Crypto Echoes Risks of 2008 Financial Crisis, Says US CFTC Commissioner

Christy Goldsmith Romero says CFTC oversight would be an answer to potential financial stability risks brewing in the industry.

AccessTimeIconOct 26, 2022 at 6:03 p.m. UTC
Updated Oct 27, 2022 at 8:46 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Though the crypto industry is a sliver of the overall U.S. financial system, the “growing interest by traditional finance” firms should put regulators on notice of dangerous risks to come, said Christy Goldsmith Romero, a commissioner with the U.S. Commodity Futures Trading Commission.

“Financial stability risk will increase and could rise to the level of systemic risk if, in the future, there are greater interconnections between the crypto industry and traditional finance players performing critical market functions,” the commissioner said Wednesday at an International Swaps and Derivatives Association conference in New York.

Just as other current U.S. regulators have argued, the crypto industry echoes certain elements of finance in the runup to the 2008 global meltdown, said Goldsmith Romero, who is the lead commissioner for the agency’s technology advisory committee.

“Cryptocurrency was supposed to break from the traditional financial system, and all of its fragility and vulnerabilities,” said Goldsmith Romero, who occupies one of the Democrat-appointed seats on the five-person commission that oversees derivatives trading. “However, this spring unregulated crypto markets revealed their vulnerabilities to similar financial stability risks as traditional finance, with parallel themes from the 2008 financial crisis.”

While suggesting the U.S. shouldn’t rush regulations, she did offer the CFTC as the answer for dealing with the industry’s risk.

“Congress can address financial stability risks by providing additional authority to the CFTC,” she said, supporting a “same risk, same regulatory outcome” approach to establishing crypto rules that would treat the industry the same as other sectors of the financial system.

The CFTC is gaining momentum in Congress to become the primary regulator for crypto trading in multiple bills that would give CFTC the authority over the spot market – or the markets in which the actual tokens trade between investors.

Goldsmith Romero recently told CoinDesk she’s also working on proposing a new definition for "retail investors" in crypto, as the CFTC is poised to potentially start policing a wide swath of digital assets trading. The new definition would require more safety measures for non-professional investors at the lower end of the spectrum.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.