Will Bitcoin and Crypto Cause the Next Global Financial Crisis?

CQFD, she would say – During her speech on October 26 at the International Swaps and Derivatives Association (ISDA) Crypto Forum, CFTC Commissioner Christy Goldsmith Romero discussed the risks that cryptocurrencies would pose to financial stability. Solution for regulations were then discussed.

From the birth of Bitcoin to risks to financial stability

Christy Goldsmith Romero there are began her speech emphasizing that she has learned cryptocurrency for law students in Georgetown Law School etc.University of Virginia School of Law.

Therefore, she would naturally be interested in cryptocurrencies. Indeed, her decade-long tenure as Special Inspector General of the Troubled Asset Relief Program (TARP) helped her discover Bitcoin.

Afterwards, the CFTC Commissioner recalled the origin of Bitcoin (BTC). It would “arise from the financial crisis of 2008 and the bailout of the banks”. At the very least, he would at least have been affected by this event.

In her speech, Christy Goldsmith Romero uses material from the introduction to show that the federal government should adopt a risk-focused approach. Purpose? Regulate cryptocurrencies.

Terra Tokens: Regulators’ favorite bad crypto student

To demonstrate that cryptocurrencies pose risks to financial stability, “with themes similar to those of 2008”The CFTC Commissioner expanded on the impact of the collapse of ecosystem tokens Earth.

TerraUSD, which was the third largest stablecoin by market capitalization, had seen its value drop to zero. of the consequences were then detrimental to other cryptocurrencies like Bitcoin. Terra Foundation executives have “probably” liquidated as much as $3.5 billion in BTC.

The Terra fire isn’t out yet, with bankrupt crypto firms still footing the bill

Christy Goldsmith Romero continued her demonstration, naming the other victims of this TerraUSD collapse. The list includes the resulting financial difficulties for Capital of three arrowsor Digital Travel.

In view of these recent events that have affected the sector, risk of contagionwhich partially caused the financial crisis of 2008, so it also applies to cryptocurrencies.

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A (allegedly) risky marriage between cryptocurrencies and traditional finance

Christy Goldsmith Romero insisted that the risk cryptocurrencies pose to financial stability will grow and could become “systemic”. In words ? Increasing interconnections between the crypto industry and traditional finance players, “who fulfill essential market functions”.

To illustrate this convergence between digital assets and traditional finance, Christy Goldsmith Romero cited the case of BNY Mellon. Bank of New York has announced the launch of a cryptocurrency custody service. It also indicated that public companies hold cryptocurrencies. By doing so, they indirectly expose their shareholders and creditors.

Regarding this approach between traditional finance and new finance, the CFTC commissioner expressed specific concerns in terms of investments that pension and pension funds may make in cryptocurrencies in the future.

Bitcoin regulation: more and more power and equal treatment

At the end of these demonstrations showing the risk cryptocurrencies pose to financial stability, Christy Goldsmith Romero wants Congress to give additional powers for the CFTC.

CFTC and Cryptocurrency Regulation
CFTC wants to play cop on crypto

The CFTC Commissioner emphasizes the need to implement these regulatory measures as soon as possible. She says the government should not wait for the risks she cited to become systemic before taking action.

Christy Goldsmith Romero also recommends implementing ” same risk, same regulatory outcome “. In other words, the crypto products currently under its jurisdiction should be subject to the same regulatory framework as traditional financial products.

CFTC officials continue to search increased powers to be able to regulate cryptocurrencies. The regulation itself is not harmful to the development of the sector. Indeed, the very use of this additional power over cryptocurrencies may worry companies in the sector. This concern is even more justified if the CFTC refuses to recognize the need for a specific framework for cryptocurrencies, instead applying to crypto products the provisions governing traditional finance without showing evidence of distinctiveness.

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