CFTC Plans to Introduce Rules For Crypto Market Predictions
The Commodity Futures Trading Commission (CFTC) has hinted at new rules guiding market predictions. Markedly, the control, which would be unveiled officially in the summer, is looking to mitigate the risks and conflicts of interest arising in vertically integrated business models.
CFTC Rules Shaped from Public Comments
In the past, these models, where a single company can control more than one level of its supply chain or operations, have been known to raise concerns within the cryptocurrency industry amongst others. Speaking at a Futures Industry Association conference that was held in Florida, CFTC Chair Rostin Behnam assured his listeners that the commission would consider a proposal in the coming months.
This proposal will reflect regulatory guidelines addressing “potential risks, conflicts, and governance issues that may be raised by new market structures and affiliate relationships,” per Behnam’s statement. The CFTC Chair acknowledged that the agency has received and reviewed comments on “the impact of affiliations of certain CFTC-regulated entities.”
Menace of Vertical Integrated Markets
Behnam claimed to be unperturbed by the vertical integration in the market that had shown up due to an outgrowth of electronification and Decentralized Finance (DeFi). He went on to describe how the markets are no longer physically delineated by the geographical separation of activities among distinguishable market actors.
The request for comments dates to as far as last year and it yielded results from top crypto firms like Coinbase and certain advocacy groups. One of the concerns raised was a lack of regulatory clarity. CFTC Commissioner Christy Goldsmith Romero had concerns about crypto firms’ ability to take on different portfolios. They sometimes serve as market makers, clearinghouses, lenders, and even custodians.
Lack of Regulation Triggered FTX Implosion
For context, she talked about FTX, the popular cryptocurrency exchange that imploded in 2022 after facing some insolvency challenges. Romero identified the possibility of having a recurrence of the unfortunate FTX situation in the presence of vertically integrated businesses in crypto. Furthermore, she explained how difficult it could be to disclose or resolve these conflicts in a highly unregulated environment.
Consequently, she stated that the CFTC must understand the risks associated with such investment vehicles and implement regulations that directly address the risks.
