USA Trends and Developments Contributed by: Andrea S Kramer, ASKramer Law
While the opportunities “to do better” and to update disjointed regulatory frameworks are all around us, this article ends with a serious note of caution. The cur - rent regulatory and institutional checks and balances that govern the US financial markets were initially an outgrowth of the Great Depression in the 1930s and subsequent market events like those of 1987 and 2008. We learned from each one, and corrected for under-regulated and over-leveraged derivative portfo - lios. Huge, tangible worldwide damage in those crash - es was also seen. Major companies folded, nations declared bankruptcy, millions of everyday investors got burned, and co-ordinated, massive-scale central bank interventions were required to calm the markets. Even with such enormous interventions, the repercus - sions in the US markets (housing, in particular) contin - ued for years. At present, strong systems of oversight govern securities and commodities transactions that seek to double-check and back-stop one another through the various regulatory frameworks. History casts a long shadow, so US regulators have moved forwards cautiously.
The efforts of the current administration may be applauded. “Fit for purpose” regulations have never been more critical for the US derivatives markets than they are today. When the derivatives markets were out of step with their regulatory frameworks, legisla - tive and regulatory changes resulted. As the crypto markets go mainstream, we are in uncharted territory. Derivatives policies and markets should be closely monitored. We must ensure that the next phase of US derivatives regulation can and does appropriately keep pace with business innovation, and that we get the regulatory framework right for crypto derivatives. The competitiveness of the US financial markets depends on it. After all, we are at a place in time where it looks like the crypto “tail” is wagging the derivatives markets “dog”.
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