Johnson from the CFTC encourages Congress to increase the commission’s authority to oversee cryptocurrency.
Kristin Johnson, commissioner of the Commodity Futures Trading Commission, aims to safeguard clients in a way that lowers the possibility of recurrent disasters.
Kristin Johnson, commissioner of the Commodity Futures Trading Commission (CFTC), has pleaded with Congress to pass legislation that “closes the current vacuum in the monitoring of crypto spot markets.”
On Jan. 21, Johnson made a series of adjustments that would allow the CFTC to perform “adequate due diligence” on companies, including cryptocurrency firms, who are interested in acquiring CFTC-regulated enterprises during a lecture at a digital assets conference at Duke University.
In order to improve customer safety, minimize liquidity crises, and reduce conflicts of interest, the commissioner also wants the commodities regulator to have more authority.
Giving the commodities regulator greater authority to look into any company that wishes to acquire 10% or more of a CFTC-registered exchange or clearinghouse is one of these prospective modifications.
Johnson cited the example of the derivatives exchange LedgerX, which on August 31, 2021, merged with FTX and is currently entangled in the collapse of the cryptocurrency exchange.
The commissioner points out that the regulator is essentially a spectator as the exchange goes through the sales process and is currently unable to perform due diligence on whichever party purchases the business.
Johnson called for regulation that formally establishes the obligation of cryptocurrency enterprises to segregate consumer funds. Johnson also addressed the co-mingling of user monies, which was one of the more heinous claims made against FTX after its collapse.
Johnson also identified a flaw in risk management practises, pointing to the spread of contagion following the failure of significant crypto companies like FTX:
“Interconnectedness among crypto-firms amplified by fragile or non-existent risk management, corporate governance failures, and conflicts of interests at individual firms fuels the likelihood of crises.”
In light of the increasingly diversified markets, the commissioner opined that present “frameworks such as anti-trust law and regulation may prove too narrow in scope” and advocated for “tailored and effective governance, and risk management procedures.”