CFTC Proposes Federal Framework for Leveraged Crypto Trading Platforms

The U.S. Commodity Futures Trading Commission on Monday proposed a new federal framework for cryptocurrency exchanges that offer leveraged digital asset trading, according to Reuters. The proposal would allow platforms to opt into a CFTC-regulated category instead of relying primarily on a patchwork of state money-transmitter licenses.

Under the plan, the agency would create a new type of regulated venue called a “crypto asset market” for exchanges that provide leveraged or margined trading to retail customers. Platforms in that category would face requirements including controls against market manipulation and an obligation to provide proof of reserves.

Intermediated trades and federal standards

The CFTC also proposes that customer trades on those venues be intermediated through registered futures commission merchants. Exchanges that choose the federal route would follow a uniform set of rules rather than complying with different regimes state by state, an approach the agency said would reduce the burden firms have described as overly complex.

The proposal relies on the commission’s existing authority to oversee margined or leveraged spot assets. According to Reuters, the CFTC has long sought broader authority over spot crypto markets, which currently operate in a regulatory gray area, but only Congress can grant that full purview. The move comes weeks after Congress failed to advance comprehensive crypto regulation.

CFTC Chair Michael Selig addressed the proposal in a speech Monday at an event held by Fordham University’s law school, according to Reuters. He said entrepreneurs in digital finance had faced uncertainty about their place in U.S. markets and that the agency was now providing an answer.

Reporting based on coverage by Reuters.