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,
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