CFTC considers changing risk rules to address crypto volatility

The US Commodity Futures Trading Commission (CFTC) has proposed a comprehensive revamp of its risk management regulations, emphasizing the need for firms to prepare themselves for the volatility of cryptocurrencies and the associated risks of holding customers’ digital assets.

Commissioner Christy Goldsmith Romero stated that emerging technologies such as digital assets, artificial intelligence, and cloud services have introduced significant risks, compelling the CFTC to reevaluate its regulatory oversight and risk management requirements.

In a June 1 statement, Romero announced the CFTC’s invitation to comment on potential risk management program changes. She highlighted the increasing integration of digital assets with banks and brokers and the evolving risks posed by these developments.

Romero also drew attention to the ongoing concerns surrounding custody practices within the industry. She noted that brokers might consider holding customer assets as stablecoins or other digital assets, which could introduce unique and unknown risks.

The proposed rulemaking process initiated by the CFTC involves an “advance notice of proposed rulemaking,” serving as the preliminary stage. Following this, a formal proposed rule will be drafted, which will then undergo a vote to determine the final version of the regulation.

The CFTC is now open to public comments on the proposal for 60 days.

The move by the CFTC reflects the regulatory body’s recognition of the digital asset market’s rapid growth and evolving nature.

By addressing the risks associated with crypto volatility and custody practices, the CFTC aims to enhance investor protection and ensure the stability and integrity of the financial system.