CFTC Commissioner Christy Goldsmith Romero has expressed her intent to modernize investor protection through technological advances. Speaking at the North American Securities Administrators Association’s annual meeting in San Diego, California, Romero stressed that keeping pace with technology is essential for the safety of investors. Her remarks underscored that the application of such technology is not without its set-backs. To make informed policy decisions, it is imperative that regulators understand the technology and its implications for finance and law.
To expedite this progression, Romero has enlisted technology experts in FinTech, responsible AI, cryptocurrency, blockchain, and cybersecurity into the CFTC’s Technology Advisory Committee (TAC). The committee is charged with the duty of exploring methods of embedding Know Your Customer (KYC) and Anti-money Laundering (AML) protocols into decentralized finance and crypto investment circles. The TAC also has a mandate to advocate for responsible artificial intelligence (AI) development.
Romero urges that federal regulators are merely starting their exploration of AI, and that governance is an ideal starting point in making the important decisions that will greatly impact investors and markets. She further suggests that technological tools can aid in investigations that have moved away from primarily tracing trade activities to monitoring social media platforms such as X, Reddit and Facebook. These tools for tracing funds, crypto, utilizing the blockchain or link analysis, and employing social media and data analytic tools should be an integral part of a regulator’s toolkit.
Romero suggests that the statements made on social media platforms can be a potent testament of intent, and in turn, these platforms can be used by the regulators to issue warnings about scams and to protect investors. Romero mentions the remote possibility of financial fraud and introduces her solution to manage such risk. She proposes the establishment of a National Financial Fraud Registry, a centralized record of all crimes and fines associated with financial fraud. The registry would equip investors with background information on any ongoing investigations or fines imposed on companies for fraud.
In conclusion, a collaborative effort between the federal and state officials can yield significant improvements in investor safety. It’s crucial however that all crypto companies verify the the digital identity of users as this could assist in managing the associated risks. The final responsibility is ensuring these companies distance themselves from mixers and anonymity-enhanced technology, whilst still providing financial privacy for customers.
Source: Cointelegraph
