The Commodity Futures Trading Commission is moving ahead with its own first round of crypto market-structure rules after Congress failed to advance the CLARITY Act.
Chairman Michael Selig noted that the existing statutory authority allows regulators to establish clearer rules without waiting for Congress.
It proposes a federal framework for exchanges trading assets including Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH).
What Does The Proposal Include?
CFTC is proposing Regulation Crypto Asset Transactions (Regulation CTX) and Regulation Crypto Asset Markets (Regulation CAM) to establish requirements for CFTC-registered exchanges that offer crypto assets for trading.
The proposals follow an earlier joint CFTC-SEC interpretation.
A broad group of crypto assets, including Bitcoin and Ethereum, are non-securities falling within the CFTC’s regulatory authority.
Unlike the CLARITY Act, however, the regulations would not require crypto assets to trade on CFTC-registered platforms because the agency lacks that authority without congressional action.
Instead, Selig said the framework would give crypto exchanges the option of operating under a single federal market-regulatory regime.
How Does It Benefit Retail Crypto Leverage?
One major feature of the proposed framework is the treatment of leveraged crypto trading.
CFTC-registered platforms could allow retail investors to trade crypto on a margined, leveraged or financed basis, distinguishing them from ordinary spot exchanges.
Federal oversight would also impose standards intended to
- Deter market manipulation and abusive trading
- Protect customer funds
- Address conflicts of interest
- Promote an orderly and transparent market
Selig contrasted that approach with state money-transmitter regimes whose frameworks were built primarily for payment providers rather than financial markets.
Why the Crypto ‘Regulation By Enforcement’ Era Is Over
Selig criticized the previous regulatory approach, arguing the CFTC and SEC relied too heavily on enforcement rather than creating rules tailored to crypto markets.
He pointed to the FTX collapse as evidence of the need for preventative federal regulation. The customer property held by FTX’s CFTC-registered subsidiary remained segregated and secure even as much of the broader group entered bankruptcy.
"Those days are over," Selig said, referring to efforts to make crypto exchanges register under legacy securities frameworks.
While additional CFTC crypto market-structure rules could follow, Selig noted “Today’s action is just the beginning.”
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