CFTC Proposes Crypto Exchange Rules Using Existing Powers After CLARITY Act Fails

CFTC moves ahead on crypto rules without Congress

The US Commodity Futures Trading Commission is moving forward on crypto regulation without help from Congress. CFTC Chair Michael Selig made the announcement on Monday, October 5, at the Fordham Law Blockchain Regulatory Symposium.

Selig said the agency is acting at the direction of President Donald Trump, who has said the United States will get a crypto market structure "with or without legislation" from Congress. The CFTC is relying on powers it already has under existing law.

What Selig announced

• The CFTC issued an advance notice of proposed rulemaking. This is the first public step that lets companies and the public see a draft rule and comment on it before it becomes final.
• The notice covers companies that let retail customers trade crypto on a margined, leveraged, or financed basis. Selig called the proposed regulation "CTX."
• The agency plans to create a new kind of designated contract market, or DCM, called a "crypto asset market" (CAM). A DCM is a regulated futures-style trading venue. Certain exchanges could choose to register under this new category.
• The goal, according to Selig, is a single national rulebook instead of companies facing a patchwork of rules from individual US states.

Selig said in his written remarks: "These rules would codify a pathway for crypto asset exchanges to operate under uniform national oversight by the CFTC pursuant to the same statutory authorities that the prior administration instead utilized to regulate by enforcement."

What the proposal leaves out

The rules would not cover ordinary spot crypto exchanges, where people buy and sell coins such as Bitcoin directly with their own funds. Selig said those venues are generally regulated under state money transmission laws, which are separate state rules for moving money on behalf of customers.

The CFTC would still keep the power to go after fraud and market manipulation by companies that offer spot trading, Selig said.

Reaction outside the agency

David Tawil of ProChain Capital, writing on LinkedIn on Monday, said: "The opponents to CLARITY may have not bargained for the seeming readiness of the executive branch to act in the absence of any constraint from the legislative branch." That is his view, not a regulator's statement.

Why the CLARITY Act failed to pass

Selig's announcement came a few weeks after lawmakers in the US Senate failed to approve passage of the Digital Asset Market Clarity Act, or CLARITY Act. The bill was expected to give the CFTC more authority over crypto oversight and enforcement.

The Securities and Exchange Commission had already announced its own proposal in August: a "tailored securities offering regime" for crypto assets. That came before the CLARITY vote failed.

Few commissioners left at both agencies

Friday was the last day for SEC Commissioner Hester Peirce, who wraps up eight years of service just ahead of an 18-month extension for her second term. Her departure leaves two commissioners leading the SEC, while Selig is the sole commissioner and chair of the CFTC.

A White House official told Cointelegraph last week that Trump planned to nominate commissioners to both agencies "in the near future." As of Monday, the administration had not announced replacements for Peirce or the other six commissioner seats.

What is confirmed and what is not

Confirmed: the CFTC issued an advance notice of proposed rulemaking on retail margined, leveraged, and financed crypto trading; Selig announced a planned crypto asset market category; and the proposals rely on existing CFTC authority. Selig's speech and remarks were the primary source.

Still unclear: the source does not give a timeline for public comment, a date for final rules, or details on how companies would choose between CFTC registration and state licensing. It also does not say whether Trump has formally directed the action, only that Selig described it that way.

Sources

• Cointelegraph
• CFTC — Remarks of Chairman Michael Selig

Read also: CFTC Proposes Two Crypto Rules, but Spot Trading Still Falls Outside Its Reach

Read also: CFTC Staff Clear Fast Track for Turning Stock-Index Futures Into True Perpetuals