US CFTC commissioner calls for new category to protect small investors from crypto

Regulation

United States Commodity Futures Trading Commission (CFTC) commissioner Christy Goldsmith Romero spoke at the Futures Industry Association Asia Derivatives Conference in Singapore on Nov. 30. She talked about “how to harness the best that technology offers, while protecting against emerging threats,” with particular emphasis on cybersecurity and crypto. 

Goldsmith Romero had two proposals for protecting consumers and markets from the risks presented by cryptocurrency. The first was rather novel. “Protecting household retail investors starts with redefining who is a retail investor,” Goldsmith Romero said. Crypto investors are different, she said:

“Most are young-born after 1980, diverse, and make less than $50k a year. That is not the typical customer that the CFTC is used to seeing.”

Thus, they should not be treated the same, Goldsmith Romero reasons. “we also should not let them be crushed, which will happen without meaningful and targeted customer protections,” she said, while acknowledging the need to maintain financial inclusivity.

Goldsmith Romero suggested creating two categories of retail investor “separating household retail from professional and high net worth individuals.” After that the CFTC would provide consumer protections across that division and for each categories individually.

In traditional finance, a broker plays a role in determining the appropriateness of an investment for a consumer. In disintermediated transactions, “it is important for regulators to assess risk to customers,” she said. Moreover:

“Today, I am calling publicly for the first time for the CFTC to invoke heightened supervision of crypto exchanges. […] It is well within our existing authority for derivatives exchanges.”

The CFTC has not heeded her calls “for months” to implement that supervision, however. Goldsmith endorsed CFTC Commissioner Caroline Pham’s call for an Office of Retail Investor Advocate.

Goldsmith Romero digressed in her speech to discuss blockchain use cases unrelated to cryptocurrency. “Distributed ledger technology has the potential to prevent disease, keep food safe, limit waste, and save our agricultural industry time and money,” she said.

Related: CFTC commissioner compares crypto contagion risk to 2008 financial crisis

Goldsmith Romero was nominated for a CFTC chair by U.S. President Joe Biden in September 2021 and sworn in on March 30. She has voiced her concerns about retail investors before, and received some industry support for her proposed household retail investor category.

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