CFTC Chairman anticipates increase of regulated clearinghouses

The Commodity Futures Trading Commission of the United States is anticipating an increase of clearing houses. According to the Chairman of the CFTC, J Christopher Giancarlo, they are expecting more and more companies submitting applications to become federally-regulated clearinghouses. Giancarlo delivered a testimony to the US House Agriculture Committee earlier this week. During the testimony, he talked broadly about the increase of applications and stated that the reason behind it is an explosion of interest in digital currencies.

Clearinghouses are financial institutions that serve as intermediary parties between two entities and are responsible for facilitating transactions between them. They need to ensure trust on both sides of the transaction. The CFTC is regulating clearinghouses with the main goal to examine them closely and identify problems that might affect the ability of the financial institutes to do their job well.  As Giancarlo stated that the clearinghouses that are regulated under the CFTC are critical single points of risk in the whole global financial system as they continue to grow more complex. Giancarlo emphasized the importance of the examination of clearinghouses to increase overall financial stability, however, he also pointed out that CFTC will soon have an increased number of clearinghouses under its jurisdiction.

According to the chairmen due to the explosive interest in cryptocurrencies, the commission is anticipating more applications from the clearinghouses since this is the area where the protection of cryptocurrencies will be the highest risks. The commission is already regulating multiple clearinghouses in the United States as well as several of them that are located overseas.

CFTCs interest in cryptocurrencies

During the testimony, Giancarlo also mentioned fintech research group LabCFTC that works under the commission. According to the Chairmen cryptocurrencies and Blockchain technology are the two most important aspects of technological development and markets that are changing rapidly. The LabCFTC has been working to understand the role of cryptocurrencies. Additionally, the work done by the research group helped the commission to determine and understand the value of the technological innovations that also include cryptocurrency-based futures products.

CFTC has been interested in cryptocurrencies for a long time. The commission has been examining crypto-related companies closely and has revealed several Crypto Ponzi scams in order to ensure the proper and safe development of the industry in the US. Especially since the interest in cryptocurrencies has increased rapidly among the investors in the country. Many of them found crypto futures products as an alternative to investing in crypto-assets and spot trading during the bear market in 2018 and the beginning of 2019. Due to this, the number of platforms offering crypto asset futures has grown in the US since 2017 when two crypto platforms got an approval to offer crypto futures. Now since the interest is growing more it is expected that CFTC will satisfie the applications of new platforms and the number of regulated clearinghouses will grow.