US CFTC Commissioner Warns of Risks if Crypto Firms Self-Certify

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By Chris Prentice and Hannah Lang

NEW YORK/WASHINGTON (Reuters) – A senior U.S. Commodity Futures Trading Commission (CFTC) official plans on Wednesday to warn lawmakers against cryptocurrency exchanges self-certifying with the agency to list the products to be exchanged.

The CFTC already allows exchanges to self-certify to list contracts for other commodities, such as commodities. Lawmakers were considering a similar process under the Crypto Bill being drafted last year.

But CFTC Commissioner Christy Goldsmith Romero said the process would open the door to “regulatory arbitrage” because some crypto assets are likely securities that must be overseen by another agency, the Securities and Exchange Commission (SEC). ).

“Oversight is necessary to prevent abuse” of the process, she said, according to remarks prepared for an event at the University of Pennsylvania.

His warnings come as lawmakers band together to draft legislation to better oversee the struggling crypto industry, which saw a wave of bankruptcies last year and continues to suffer from the sudden collapse and FTX’s alleged fraud.

Romero also raised questions about the level of due diligence companies have before investing in FTX, suggesting there may be incentives to “turn a blind eye” to red flags in a competitive market.

Federal prosecutors have brought charges against three of FTX’s former top executives, accusing them of defrauding investors and embezzling client funds.

The SEC is also investigating the due diligence of FTX investors, according to two sources familiar with the investigation.

In order to regain public trust after the collapse of FTX, the crypto industry should enshrine strong corporate governance and increase the roles that gatekeepers like lawyers and compliance professionals play in companies, a said Goldsmith Romero.

“Guardians should have seriously questioned FTX’s operating environment before its collapse,” she said.

(Reporting by Chris Prentice; Editing by Josie Kao)

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