CFTC Commissioner Wants Two-Tier Crypto Rules for Retail Investors and Millionaires

The CFTC chief has proposed that the average crypto investor should get different protection from professional and high-net-worth individuals.

In remarks prepared for a conference in Singapore, Commodity Futures Trading Commission (CFTC) commissioner Christy Goldsmith Romero said the current regime’s definition of a “retail investor” is too broad, covering everything from average households to millionaires and hedge funds.

She proposed that the CFTC should have two categories of retail customers so that additional protections can be targeted to each group.

“What is safe and affordable for a millionaire or hedge fund is likely to be very different for regular people who want access to markets but cannot afford to lose everything,” she said.

She added that she was not seeking to cut off the average investor’s access to the markets altogether but would seek public input on what kinds of extra protections should be afforded to these users. Initial ideas include easy-to-understand disclosures and limitations on leverage.

But she was critical of the shift towards giving users direct access to the markets via trading apps, saying that a broker traditionally adds an extra layer of protection for the customer.

“I caution against market structures that remove a broker’s duties to retail customers without a full assessment of what will be lost,” she said.

Tighter scrutiny of crypto exchanges, says CFTC

Romero also called for her agency to invoke “heightened supervision” of crypto exchanges, adding she had been calling for such a move internally for months.

Appearing to criticize the CFTC and tie its inaction to the failure of crypto exchange FTX, she said: “Despite my multiple requests, the CFTC has not implemented heightened supervision.  My proposal should take on urgency in light of recent events.”

The CFTC, which shares oversight of the crypto industry with the Securities and Exchange Commission (SEC), is one of the agencies that has come under fire in the wake of FTX’s collapse, with critics arguing that regulators should have done more to prevent the disaster.

CFTC chair Rostin Behnam has in recent days called for more regulation, defending his own agency’s role in the debacle, saying action was needed from lawmakers. 

He was speaking at an event at Princeton University, filling a slot during which the scheduled keynote speaker had originally been Sam Bankman-Fried.

SBF, for his part, seems to agree with Behnam. In a recent interview, he said regulation could have protected FTX from collapse. 

“I wish that I had more reporting and transparency to outside parties,” he said.

Behnam is set to appear in front of the Senate Agriculture Committee today as part of a hearing focused on whether congressional action is needed in response to the FTX crisis.