A leading cryptocurrency exchange, FTX, that offers derivatives and spot trading has released a wishlist of the regulations and hopes to see in the United States as its CEO Sam Bankman-Fried will be testifying before the House Financial Services Committee on December 8. The exchange has posted a new blog post describing its "Key Principles for Market Regulation of Crypto-Trading Platforms."

Firstly, Cryptocurrency Exchange FTX wants a single primary market regulator responsible for listing crypto assets in the spot and derivatives markets. It states spot and derivatives markets are subject to different regulations, which generate inefficient and suboptimal market structures.

As a solution to this issue, FTX proposes a primary regulator model that would allow market operators "to opt in to a unified regulatory regime for spot and derivatives markets."

FTX also cites practices regarding the custody of crypto assets on behalf of clients, saying that it should be more transparent about how funds are handled behind the scenes.

Several areas require attention and disclosure, including wallet architecture, insurance provided by custodians, how private keys are managed, saved, transferred, and protected from fraud, insider collusion, and physical security of data centers.

In addition to recommending standards for stablecoins, FTX states that some stablecoins may not be sufficiently backed by real assets.

The platform could be impacted by price risk if a stable coin is backed by risky and volatile assets and "not be transparently backed by an adequate amount of such assets with appropriate haircuts." This could be harmful to settlement finality.

At the end of its list of proposals, FTX suggests standardizing  KYC and anti-money laundering (AML) protocols for the crypto industry.

The regulation of crypto marketplaces should continue to place a high priority on the performance of KYC and AML obligations. For this to happen, operators should be performing periodic self-audits and regular reviews by their primary regulator.

Pavan A

CBW - External Analyst

INDIA