A commissioner at the Commodity Futures Trading Commission (CTFC) is weighing in on the risks associated with buying cryptocurrencies after Terra (LUNA) and its algorithmic stablecoin TerraUSD (UST) collapsed last month.
In an interview with CNBC, Caroline Pham host MacKenzie Sigalos that the LUNA and UST implosions were an important wake-up call for people who buy into crypto thinking it’s the path to easy money.
“When everything is going great, when the price keeps going up and everybody feels like they’re winning, then people are not aware of the risks.
I think that this happened, and it was a tragedy that it happened, but I think it also really was a reality check in showing just how risky some of these products can be, that they’re not guaranteed.”
Pham goes on to compare investing in newer digital assets to playing the lottery, while also indicating a desire to see more consumer protections put in place.
“I think if people started to think about some of these really novel crypto tokens as, frankly, lottery tickets… When you go and you buy a lottery ticket, you might strike it big and get rich quick, but you might not. But when people buy a lottery ticket, they don’t expect to win.
I think what I’m worried about is, without appropriate protections in place and the right disclosures, that people are buying some of these crypto tokens thinking they’re guaranteed to strike it rich.”
Commissioner Pham next points out that the CFTC first identified Bitcoin (BTC) as a commodity seven years ago, and says both Ethereum (ETH) and Litecoin (LTC) also fall under that umbrella.
“The CFTC first said that Bitcoin is a commodity back in, I think, 2015. It’s great that [U.S. Securities and Exchange Commission] Chairman [Gary] Gensler agrees with us.
The CFTC has over the years identified specific cryptocurrencies that are commodities. There’s Bitcoin, there’s Ethereum. There’s also Litecoin, we’ve identified that in one of our enforcement actions as a commodity.
I think what’s important to realize about the CFTC’s jurisdiction is that, of course, the SEC regulates securities, but for everything that’s not a security, it’s probably likely that the CFTC has some regulatory touch-point over it.”
The commissioner also recently immediate regulatory actions are needed to safeguard crypto traders from incurring the types of losses they did when LUNA and UST disintegrated to the tune of around $40 billion.
