- Former SEC Chairman Jay Clayton is still optimistic about the potential of cryptocurrencies despite the FTX turmoil.
- Clayton touted the “potential of distributed ledger technology” in an interview with Goldman Sachs.
- The former SEC Commissioner also analyzed three ways regulators could better oversee the space.
Former US Securities and Exchange Commission Chairman Jay Clayton is optimistic about blockchain technology’s potential to improve the traditional financial system, even as turmoil continues to weigh on cryptocurrency markets. .
Despite last month’s plunge in FTX, Clayton said, “The potential for distributed ledger technology is astounding given the number of transactions that are happening 24/7 around the world.” increase. (Clayton mentions blockchain’s ability to conduct cross-border transactions, along with faster trade settlement than traditional stocks.)
In an interview with Goldman Sachs, Clayton said, “This underscores the enormous opportunity to improve the efficiency of traditional financial markets.
FTX, once a $32 billion crypto empire started by Sam Bankman-Fried, filed for bankruptcy protection last month. With about $8 billion in client funds missing, his FTX backers, including some of the largest venture capital firms, have written their investments down to zero.
Bankman-Fried was arrested in the Bahamas this week on charges including money laundering conspiracy, campaign finance violations and wire fraud. US prosecutors have accused the disgraceful founder of orchestrating a years-long scheme to defraud investors.
SEC Chairman Gary Gensler said: “Sam Bankman-Fried claims he built a house of cards based on deception while telling investors it was one of the safest buildings in cryptocurrency. there are,” he said. statement on tuesday.
Influenced by FTX, regulatory oversight of digital assets has become a top priority.
In a Goldman Sachs report, former chairman of the Commodity Futures Trading Commission (CFTC) Timothy Masad argued that a lack of regulatory clarity was hurting the industry, and Clayton echoed that view. We call it “garbage”.
According to Clayton, there are three things regulators can do to crack down on bad behavior in this area.
1. The SEC and CFTC should require all cryptocurrency intermediaries to adhere to a basic set of customer protections.Meanwhile, “the classification problem that many entities have exploited has been resolved,” says Clayton.
“[This] It could easily draw from the existing requirements of US stock exchanges and derivatives exchanges, and mandate that all crypto exchanges follow them if they are not already registered with the SEC or CFTC.
2. Regulators need to crack down on existing digital asset regulations ‘vigorously’ Such as forcing the platforms trading securities to comply with SEC rules.
“The SEC crackdown on unregistered initial coin offerings (ICOs) that I oversaw was necessary because these offerings ignore public offering rules and don’t even provide basic financial information or risk disclosure. Because there are a lot of things,” Clayton said.
“Both the SEC and CFTC have taken various actions against unregistered or illegal products, Ponzi schemes, and other frauds and should continue to do so.”
3. Stablecoins need to be compliant.
Algorithmic stablecoin TerraUSD, which was touted as a way to keep assets safe while earning yield, also went bankrupt earlier this year. This has caused many retail investors who used cryptocurrencies as high-yielding savings accounts to lose a lot of money.
“Many stablecoins, much like cash equivalents do to traditional financial intermediaries, have volatile characteristics often associated with regulated counterparties and credit risks,” Clayton said. Banking regulators “can take the lead on this,” he added.