October 27, 2022

CFTC Commissioner Goldsmith Romero Urges "Same Risk, Same Regulatory Outcome" Approach to Crypto

CFTC Commissioner Christy Goldsmith Romero said that because digital assets present similar financial stability risks compared to traditional assets, like policies that are applied to traditional finance should also apply to digital finance.

In remarks before the ISDA Crypto Forum in New York, Ms. Goldsmith Romero argued that the CFTC should continue to utilize its existing regulatory and enforcement authority with respect to digital asset markets, and emphasized that the CFTC should follow a "same risk, same regulatory outcome" approach. Such an approach, she said, would establish the "basic foundation of customer protections and guardrails that investors and customers are familiar with, and expect, from other regulated financial products and markets." She also noted that crypto companies seeking to enter into CFTC-regulated derivatives markets should (i) expect the application of the CFTC's existing regulatory framework, and (ii) adapt their businesses accordingly. Ms. Goldsmith Romero warned regulators to be wary of allowing "bespoke treatment that could increase financial stability risks."

Ms. Goldsmith Romero recognized that novel technologies pose novel risks, and said that the CFTC should continue using its existing authority to implement a "same risk, same regulatory outcome" approach. She emphasized that financial institutions seeking to enter digital asset markets should engage in "substantial due diligence to determine vulnerabilities" in such markets with respect to, among other things, cyber theft, money laundering, market manipulation and conflicts of interest.

Ms. Goldsmith Romero acknowledged that traditional financial institutions are increasingly interested in exploring crypto markets, which may amplify the systemic risk currently posed by cryptocurrencies. As a result, she warned against allowing cryptocurrency investments in pension and retirement funds. She explained that cryptocurrencies aren't seen as opportunities for diversification because they typically trend in line with equity markets.

Ms. Goldsmith Romero urged Congress to extend the agency's authority to regulate crypto markets based on the agency's experience handling the post-2008 economic recovery.

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