The human race has used some sort of currency since time immemorial. Starting with simple barter system in which humans exchanged commodities based on their requirements, the currency market has seen substantial developments in the last 50 years. Metals, animal skin, stones, etc., were being used as currencies in the last millennium. However, in the last decade, a digital currency which doesn't have a centralized authority has created ripples that has disrupted the global currency market. Cryptocurrency, which includes notable coins such as Ethereum, Bitcoin, amongst others, has gained traction in the last five years, and companies are increasingly starting to integrate crypto transactions in their arsenal, especially in countries like the U.S. and Canada. But, a major concern with crypto trading is the highly volatile nature of crypto currency value, and how the market fluctuates with regards to various political turmoil. For instance, the crytocurrency market faced considerable losses as the Chinese central bank decided to ban the operation of crypto transactions in the country in September 2021. The need for regulation to increase the accountability and transparency in the crypto currency market is a hotly debated subject amongst finance and banking professionals, and a major crypto trading platform, FTX, has generated a list of policies that can be used for the regulation of the cryptocurrency market in the coming years.
FTX, which is a crypto currency exchange platform built by a group of finance traders, has issued a document titled, "FTX's Key Principles for Market Regulation of Crypto-Trading Platforms", a few days before the company's CEO and Founder, Mr. Sam Bankman-Fried, is expected to arrive at the House Committee on Financial Services hearing to discuss the challenges and opportunities of the future of digital finance in the coming years. The testimony will be presented on December 8th, 2021. Bankman-Fried reported that he wishes to engage in a discussion with the policy makers regarding the establishment of rules for ensuring a level playing field for the stakeholders, and believes that they can work with the lawmakers in the U.S. to reach a consensus with regards to crypto operation, which in turn would help in creating a uniform transaction code across the globe.
The summary of some of the suggestions put forward by FTX is given below:
- Creation of a primary market regulator, along with a single rule book for the listing of spots and derivatives:
- In the U.S., the CFTC regulates the commodity derivates, while the SEC regulates cash securities. This creates confusion in the long run. To avoid such a predicament in the crypto market, the company wishes to see a single market regulator that operates on the basis of a single rule book which is uniform across states, which in turn increases the pace of operation and helps to avoid further confusions with regards to compliance and reporting.
- Crypto Asset Disclosure and Custody :
- The crypto assets can be stored in a secure digital or physical wallet, and the rights to perform the custody should be on the shoulders of the asset owner or a representative authorised to perform custody by the asset owner. Key areas to address in this regard include insurance coverage, physical security of data centers, risk management in the case of fraud or collusion, amongst others.
- Regulatory and Market Reporting for Trading Platform Companies
- The providers of crypto trading platforms should ensure that the transactions are monitored regularly, and unfair trading practices are curbed at the earliest. This will ensure that the market supervisors receive ample vision to monitor the transactions to flag any suspicious activities.
About FTX:
FTX is a cryptocurrency exchange platform that is built by traders, for traders. The company offers innovative products, which include industry-leading derivatives, leveraged tokens, tokenized stocks, options, volatility products and prediction market. It strives to be an influential platform for all kinds of users, and to be the most innovative exchange tool in the industry.
For the detailed suggestions, please visit: https://blog.ftx.com/policy/ftx_key_principles/
It will be interesting to see the measures taken by the House committee in deciding the future of the crypto trading market in the coming years, based on the suggestions and recommendations received during the hearing.