LedgerX highlights CFTC regulatory gap in customer asset rules


The United States Commodity Futures Trading Commission (CFTC) has turned its attention to how companies handle customer assets.

The recent CFTC proposal seeks to enhance the rules for futures commission merchants (FCMs) and derivative clearing organizations (DCOs). These companies are now required to invest customer funds in highly liquid assets. However, the revised rules do not account for LedgerX’s unique operational model.

LedgerX operates as a DCO, establishing direct connections with clients and deviating from the conventional role of FCMs as intermediaries.

Screenshot of CFTC’s proposed rule. Source: CFTC

CFTC Commissioner Kristin Johnson has raised concerns, highlighting that the regulatory framework lags behind the industry’s rapid evolution. LedgerX, which was previously affiliated with FTX and is currently a part of Miami International Holdings, operates in a unique sector by providing direct client access, deviating from established industry conventions.

Furthermore, LedgerX has garnered attention for its efforts to directly settle cryptocurrency transactions for clients, diverging from the conventional practice of involving intermediaries. The company has successfully obtained several CFTC registrations, reinforcing its operations with enhanced consumer safeguards, such as asset segregation.

Importantly, Commissioner Johnson advocates for a revised regulatory framework that would provide uniform protection for retail clients, regardless of whether they trade through intermediaries or directly with non-intermediated DCOs such as LedgerX.

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This appeal for action coincides with the public being granted a 75-day window to offer feedback on the proposal. This period of contemplation and dialogue has the potential to guide the CFTC in addressing the regulatory deficiencies pointed out by Commissioner Johnson.

Hence, it becomes the responsibility of the CFTC to guarantee that regulatory measures remain aligned with the constantly changing derivatives market. This commitment is essential to protect the interests of retail customers and maintain a level and fair environment in this swiftly transforming digital financial arena.

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