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CFTC Commissioner Comes Out Strongly Against Self Certification of Product Listings by Exchanges

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Christy Goldsmith Romero. Source: a video screenshot, CIGIE / YouTube

Christy Goldsmith Romero, a top official with the US Commodity Futures Trading Commission (CFTC), is warning lawmakers against allowing cryptoasset exchanges to self-certify with the regulator to list trading products.

Goldsmith Romero suggested that this is a dangerous process, as it would enable “regulatory arbitrage”, given that some cryptoassets may be deemed securities by the Securities and Exchange Commission (SEC) – and therefore also overseen by this separate agency.

According to Reuters, citing remarks prepared for a University of Pennsylvania event, the official said that,

“Oversight is necessary to prevent abuse” of the process.

The CFTC already allows exchanges to self-certify in order to list contracts for other products, including commodities. 

Since last year, lawmakers have been considering a similar process as part of a draft legislation they are working on. This proposed legislation would enable better supervision of the crypto industry. 

All this followed a particularly difficult period for the industry, which has seen a wave of bankruptcies and legal proceedings amid a crypto winter. 

Goldsmith Romero, per Reuters, also mentioned the infamous FTX exchange and its collapse, specifically questioning the level of due diligence that firms had conducted before investing in the now-defunct exchange. 

She suggested that “there could be incentives “to turn a blind eye” to red flags in a competitive market.”

What has to be done from the crypto industry’s corner, if it wishes to regain the public’s trust post-FTX, is that it needs to preserve strong corporate governance, but also increase the roles in the companies of gatekeepers, such as lawyers and compliance professionals, she said.

Goldsmith Romero argued that,

“Gatekeepers should have seriously questioned the operational environment at FTX in the lead-up to its meltdown.”

FTX and its group of crypto companies filed for Chapter 11 bankruptcy in early November. Sam Bankman-Fried, the disgraced founder of FTX, was arrested in The Bahamas after US prosecutors formally filed criminal charges against him. He was eventually extradited to the US where he was released from jail after posting a $250m bond in a New York court.

Also, among other legal proceedings, earlier this month, the SEC brought charges against major crypto exchange Gemini and the troubled crypto lending and trading firm Genesis “for the unregistered offer and sale of securities to retail investors through the Gemini Earn crypto asset lending program.”

Meanwhile, as reported, US House Republicans decided to establish a new subcommittee dedicated to cryptocurrency. Incoming Financial Services Chair Patrick McHenry said that he plans to create the panel because he believes there is “a big hole in how we structure the committee” as it spends more time grappling with crypto issues. The subcommittee on digital assets, financial technology, and inclusion will be chaired by Representative French Hill. 


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