• CFTC Commissioner Kristin Johnson urged Congress to expand the agency’s authority to review crypto acquisitions.
• Johnson believes that old regulatory frameworks, like antitrust legislation, may not be enough to prevent the next crypto crisis.
• She proposed modifications to digital asset legislation to formalize the obligation to separate customer property, ensure financial resource requirements, and introduce effective governance and risk management controls.
At a speech at Duke University on Wednesday, Commodity Futures Trading Commission (CFTC) Commissioner Kristin Johnson called for Congress to modify several pieces of proposed digital asset legislation to give the agency more authority to review crypto acquisitions. Her comments come on the heels of the rapid collapse of crypto exchange FTX in November, a development that caught regulators and industry participants alike off guard.
Johnson expressed her concerns that the existing regulatory frameworks, such as antitrust law, are not enough to protect against similar future shocks in the crypto market. To that end, she proposed that Congress expand the CFTC’s authority to conduct due diligence on any firm – foreign or domestic – seeking to purchase a minimum 10% share of the equity interest in a CFTC-registered market participant. This would include the ability to “separate customer property, ensure financial resource requirements … and introduce effective governance and risk management controls.”
The CFTC Commissioner cited the example of LedgerX, a crypto company that was subject to a CFTC investigation in 2020 due to its failure to properly segregate customer funds from company funds. She noted that such incidents could be avoided in the future if Congress were to pass the proposed modifications to digital asset legislation.
“It’s important that Congress give the CFTC the authority to review potential acquisitions of registered entities, so that we may better protect the public from harm,” Johnson said. “The CFTC has a long history of protecting consumers, and these changes to the regulatory framework would ensure that we can continue to do so in the digital asset space.”
Given the continued growth of the crypto market, and the potential for future shocks, Johnson’s call for Congress to grant the CFTC more authority to review crypto acquisitions is becoming increasingly significant. If Congress were to pass the proposed modifications to digital asset legislation, it could go a long way in helping the agency protect consumers from harm and ensure that the crypto market remains healthy and stable.