Something has to give and regulations may be the only way.
•CFTC Chair Rostin Behnam told Senators today that his agency needs more power to regulate crypto, saying that cryptocurrency is “potentially a threat to national security.”
• This comes after the collapse of FTX and the fall of its disgraced founder Sam Bankman-Fried.
• Part of FTX’s downfall was due to the exchange allegedly using customer money (without them knowing) to make bets through Alameda Research, a trading firm also set up by ex-FTX CEO Sam Bankman-Fried.
• Behnam said that his agency needs registration of exchanges; surveillance of market activity; and direct relationships with custodians who are holding customer money so they can prohibit and prevent money moving around that’s not house money.
In the wake of the collapse of FTX and the fall of its disgraced founder Sam Bankman-Fried, cryptocurrency is once again under scrutiny. This time, it’s for its potential to pose a threat to national security. CFTC Chair Rostin Behnam told Senators today that his agency needs more power to regulate crypto, saying that cryptocurrency is “potentially a threat to national security.” Behnam said that the CFTC is limited in its ability to regulate crypto because it does not have direct oversight of exchanges.
He called on Congress to give the agency more authority to police the markets. “Right now, we only have consumer protection authority over derivatives transactions,” he said. “We don’t have direct supervision of exchanges. So we need Congress to clarify our authority.” He also warned that Initial Coin Offerings (ICOs) are “highly speculative investments” and urged caution for investors. “Many ICOs are being conducted illegally,” he said. “They’re often frauds.”
Calls for more regulation of cryptocurrency exchanges are growing louder, with Behnam saying that his agency needs registration of exchanges; surveillance of market activity; and direct relationships with custodians who are holding customer money so they can prohibit and prevent money moving around that’s not “house money.” Let’s take a closer look at why Behnam’s concerns are warranted and what steps need to be taken to protect consumers and national security.
The Dangers of Unregulated Cryptocurrency Exchanges
In the wake of the collapse of FTX and the fall of its disgraced founder Sam Bankman-Fried, cryptocurrency is once again under scrutiny. This time, it’s for its potential to pose a threat to national security. CFTC Chair Rostin Behnam warned that without proper regulation, cryptocurrency exchanges could be used to launder money or finance terrorists. This is a valid concern, especially in light of the recent news that FTX was allegedly using customer money to make bets through Alameda Research, a trading firm also set up by ex-FTX CEO Sam Bankman-Fried.
Calls for more regulation of cryptocurrency exchanges are growing louder, with Behnam saying that his agency needs registration of exchanges; surveillance of market activity; and direct relationships with custodians who are holding customer money so they can prohibit and prevent money moving around that’s not house money. Let’s take a closer look at why Behnam’s concerns are warranted and what steps need to be taken to protect consumers and national security.
The first thing to understand is how cryptocurrency exchanges work. These exchanges are platforms where people can buy and sell cryptocurrencies like Bitcoin or Ethereum. The problem is that these exchanges are largely unregulated, which means there isn’t much stopping bad actors from using them for nefarious purposes. For example, an exchange could be used to launder money or finance terrorism without detection because there aren’t any reporting requirements in place.
This is clearly a problem, but it’s one that can be solved with proper regulation. By requiring exchanges to register with the government and putting into place Know Your Customer (KYC) guidelines, we can go a long way toward ensuring that these platforms aren’t being used to commit crimes. In addition, increased surveillance of market activity will help spot any unusual activity that could be indicative of criminal behavior. And finally, developing direct relationships with custodians who are holding customer funds will allow authorities to track where money is going and prevent it from being moved around without approval.
The bottom line is that we need more regulation of cryptocurrency exchanges if we want to protect national security. These steps will go a long way towards ensuring that these platforms aren’t being used for illegal activities like money laundering or financing terrorism. There are some that believe that adding too much regulation would damage crypto completely. The argument is still going on but the consensus indeed is that something must be done and crypto as we knew it will need a new evolution if it is meant to continue.
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