Key highlights:
- The CFTC has proposed a new crypto trading regulatory proposal.
- The regulator intends to bring a new registration category called “crypto asset market.”
- Market participants can submit their feedback on the proposal within 60 days.
The US crypto market may be witnessing a significant transformation as the Commodity Futures Trading Commission (CFTC) prepares to launch clearer rules. As CFTC Chair Michael Selig stated, the regulator has proposed a new regulatory framework for margined and financed crypto trading.
CFTC proposes clear regulatory framework for crypto trading
According to a press release shared by the CFTC, the agency has proposed a new crypto framework. These rules intend to bring clear rules to crypto exchanges that offer leveraged, margined, or financed trading to retail customers. The regulator aims to create a new registration category called a “crypto asset market,” providing more regulatory clarity for these platforms.
Reportedly, the CFTC’s new rules require crypto exchanges to maintain proof of reserves and use futures commission merchants to intermediate certain leveraged trades. The platforms will also be asked to meet new requirements when they offer margined or financed crypto products to retail customers. The rule also states that if a crypto exchange sends assets to a customer’s non-custodial wallet within 28 days, the CFTC may consider it as an “actual delivery.” Chair Michael Selig stated,
“Today’s action is a critical step in the CFTC’s ongoing efforts to ensure America remains the crypto capital of the world. The American people deserve clarity, certainty, and consumer… the agency is committed to delivering this by incorporating crypto asset transactions into its uniform national market regulatory framework…Under my leadership, the Commission will take every necessary step to establish regulations that are designed to prevent, rather than only prosecute after the fact, fraudulent schemes such as FTX.”
Spot crypto market remains outside CFTC’s full reach
Notably, the CFTC’s latest proposal could govern leveraged and complex crypto trading. But it does not actually cover the spot market. Spot trading is the direct buying and selling of assets at current market prices. Here, cryptocurrencies are exchanged without leverage or margin.
Thus, the CFTC’s rules, if implemented, will not oversee everyday crypto trading. Still, the agency has the power to act against fraud and market manipulation in these spot markets.
It is also important to mention that the new rules will not replace the existing state-level regulations that oversee direct crypto trading. According to the CFTC, companies offering more complex crypto products would be able to operate via platforms regulated by the agency.
Regulator seeks public feedback
Interestingly, the CFTC is also seeking public feedback on the new crypto rule proposal. The regulator has now given a 60-day period for market participants to submit their feedback on the framework. The agency is willing to hear public views on preventing abusive activities, providing clear regulations, and creating the new CAM registration category.
The public comments will help the agency decide the future rules. The information received from the market participants during the mentioned timeline will be used to inform potential rulemaking on crypto asset transactions and the CAM framework.
Source:: CFTC Unveils New Federal Framework for Leveraged Crypto Trading