Former CFTC Chairman Says Crypto Needs New Framework and New Protections

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Timothy Massad, the former chairman of the Commodity Futures Trading Commission, told CNBC’s Jim Cramer on Tuesday that the future of cryptocurrency will depend on the outcome of recent government lawsuits against exchange platforms Binance and Coinbase.

According to Massad, the government and the Securities and Exchange Commission must create a new industry framework that protects investors, prevents fraud and manipulation, and finally answers the controversial question: are digitized tokens securities?

“A lot of what’s happening in the crypto world revolves around itself, you know, it’s very interesting technology, the practical use cases that connect to the real economy, frankly , are still rare,” Massad said. “The question is how do you create a framework where this innovation can still take place, and perhaps lead to things of real value, but protect investors at the same time.”

One of the biggest problems in crypto involves wash trading, which is when someone trades with themselves or with affiliates to mislead others about stock performance. Massad said this type of fraud accounts for 50% to 90% of trading on crypto platforms.

“There is no guarantee that there are procedures to prevent this,” he told Cramer. “And these trading platforms, most of them have their own proprietary trading operations, which they shouldn’t have.”

The SEC on Monday filed 13 charges against Binance alleging various types of fraud and wrongdoing. On Tuesday morning, Coinbase was hit with a series of similar, albeit milder, accusations, sending its stock down 12%.

“The business model of these exchanges is incompatible with the functioning of our stock markets,” Massad pointed out.

Massad added that he and Federal Reserve Chairman Jay Powell have advocated for measures that at least protect short-term investors while the government works to create an entirely new framework model.

“One of the issues with the model is whether you can trade bitcoin and ether, which are let’s say commodities, on the same platforms as other things,” he said. declared. “Now, from the perspective of the SEC, I don’t think that would be allowed. But is that the model we want? So again there are questions about where do we really want to go, but we need to have much better investor protection.”

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