Inside the CFTC’s New Rules for Crypto Asset Markets

The US Commodity Futures Trading Commission (CFTC) recently released comprehensive guidelines for crypto market trading.

Notably, Chairman Mike Selig formally announced the proposal on October 5, following an initial confidential White House review. It honors a commitment that the agency, alongside the US Securities and Exchange Commission (SEC), made to provide regulatory directives for the crypto industry following the collapse of the CLARITY Act.

CFTC crypto regulation proposal details

Under this recommendation, CFTC-registered crypto exchanges would comply with the rules within, rather than the traditional securities models that often come across as restrictive and poorly designed for digital asset markets. 

The two proposals covered are:

1. Regulation Crypto Asset Transactions (Regulation CTX)

This framework focuses on the derivatives and financing layer of the crypto industry. It regulates retail crypto trading using borrowed funds, leverage, and margin under Section 2(c)(2)(D) of the Commodity Exchange Act.

Here, the agency says it will recognize crypto purchased and sent to non-custodial wallets as an “actual delivery” if the transaction is completed within 28 days. This keeps normal crypto buying and self-custody away from heavy exchange regulation.

2. Regulation Crypto Asset Markets (Regulation CAM)

This framework targets the market structure and platform registration. Here, the CFTC proposes new customized and optional federal licenses for crypto exchanges under its Designated Contracts Management (DCM) system.

The license would mandate strict platform operational protections, including proof-of-reserves audits, anti-money laundering safeguards, and mandatory intermediation by the commission’s merchants.

Its biggest advantage is giving these exchanges an option to bypass State-by-State rules by adopting a single federal registration. Even more, such a license allows these entities to offer retailers financed or leveraged trading – both of which are prohibited at the state-level spot market trading. 

While federal and state license benefits differ, the CFTC will have ultimate oversight across the entire system.

What Next?

Stakeholders, industry participants, and the public will have a 60-day commentary period following the proposal’s publication in the Federal Register.

While a positive development on the regulatory front, industry lawyers warn that the guidelines lack permanence. They are prone to alterations with regime changes at the agency and presidential levels.