CFTC Commissioner: Investor protection needs blockchain

CFTC Commissioner Christy Goldsmith Romero delivered a warning about the need for regulators to modernise investor protection measures in the face of rapidly evolving technology. Speaking at the North American Securities Administrators Association’s annual meeting in San Diego, California, she stressed that not maintaining pace with technological advancements would ultimately harm American investors, particularly those most vulnerable.

Romero emphasised the importance of regulators with a solid understanding of emerging technologies and their implications for the financial and legal sectors. As policymakers grapple with decisions related to next-generation technology, she urged a strong foundation of technological knowledge.

Romero took proactive steps by appointing experts in various technology domains to the CFTC’s Technology Advisory Committee (TAC). This is part of efforts to boost investor protection and enhance oversight. Experts specialising in fields like FinTech, responsible artificial intelligence (AI), cryptocurrency, blockchain, and cybersecurity are tasked with finding ways to integrate Know Your Customer (KYC) and Anti-Money Laundering (AML) processes into decentralised finance and cryptocurrency investments.

“As regulators are making policy decisions on next-generation technology, it is critical that we have a foundational understanding of the technology, and its implications for finance and law… All crypto companies can distance themselves from mixers and anonymity-enhanced technology, while still appropriately providing financial privacy for customers.”

The TAC is also responsible for advocating responsible AI development. Romero stressed the importance of governance in AI decision-making, especially concerning matters that affect investors and market stability.

Romero highlighted the evolving nature of federal crypto investigations, shifting from trade activity tracking to monitoring social media platforms like X (formerly Twitter), Reddit, and Facebook.

To aid investigations into investor protection, she advocated the use of tools such as blockchain analysis, link analysis, and data analytics, as well as monitoring social media posts and tweets, which can serve as strong evidence of intent and be used for regulatory warnings and investor protection.

Romero proposed the establishment of a National Financial Fraud Registry as a way to mitigate financial fraud and enhance transparency. This registry would serve as a centralised database containing records of all financial crimes and fines related to fraud. Romero believes that the creation of such a registry would empower investors to safeguard themselves against financial fraud more effectively.

Investors could use this resource to conduct background checks on companies and assess ongoing investigations or fines for fraudulent activities.