A wide range of topics has been covered in the FTX proposal ranging from custody to stablecoin regulation to KYC and AML.
The United States arm of crypto exchange FTX has suggested some ‘principles’ for the regulation of the industry.
This proposal has come a few days before the Congressional hearing scheduled for December 8 wherein several crypto companies CEOs will testify before the House Committee on Financial Services.
The exchange published a blog on Friday titled “FTX’s Key Principles for Market Regulation”.
It talks about 10 principles covering topics ranging from the proposed regulator to custody to stablecoins.
FTX calls for a single unified regulator for the crypto market. Right now, the Commodity Futures Trading Commission (CFTC) regulates commodity derivatives marketplaces, whereas the Securities and Exchange Commission (SEC) is the primary regulator of cash securities marketplaces.
The exchange says that such a bifurcation of crypto market regulators can lead to inefficiency, as many exchanges host both spot and derivatives markets, which is not the convention in the US.
About the custody of the assets, the document reads that wherever custody is sought, the custodian should properly disclose the security of private keys, wallet architecture, insurance, etc.
In case the custodian uses third party services, for instance cloud storage, users should be informed about this. If any issue occurs with third parties, the custodian will be held responsible.
For stablecoins, it says an exchange must provide reasons for supporting a specific stablecoin. The logic provided for this is that some stablecoins “are exposed to reserve-volatility as well as redemption risk.” Users are entitled to know about those risks so that they can assess their risk management strategy.
The document also talks about the Know Your Customer (KYC) and Anti Money Laundering (AML) compliances and also calls for periodic self-audits along with regular review and examination by the primary regulator.
Consultation and deliberation are imperative to formulate a regulatory framework. Proposals from the stakeholders would also make the policymaking processes faster and efficient and also apprise the policymakers of the contemporary developments of the industry.
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