CFTC Proposes New Rules for Leveraged Crypto Trading Platforms

The US Commodity Futures Trading Commission (CFTC) has proposed new federal rules to regulate leveraged crypto trading platforms. Announced by CFTC Chairman Michael S. Selig on October 5, the framework aims to provide clearer oversight for crypto exchanges offering leveraged trading to retail customers. The proposals, Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM), are open for public input.

The new framework would offer a federal option for crypto exchanges, allowing them to operate under CFTC regulations instead of state licenses. Platforms offering leveraged, margin, or financed crypto trading would fall under the second category of the CFTC’s three-level market structure. Exchanges could register as a new type of derivatives exchange called a crypto asset market (CAM) to offer these products.

The proposed rules include customer protections such as market surveillance, financial safeguards, and requirements for customer funds. The CFTC is also considering proof-of-reserves rules for exchanges holding customer assets in omnibus accounts. Futures commission merchants (FCMs) would handle customer accounts and funds, ensuring compliance with anti-money laundering and customer identification rules.

Selig emphasized that the framework is a step towards bringing crypto asset markets under the protections of the Commodity Exchange Act (CEA). However, the proposal does not create a full federal crypto regime, as Congress would still need to decide on mandatory federal registration for all exchanges.