US commodities regulator proposes new federal crypto oversight rules

Oct 5 : The U.S. commodities regulator on Monday proposed a new federal framework for cryptocurrency exchanges that offer leveraged digital asset trading, in a move to bring parts of the spot crypto market under federal oversight weeks after Congress failed to advance comprehensive crypto regulation.

The U.S. Commodity Futures Trading Commission's proposed rules would effectively allow U.S crypto exchanges to opt into a federal regulatory regime instead of relying primarily on a patchwork of state money-transmitter licenses, the agency said.

Exchanges that opt into the new framework would comply with a uniform set of federal rules instead of complying with different regulatory regimes on a state-by-state basis, which many have previously argued is overly burdensome.

The proposed rules make use of a specific authority the CFTC has to oversee margined or leveraged spot assets. The CFTC has long sought authority to regulate the spot cryptocurrency markets - which currently operate in a regulatory grey area - but only Congress has the ability provide the regulator with that purview.

"For years, entrepreneurs building on the new frontier of finance faced uncertainty about whether there was a place for them in our markets. We are giving them an answer," said CFTC Chair Michael Selig in a speech Monday at an event held by Fordham University's law school.

Under the proposed rules, the CFTC would establish a new category of CFTC-regulated trading venues called a "crypto asset market" for exchanges that offer leveraged or margined trading to retail customers. Those platforms would be subject to specific requirements including anti-market manipulation controls and a "proof of reserves" obligation.

The CFTC is also proposing that customer trades on the new category of exchanges be intermediated through registered futures commission merchants.