In an interview with Axios, Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero urged Congress to close the regulatory loophole on cryptocurrencies. In response to the recent crash that has drained more than $400 billion from the crypto market in a matter of days, she said that the unregulated sector shares similarities with some parts of the financial sector in 2008.

Crypto Today Similar to the banking sector in 2008

Given the turbulent market conditions in recent weeks, CFTC Commissioner Christy Romero laid out two main risks in the crypto space, as she viewed the rapidly growing industry as similar to the banking sector in 2008.

First of all, he pointed out that both have a “pretty sizeable market that is not regulated.” Meanwhile, watchdogs have no way to regulate them because, he said, there is a “regulatory gap.”

“We are going to regulate derivatives and crypto products like bitcoin and Ether, but we don’t really regulate spot and spot markets. We have the anti-fraud authority, but it is quite limited. We have brought enforcement actions, but we can’t really investigate that market.”

Second, the markets are highly correlated to the broader equity markets, citing the rise and fall of bitcoin with the tech-heavy Nasdaq index. Accepting that cryptocurrencies weren’t designed for that purpose in the first place, he viewed the correlation as an incentive for institutions and retail investors to invest in the asset.

“In a down market, you will see risks exposed… My biggest concern is that if regulations don’t keep up with technology, the most vulnerable people will be hurt.”

When asked if the regulations could stifle the evolving technology of cryptocurrencies, Romero said that oversight is essential for crypto firms looking to scale and expand their customer bases to a larger group of investors. To facilitate the growth of the sector, he recommended that Congress step in and clarify the regulatory framework for the growing asset class.

The notable difference, he added, between cryptocurrencies today and the economy of the 2000s is that large institutional investors have yet to dive into digital assets, as they are concerned about the lack of regulatory control over the industry.

About the Lummis Bill

In regards to Senator Cynthia Lummis’s newly introduced and eye-catching cryptocurrency bill, which pushes the CFTC, rather than the SEC, as the main regulatory watchdog for cryptocurrencies, Romero said he would like to see Congress gave his agency a higher degree of authority. beyond the anti-fraud authority and into the spot market.

It is worth noting that Romero has work experience with both the SEC and the CFTC. She served as legal counsel to SEC Chairman Christopher Cox. and Mary Schapiro before joining the CFTC. The commissioner said that both authorities are positioned to protect customers, with the notable difference being that the CFTC tends to allow more products to be traded on its regulated crypto exchanges.

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