Regulators Have Feet on the Ground at LedgerX- Commissioner CFTC  

  • FTX US acquired LedgerX in the second quarter of 2021. 
  • The CFTC has enforced digital assets cases involving frauds, Ponzi Schemes, Pump and Dump schemes. 

The Commodity Futures Trading Commission Commissioner Kristin Johnson said regulators have “feet on the ground” in FTX’s wholly owned LedgerX U.S.-based business. Still, it’s left out of FTX’s bankruptcy filing. 

According to reliable data, FTX acquired LedgerX in 2021, and it is known as a federally regulated exchange founded in 2013. It offers Mini contracts that trade in increments of 0.01 bitcoin and are available to all US citizens. 

Zach Dexter, Chief Executive Officer of LedgerX, wrote in his tweet that LedgerX is out of bankruptcy filing of FTX. 

On November 17, during the City and Financial Global Conference on Institutional Digital Assets and Crypto Regulation, Johnson was asked about the failure of FTX and whether it was a regulatory failure.

The Commissioner said the question asked also relates to risk management, a challenge across asset classes and markets.  

Johnson Explained, “Careful risk management oversight, proper internal policies and procedures, and circuit breakers are critical,” she added, “Any number of internally developed and externally imposed regulatory guidelines could not have played a critical role in preventing some of what we have seen.” 

Kristin clarified that US regulation is divided into two separate buckets; The first bucket is where regulators have transparent regulatory authority, a mandate to engage in rule-making and require registration and direct oversight of market participants directly. And the second basket is where Congress has given full control to engage rigorously in enforcement against money laundering, fraud or market manipulation that is mostly reactive and needs proof.  

The CFTC has enforced digital assets cases involving frauds, Ponzi Schemes, Pump and Dump schemes.   

Kristin said, “I want to highlight that the CFTC lacks spot market jurisdiction with respect to digital assets,” adding, “We need direct authority from Congress to require market participants to come into our regulatory framework.” 

Kristin explained that in 2017, before FTX acquired LedgerX, LedgerX applied to become an enlisted derivatives clearing organization with the CFTC. This includes enabling direct clearing without the interference of intermediaries such as futures commission traders. 

 The Commissioner quotes that ” Right now we have boots on the ground at LedgerX and we are directly, and effectively, monitoring and overseeing on a daily, if not hourly, basis,” she added ” We are verifying that every dollar of customer assets held at LedgerX continues to be available.”   

“There may be much more to learn and discover, but in the immediate moment, it is obvious there is a pathway through the CFTC’s existing authority,” Kristin added. “Part of the challenge is to level up our regulatory expectations regarding how we think about and our capability to navigate these issues.” 

She concluded by mentioning, “I believe that there is room to start a series of conversations, dialogues and roundtables around the best way to craft well-tailored regulation for the nuances of this novel technology.” she added, “We will also be doing this in partnership with global financial regulators from various jurisdictions.” 

Nancy J. Allen
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