FTX case has given a lifetime lesson to all, including the highest regulatory bodies who are planning to protect customer money by laying grounds on FTX-inspired rules. The rule aims to separate customer funds from DCO’s funds, reducing risk. An important step in crypto regulation.
Here’s everything you need to know about the rules and their implications on crypto.
FTX’s Impact on Regulatory Policies
The U.S. Commodity Futures Trading Commission (CFTC) has taken steps to enforce stringent regulations on derivatives clearing organizations (DCOs), pushing to mandate the segregation of customer funds from those of the organizations. This initiative was prompted, in part, by the collapse of FTX last year, where billions of dollars of customer funds were compromised.
The proposal, approved by CFTC commissioners, seeks to prevent instances where DCOs could manipulate or misuse customer funds, particularly during liquidity crises. While the proposal allows for the commingling of “proprietary funds” from different clearing members, it strictly prohibits the mingling of these funds with customer or DCO funds, aiming to safeguard customer assets.
Commissioners’ Stance and Concerns
According to Chairman Rostin Behnam, the proposal’s significance emphasizes the changing market landscape with the emergence of new participants in both traditional finance and the crypto sector. But as per, Commissioner Kristin Johnson FTX’s collapse is the main driving force behind the proposal, stressing the dire consequences customers face without adequate regulations to prevent fund commingling.
However, Commissioner Summer Mersinger had concerns about the proposal’s scope and called for a more thorough evaluation and in-depth cost-benefit analysis to properly address outstanding problems. Caroline Pham, a commissioner, supported the plan but warned that it might upset existing regulatory frameworks. She stressed the need to think carefully before changing existing rules.
CFTC Commissioner Mersinger: “We understand rules better and know where to relax those to support innovation. It’s high time now, that the crypto industry should be handed over to CFTC after all the mess created by SEC.”
On the flip side, Commissioner Christy Goldsmith Romero was worried about how the jobs of regular people would change when they joined a clearing organization, which doesn’t have the usual protections for customers. She asked if the rights given to these people were clear and enough.
Can CFTC Better Handle the Crypto?
The CFTC’s action shows that they are trying to protect customers better in the swaps market so that things like FTX’s collapse don’t happen again. The CFTC wants to protect customers from possible financial risks caused by DCOs’ liquidity problems by requiring strict separation of their funds from those of DCOs. This will protect customers’ assets and build trust in the swaps market.