CFTC Commissioner Romero Discusses Crypto Crisis of Trust
January 18, 2023
On January 18, 2023, Commissioner Christy Goldsmith Romero gave remarks at The Wharton School and the University of Pennsylvania Carey Law School in which she discussed the “Crypto’s Crisis of Trust: Lessons Learned from FTX’s Collapse.”
Commissioner Romero noted multiple lessons learned, including:
- Lesson 1: Financial markets are heavily dependent on public trust. Despite crypto’s origin as a trustless system, investors and customers have come to trust centralized exchanges for access to crypto markets.
- Lesson 2: FTX sought public trust by messaging itself and its founder as trustworthy. Celebrity endorsements and social media added to retail customers’ trust in FTX and other exchanges.
- Lesson 3: The digitization of financial services and products, which accelerated during the pandemic, brought convenience but also a presumed trust in crypto exchanges with name recognition—trust that FTX violated.
- Lesson 4: Good corporate governance, starting with tone-at-the-top, is necessary to establish and keep trust.
- Lesson 5: Gatekeepers failed customers in the unregulated crypto market.
- Lesson 6: There is also a trust deficit with venture capital firms, pension funds and other large equity investors who owe fiduciary duties to their clients to conduct due diligence.
- Lesson 7: Hackers will seek to exploit crypto companies with customer funds. Sound custody practices and strong cybersecurity are necessary to restore trust and protect customers.
CFTC Commissioner Romero also outlined seven “proactive steps for the digital asset industry to take in order to begin regaining trust.”
CFTC Commissioner Romero’s full statement can be found here – Statement.
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