- In a recent event, the CFTC Commissioner said that the oversight of CFTC is an answer to the possible financial stability risks.
- She mentioned that the crypto industry is repeating certain elements of finance to the 2008 global financial crisis.
On October 26, 2022 at an International Swaps and Derivatives Association Conference in New York, Christy Goldsmith Romero, a commissioner with the U.S. Commodity Futures Trading Commission (CFTC,) made the statement that “Financial stability risk will increase and could rise to the level of systemic risk if, in the future, there are greater interconnections between the crypto industry and traditional finance players performing critical market functions.”
The Warning of Crypto Market Crisis
Goldsmith Romero also added in her statement as “Cryptocurrency was supposed to break from the traditional financial system, and all of its fragility and vulnerabilities. However, this spring unregulated crypto markets revealed their vulnerabilities to similar financial stability risks as traditional finance, with parallel themes from the 2008 financial crisis.”
She noted that “Congress can address financial stability risks by providing additional authority to the CFTC, and supporting a same risk, same regulatory outcome plan to establish crypto rules that would treat the industry the same as other sectors of the financial system.”
Additionally, in a prepared remarks to the crypto conferences Goldsmith Romero said “Cryptocurrencies have not served as a hedge or to diversify traditional investment exposures, rather those investments could unexpectedly amplify risk, heightening financial stability concerns.”
The following speech by Goldsmith Romero matters just because it was delivered in front of an audience of banks and Wall Street companies which comes as a growing number of traditional financial firms invent tie-ups with crypto startups that were hammered by a market contagion in the beginning of this year.
Crypto Industry: A Major Systemic Risk
Throughout the year, the digital asset industry was afraid of the collapse that sparked by the sudden decline of two popular digital tokens and an accompanying lending protocol that may drive mainstream investment companies from the industry. But, some institutions like BlackRock and Bank of New York Mellon started to partner with startups or offer their own crypto-friendly services in the past several months.
Here, it is quite interesting to see as the CFTC is gaining momentum in Congress to become the primary regulator for crypto trading in several bills that would give CFTC the authority over the spot market or at the markets where the actual tokens trade between investors.
Moreover, the CFTC Commissioner Goldsmith Romero mentioned in the mid of thin month that she is also working on proposing a new definition for “Retail Investors” in crypto, as the CFTC is poised to potentially start policing a wide swath of digital assets trading.
Source: https://www.thecoinrepublic.com/2022/10/27/u-s-cftc-commissioner-said-crypto-recalls-2008-financial-crisis/