Is crypto any safer than it was a year ago?
More importantly, are we safe enough to never see an FTX rerun again? It turns out that the answer to both of these questions is no, and the crypto industry may be headed for some very disturbing times ahead.
According to reports, the head of the Commodity Futures Trading Commission (CFTC) has said that regulators are in no better position than they were last year, to prevent or even regulate another meltdown like we saw with FTX.
The collapse of FTX, which filed for bankruptcy last year after its CEO, Sam Bankman-Fried was accused of one of the biggest scams in crypto history continues to haunt the crypto market to date.
Rostin Behnam the CFTC chairman, while speaking at the Georgetown University Financial Markets Quality Conference on Wednesday, said some very disturbing things.
According to Behnam, "nothing has changed". The CFTC chair was referring to the country's regulatory landscape since FTX's collapse.
Behnam says that the CFTC is still powerless to control or regulate spot markets for cryptos like Bitcoin and Ethereum, as well as other assets.
"Nothing has changed, and we could be in a position where another FTX-type event happens,"
Behnam explained that the CFTC can only oversee derivatives like futures and options, and can only make arrests on fraud or manipulation in the spot markets "after", not before, it has been reported.
Behnam also revealed some interesting details about the CFTC's interaction with FTX before it went down.
Behnam said that FTX owned FTX US Derivatives, a regulated clearing house with the CFTC, which used to be known as LedgerX.
FTX bought LedgerX in 2021, renamed it and was trying to modify its application with the CFTC, but the agency never approved it.
"We had an interesting regulatory relationship. FTX had a regulated clearing house with the CFTC and they were trying to modify the application.
In the end, we never approved their application—but there was a lot of discussion between the agency and FTX."
It turned out that Bankman-Fried, who was once hailed as a crypto billionaire and philanthropist, paid almost $300 million to acquire LedgerX.
This figure was about six times the price that a private equity firm paid for the derivatives company in May.
Behnam also expressed his disappointment with the Digital Commodities Consumer Protection Act of 2022.
In detail, this bill, had it been approved in Congress, would have given the CFTC more power to regulate the cash markets for crypto and other digital assets.
According to Behnam, this bill would have made it easier for the CFTC to act how the SEC does, by way of registration, reporting, and enforcement.
Behnam admitted that the bill truly had some issues. However, it would have been the perfect tool to accomplish the goals that he has been advocating for years.
"I certainly know that there were some issues and opposition to the bills—on both the Financial Services and the Agriculture Committee side.
The bill that they passed—relevant to the CFTC—does in fact accomplish the goals that I've been advocating and requesting for a number of years now."
Behnam went further to urge lawmakers and the crypto industry to work together to create a clear regulatory framework for the crypto space.
This, Behnam says, is necessary to create innovation and protect consumers.
"I think we all agree that this is an important and growing market that has tremendous potential, but also tremendous risk.
We need to work together to ensure that we have a safe and sound market that benefits everyone."
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