US Senate flags gaps in CFTC powers in wake of FTX collapse

As the consequences FTX collapse unfold, serious gaps in the existing law have become evident. The conclusion was reached by members of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry (which oversees derivatives trading) and CFTC Chair Rostin Behnam.

Behnam warned that the Commission’s rules contain “basic elements that have served markets for decades” that proved insufficient in the context of the FTX collapse. In particular, SEC, unlike the CFTC, has the authority to require adherence to such basic safeguards as customer funds segregation and best execution.

“Without new agency powers, there will be gaps in the federal regulatory framework, even if other regulators act within their existing mandates,” — Behnam said.

The official touched on interagency conflicts, responding to suspicions of a bid to seize power. He said cooperation between the SEC and CFTC will continue, but expanding the powers of the Commission he chairs would “fill the gaps”, he emphasised.

I believe the duties could be the same between [agencies] with comprehensive regulation. CFTC regulation works well when it is applicable, Behnam explained.

As a successful oversight example, the official cited LedgerX , the FTX-group platform that provides services in the crypto-derivatives market. He stressed that the Commission did not have the authority to study violations by unregulated entities within the FTX group.

Behnam also highlighted shortcomings in the oversight of rating agencies, which had given high marks to the governance of the cryptocurrency exchange run by Sam Bankman-Fried.

Senator Kristen Gillibrand, co-author of the Responsible Financial Innovations Act , identified as issues requiring special attention the influence of foreign firms on US rivals, including offshore. She also noted risks from mergers and acquisitions.

Behnam acknowledged that FTX documents to the CFTC regarding the LedgerX acquisition were, at best, a notice filing.

Earlier, U.S. Representative Tom Emmer called the FTX crisis a failure of crypto-industry regulation.

In July, Behnam announced the creation of the Office of Technology Innovation, which will regulate the crypto industry.

In October, the official warned participants in the digital-asset space of the inevitability of regulation. SEC Chair Gary Gensler {{AOPEN_9}}supported{{ACLOSE_9}} expanding the CFTC’s mandate in the industry.

Read ForkLog’s Bitcoin news on our Telegram — cryptocurrency news, prices and analysis.