On 24 January 2025, the United States Commodity Futures Trading Commission (US CFTC) Commissioner Kristin Johnson delivered a keynote address at the University of Chicago Law School, titled Charting the Future of Financial Regulation. Her speech focused on financial technology, with a strong emphasis on digital assets and artificial intelligence (AI). Commissioner Kristin Johnson spoke about the need for clear regulations, investor protections, and governance in digital asset markets. Her remarks followed recent Executive Orders from the new administration on AI and cryptocurrency.
Commissioner Kristin Johnson spoke about how technology is changing financial markets, particularly in digital trading, algorithmic models, and decentralised finance (DeFi). She said that while these developments bring new possibilities, they also create risks such as fraud, financial instability, and market manipulation. She also called for regulatory measures that would apply the same safeguards to digital asset markets as those used in traditional finance.
She further stated that regulators must take a forward-looking approach to ensure that digital markets operate under clear rules. The main goal, she said, is to create a system that allows innovation while protecting investors and market stability.
Digital assets have grown rapidly, drawing interest from institutional and retail investors. However, the lack of regulation has led to market failures, fraud, and financial losses. The collapse of major crypto firms in 2022 showed that many platforms had poor financial management and weak investor protections.
Commissioner Kristin Johnson pointed out that the recent Executive Orders on AI and cryptocurrency show that the administration wants to bring more structure to these markets. She said that new regulations should focus on key areas like customer fund protections, corporate governance, and anti-money laundering (AML) compliance.
The 2022 collapse of major crypto firms highlighted weaknesses in the digital asset industry, with poor financial practices leading to substantial investor losses. In response, regulators, including the US CFTC and the United States Securities and Exchange Commission (US SEC), intensified efforts throughout 2023 and 2024 to define the legal boundaries of digital assets, holding public consultations and increasing enforcement actions. In January 2025, the new administration issued Executive Orders prioritising AI and digital asset regulation, indicating a shift towards greater oversight. On 24 January 2025, Johnson delivered her keynote address, where she called for a clear regulatory framework to address the risks in digital asset markets.
Johnson said that digital asset firms should be required to segregate customer funds from company assets to prevent mismanagement. She explained that many of the failures in the crypto industry were due to firms mishandling investor funds, and that separating customer money from operational funds would provide better protection.
She also spoke about the need for stronger corporate governance standards. She called for digital asset platforms to implement internal controls, independent oversight, and risk management committees. According to her, these structures already exist in traditional finance, and digital asset firms should follow the same rules.
Anti-money laundering (AML) and know-your-customer (KYC) compliance were also a major focus of her remarks. She argued that strengthening these regulations would help prevent fraud and illicit financial activity within the digital asset industry. Johnson noted that the lack of standardised compliance practices in crypto markets had allowed bad actors to exploit regulatory gaps.
She also said that interagency coordination would be essential in ensuring effective regulation. She urged the US CFTC, US SEC, and other financial regulators to work together to establish consistent rules and enforcement strategies for digital assets. Without coordination, she warned, regulatory uncertainty could continue to slow the development of a structured digital asset market.
With the establishment of the Presidential Working Group on Digital Asset Markets under the National Economic Council and the appointment of a Special Advisor for AI and Crypto, Johnson expects regulatory changes to take shape over the coming months. While she acknowledged that drafting and passing comprehensive regulations would take time, she said that immediate steps could be taken to enforce baseline protections, particularly in fund segregation and governance structures.
(Source: https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson15)
