Commodity Futures Trading Commission’s (CFTC) Christy Goldsmith Romero has actually pointed to the collapse of the Terra community and its flow-on results as an example of how contagion threats within crypto markets are comparable to those experienced by the conventional financial (TradFi) system throughout the worldwide financial crisis (GFC) of 2008.
Romero recommended in a speech offered at the International Swaps and Derivatives Association’s (ISDA) Crypto Forum on Oct. 26 that increased links in between crypto markets and TradFi increases the risk positioned by crypto to general financial stability, keeping in mind:
“The digital asset market remains relatively small and contained from the level of systemic risk that would come with greater scale or interconnections with the traditional financial system. But this may not be the case in the near future, particularly given growing interest by traditional finance.”
One location of TradFi the commissioner would choose to stay far-off from crypto is retirement and pension funds, a viewpoint which has actually likely been affected by current occasions in the U.K. where pension fund concerns needed intervention from the Bank of England.
I have considerable issues about the possibility of pensions and retirement funds purchasing #Cryptocurency
— Commissioner Christy Goldsmith Romero (@CFTCcgr) October 27, 2022
While Romero warns the U.S. not to rush policies, she supports a “same risk, same regulatory outcome” technique as the level of risk positioned by the crypto market increases, recommending:
“Similar to post-crisis reforms, Congress can address financial stability risks by providing additional authority to the CFTC.”
The GFC happened after banks started to provide recklessly to individuals without the ways to totally repay their home mortgages. These ‘subprime’ home mortgages were bundled together and offered as safe financial investment items prior to defaults began a causal sequence that spread out throughout the world.
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While the CFTC is typically considered the more crypto-friendly regulator compared to the Securities and Exchange Commission (SEC), it appears to be trying to modification that image as part of its quote to gain more regulative oversight after exposing it prompted 18 enforcement actions on the sector throughout the 2022 .
One of the more current CFTC actions was the great imposed at the Ooki DAO and its members, which was greatly slammed by a CFTC commissioner and members of the crypto community, who referred to it as “blatant regulation by enforcement.”
Before this action, decentralized self-governing companies (DAOs) were concerned by lots of supporters as being “above the law”, and have actually led to the development of legal entities within DAOs as a method to limitation liability.