CFTC Chairman Says Regulators Don’t Have The Power To Prevent Another FTX

CFTC Chairman Says Regulators Don’t Have The Power To Prevent Another FTX

Speaking at an event at Georgetown University, the chairman of the CFTC, Rostin Behnam, said that they were not in any position to prevent a collapse similar to the FTX crypto exchange.

According to the Chairman, the position of the Commodity Futures Trading Commission (CFTC) was not different than it had been a year ago when FTX had collapsed.

He stated that nothing had changed, which means that another event like that of FTX could happen in the market.

The event

Alumni of D.C. University, Behnam visited the campus to attend the Georgetown University Financial Markets Quality Conference.

This is not the first time that he attended the conference, as he has done this before with attendees like Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC).

Likewise, Senators Kristen Gillibrand and Cynthia Lummis had also attended the conference before. According to Behnam, the regulatory landscape has remained unchanged in the last year.

Therefore, this makes the market vulnerable to collapses similar to FTX. He stressed that CFTC has the authority to oversee the derivatives market.

But, he was quick to add that their power was limited when it comes to regulating the spot markets for crypto tokens like Ethereum and Bitcoin.

The regulatory relationship

He stated that the CFTC can only take action against manipulation and fraud only after it has been reported, which means there cannot be preemptive regulation and they cannot monitor exchanges.

Last year, Behnam had been called before Congress to testify after the collapse of the FTX crypto exchange.

Leading up to its filing for bankruptcy in November, the crypto exchange had been engaged in talks with the CFTC.

Behnam said that their regulatory relationship with FTX was quite an interesting one. He stated that the company had a regulated clearing house and was trying to modify its application.

He stated that they had not approved their application, but they had had a lot of discussion with the exchange over the matter.

The details

LedgerX was the clearing house that was regulated by the CFTC and Sam Bankman-Fried, the co-founder of the FTX crypto exchange, said that the derivatives exchange was a top priority.

The once-popular crypto mogul has now been convicted of several fraud charges in relation to the downfall of his FTX empire and is now awaiting sentencing.

Last summer, he had said in a podcast interview that he was paying the most attention to US crypto derivatives.

LedgerX had been acquired by FTX back in 2021 for an undisclosed figure and it had then been renamed FTX US Derivatives.

It had come to light during the bankruptcy proceedings that Bankman-Fried had acquired the company for a price of $300 million.

This is six times the price that M7 Holdings, the private equity firm, paid to acquire the company back in May.

Behnam also expressed his disappointment over the Digital Commodities Consumer Protection Act of 2022 dying out because it would have given the CFTC regulatory power.

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