LedgerX Exposes Regulatory Void: CFTC Customer Asset Rules Under Scrutiny

The focus of the United States Commodity Futures Trading Commission (CFTC) has shifted towards the manner in which companies manage customer assets.

The latest proposal from the CFTC aims to bolster regulations for futures commission merchants (FCMs) and derivative clearing organizations (DCOs), mandating that these firms invest customer funds in highly liquid assets.

Nevertheless, the updated regulations need to address the distinct operational model of LedgerX. LedgerX functions as a DCO, forging direct connections with clients and diverging from the typical intermediary role played by FCMs.

Image capturing the CFTC’s suggested regulation. Source: CFTC

CFTC Commissioner Kristin Johnson has expressed apprehensions, underscoring the regulatory framework’s failure to keep pace with the swiftly evolving industry.

LedgerX, formerly associated with FTX and now a subsidiary of Miami International Holdings, operates within a distinctive sector by offering direct client access, departing from established industry norms.

Public Feedback Period Fuels CFTC Response To Regulatory Gaps

LedgerX has gained recognition for its initiatives to directly finalize cryptocurrency transactions for its clients, departing from the conventional approach of engaging intermediaries.

The company has effectively secured multiple CFTC registrations, further bolstering its operations with improved consumer protection measures, including asset segregation.

Johnson advocates for an updated regulatory framework that would offer consistent protection to retail clients, irrespective of whether they trade through intermediaries or engage directly with non-intermediated DCOs like LedgerX.

This call for action aligns with the 75-day public feedback period on the proposal. This discussion period holds the potential to steer the CFTC in rectifying the regulatory shortcomings highlighted by Johnson.

The CFTC ensures that regulatory measures stay in sync with the ever-evolving derivatives market. This is vital to safeguard the interests of retail customers and uphold a just and equitable environment.

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The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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