FTX’S downfall shows CFTC needs more crypto sway

NEW YORK: The collapse of Sam BankmanFried’s FTX crypto exchange adds urgency to a Washington push to transform the Commodity Futures Trading Commission (CFTC) into a top crypto watchdog, according to the head of the derivatives regulator.

CFTC chairman Rostin Behnam said the implosion of FTX, whose swift and dramatic downfall culminated in a bankruptcy filing last week, is an example of why his agency needs more power to oversee cryptocurrency operations and trading.

“I’m hopeful that this will elevate the urgency for Congress to act to pass legislation that would give the CFTC more authority to regulate cash markets” and digital assets, the chairman said in an interview. “No question asked.”

Crypto executives have been pressing for the CFTC to get more power as they resist Securities and Exchange Commission (SEC) chairman Gary Gensler’s assertions that many digital coins are securities under the SEC’S purview.

Following FTX’S collapse, signs are growing that customers have little chance of recovering much of their deposits, with FTX Trading International holding just Us$900mil (Rm4.13bil) in liquid assets against Us$9bil (Rm41.3bil) of liabilities as of late last week.

FTX’S unraveling – which swiftly sparked chaos in the industry – could have a knock-on effect on other financial institutions, though how far that pain could spread remains unknown, Behnam said at the Futures Industry Association conference in Chicago.

So far, the crisis appears limited to investors and traders directly involved in FTX, he said earlier at the event.

Behnam has previously said his agency is poised to take on an expanded oversight role in crypto markets – a shift that many in the industry say they would welcome. The CFTC’S jurisdiction over crypto is now largely limited to crypto futures.

“We don’t have surveillance tools, market monitoring tools – so we have to rely on either implosions or people coming to us and saying they are seeing fraud or manipulation in the marketplace,” Behnam said.

“We’re going to continue to monitor the entities we can, and other than that, I will continue to advocate for new authority.”