CFTC commissioner suggests that new crypto coins be seen as lottery tickets
CFTC commissioner Caroline Pham has urged investors to view crypto tokens as a lottery ticket where they may anticipate gains or losses after the collapse of Terra coins.
Most crypto projects lack consumer disclosures, and investors purchase assuming they are ‘certain to strike big,’ Pham said in an interview with CNBC on May 27.
Some of these truly unique crypto tokens may be seen as lottery tickets if people were to think of them as such.” In the lottery, you may hit it big and become wealthy soon, but you might not,” said Pham. “When you go and purchase a lottery ticket.” “The Terra Coin Crash was a Tragedy for Markets and a Reality Check for Stakeholders,” Pham said.
Shadow banking might make a comeback
A prospective resurgence of shadow banking, where financial transactions are assisted by uncontrolled intermediaries or occur under unregulated conditions, may have been signalled by the collapse of the UST, according to the commissioner.
Aside from stablecoins, the United States has taken some early measures to control digital currencies, but Pham said that standard financial regulations might also be applied to the crypto markets.
If you already have a regulatory framework in place, it’s always easier to put it in place.” Simply widening the regulatory perimeter to include newer, unique items is all you’re talking about,” she said.
Stablecoin restrictions in the United States have long been a source of controversy, with various groups perceiving them as a danger to the financial system before UST’s demise. Pham, on the other hand, believes that the uncertainty around stablecoins must be clarified.
Algorithmic stablecoins, as well as the subset of algorithmic stablecoins, should be subject to regulation and legislation to establish if they are derivatives.
When the Terra ecosystem collapsed, Pham said, it should be enough for politicians to establish the correct legislation because of the introduction of cryptocurrency.
Wall Street Reform and Consumer Protection Act of 2010 was mentioned as an example by the CFTC official. Additionally, the bill placed limitations on trading activities and derivatives under regulation.