating crypto alongside the Securities and Exchange Commission (SEC).
However, industry players are worried about the "shaky" jurisdiction of both regulatory bodies. That is, no legislation designates both bodies as enforcement agencies. Similarly, no laws or legislation classifies cryptocurrency as a security or derivative.
There is, therefore, the need for Congress to brace up and pass the Digital Commodities Consumer Protection Act. The act will confer power on CFTC to regulate the crypto industry.
Experts say the CFTC could have prevented the FTX bankruptcy and collapse if the act had been passed. They can prevent FTX from taking root or speculating for the future.
Charles Gasparino, however, tweeted that the agency will be scrutinized amidst the FTX implosion. This corroborates the assertion that key individuals of the CFTC were involved in the dealings that led to the collapse.
The major events that led to the FTX collapse were the dealings between the FTX founder and Alameda Research.
The FTX engaged in inventing tokens and basing its holdings' value on the amount it sold— in most cases, it sells small amounts. Days before the bankruptcy filing, FTX would issue tokens such as SRT and FTT, buy some for themselves, and then use the price to set their valuation.
Furthermore, they will list the stock of tokens as an asset on FTX's balance sheet. Sometimes, they will deposit it with Alameda Research to use it as collateral.
This practice became frequent and went unnoticed until the week FTX filed for bankruptcy. At that time, about $14.4 billion of FTX's $19.6 billion assets were represented by coins and tokens that FTX created. However, just $5.2 billion was in conventional assets.
Similarly, FTX lent about $10 billion of its depositors' money to Alameda.
Experts say if the CTFC were to have jurisdiction over FTX dealings, it would have stopped that practice.
This is because if it were to be firms dealing in conventional securities or derivatives— where the CFTC has direct jurisdiction, the dealing would have been stopped, and the collapse wouldn't have happened.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.