Christy Goldsmith Romero of the United States Commodity Futures Trading Commission (CFTC) has pointed to the collapse of the Terra ecosystem and its outflow effects as an example of how contagion risks within crypto markets are similar to those experienced by the traditional financial system (TradFi) during the global financial crisis (GFC) of 2008.
Romero suggested in a speech at the International Swaps and Derivatives Association (ISDA) Crypto Forum on Oct. 26 that increasing links between crypto markets and TradFi increases the risk cryptocurrencies pose to overall financial stability, pointing out:
“The digital asset market remains relatively small and contained the level of systemic risk that greater scale or interconnections with the traditional financial system would entail. But this may not be the case in the near future, especially given the growing interest in traditional finance.”
One area of TradFi that the commissioner would prefer to keep away from cryptocurrencies is retirement and pension funds. This view has probably been influenced by recent events in the UK, where pension fund problems required intervention by the Bank of England.
I have significant concerns about the possibility of pensions and retirement funds investing in #Cryptocurrency
— Commissioner Christy Goldsmith Romero (@CFTCcgr) October 27, 2022
I am very concerned about the possibility of pension and superannuation funds investing in cryptocurrencies.Bank of England intervention.
While Romero cautions the United States against rushing regulations, he supports a “same risk, same regulatory outcome” approach as the level of risk posed by the cryptocurrency industry increases, and suggests:
“Similar to post-crisis reforms, Congress can address financial stability risks by providing additional authority to the CFTC.”
The CFG arose after banks began recklessly lending to people without the means to fully repay their mortgages.. These “subprime” mortgages were bundled together and sold as safe investment products before defaults started a domino effect that spread across the world.
Although the CFTC is often considered the most crypto-friendly regulator compared to the United States Securities and Exchange Commission (SEC), it seems that it is trying to change that image. as part of his bid for greater regulatory oversight after revealing he instigated 18 enforcement actions in the sector throughout fiscal 2022.
One of the most recent CFTC actions was the fine imposed on the Ooki DAO and its members, which was heavily criticized by a CFTC commissioner and members of the cryptocurrency community.who referred to it as “blatant per-app regulation.”
Prior to this action, decentralized autonomous organizations (DAOs) were considered by many advocates to be “above the law”, and have led to the formation of legal entities within DAOs as a way to limit liability.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.