CFTC Commissioner Johnson defends agency approach to FTX, crypto

Kristin Johnson, a commissioner at the Commodities Futures Trading Commission, defended the agency's approach to digital asset regulation in the wake of FTX's collapse, saying the agency lacked authority to fully supervise the crypto industry.

‘’CFTC lacks spot market jurisdiction for digital assets, plainly stated,’’ she told a City and Financial Global crypto policy conference in London.

One part of the FTX group that the CFTC did oversee, a crypto derivatives platform called LedgerX, had not been included in the bankruptcy filing, Johnson noted.

She explained how the agency had earlier required LedgerX to put in place new internal monitoring and other processes in order to meet regulatory standards.

''We have, right now, boots on the ground at LedgerX. We are directly and effectively monitoring on a daily if not hourly basis verifying what we believe to be the case, that every dollar of customer assets held at LedgerX are accounted for.''

The collapse of FTX led to heated debates in Congress over how best to regulate the crypto industry. FTX's main operation was based outside the U.S. and licensed in the Bahamas, though the company also had a sizable U.S. trading platform. 

The firm filed for bankruptcy last Friday with subsequent filings confirming multibillion-dollar holes across balance sheets, due to a "complete failure of corporate controls." FTX founder and former CEO Sam Bankman-Fried is actively attempting to undermine the bankruptcy process through public communications and a competing Bahamian bankruptcy process, outside attorneys and a new CEO hired by FTX argued in court today. 

U.S. lawmakers are currently reviewing several pieces of legislation designed to create a more robust regulatory framework for digital assets. 

Johnson said the CFTC walked a fine line when it came to overseeing crypto firms as it didn't have the power to force many of them into the agency's regulated space.

She also argued that the definition of digital assets in the context of bankruptcy proceedings remains unclear. Many digital assets are considered securities under U.S. law, while bitcoin itself has been defined and regulated as a commodity, due to its lack of a central ownership structure or common enterprise.