FTX Releases 10 “Commandments” for Crypto Regulation
Cryptocurrency exchange FTX has put forward a list of 10 principles and proposal to aide crypto regulation in the United States.
FTX’s proactive approach and recommendations come after Maxine Waters, the chair of the House Committee on Financial Services, recently invited several Executives of large crypto firms to testify on the topic of digital assets and the future of finance.
On their company blog, the exchange shares its “FTX’s Key Principles for Market Regulation of Crypto-Trading Platforms.”
Topping the list of improvements is the proposal to have one single regulator, responsible for the listings of crypto assets in spot and derivatives markets. According to FTX, the current regulatory system is too complex and creates inefficient and sub-optimal market structures.
“We propose as a solution an alternative regulatory approach that would provide market operators the ability to opt in to a unified regulatory regime for spot and derivatives marketplaces, through a primary regulator model.”
Custodial services of crypto assets are another priority on FTX’ list that requires attention. There needs to be a transparency and monitoring on how these assets are held on behalf of clients, the exchange stresses.
“Key areas of focus and disclosure should include: wallet architecture; whether insurance is provided by the custodian; how private keys are kept secure, managed and transferred; managing risks related to insider collusion or fraud; and physical security of data centers.”
FTX also notes the urgency for clarity on stablecoins, with some stablecoins possibly being insufficiently backed.
“For example, a stable coin backed by risky and volatile assets and not transparently backed by an adequate amount of such assets with appropriate haircuts, could become exposed to price risk. This price risk could interfere with settlement finality on the platform, insofar as the value of the stable coin delivered as payment for the crypto assets in a transaction on the platform are suddenly not equal.”
Concluding their shortlist of improvements, FTX suggests standardized know-your-customer (KYC) and anti-money laundering (AML) protocols for the crypto industry.
“However accomplished, it is critical that crypto marketplace regulation continues to require significant focus on the performance of KYC and AML obligations. To ensure this, marketplace operators should be performing periodic self-audits and should also be subject to regular review and exam by their primary regulator on these requirements.”
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Author: Peter Siu