CFTC Proposes New Rules to Regulate Crypto Exchanges Nationally

The Commodity Futures Trading Commission (CFTC) has unveiled a plan to bring crypto exchanges under federal oversight with two new regulatory frameworks: Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM). The proposal aims to create a new type of federally regulated "crypto asset market" for exchanges. Under Regulation CTX, the CFTC suggests that even fully paid trades could fall under its oversight if leverage is offered, unless customers take actual delivery of their crypto, such as holding their private keys.

Exchanges that do not offer leverage could continue operating under state licenses. The CFTC is considering proof-of-reserves requirements and standards against listing tokens prone to manipulation. The agency's goal is to prevent fraudulent schemes like the collapse of FTX. CFTC Chairman Michael Selig stated that the rules are designed to prevent fraud rather than prosecute after the fact.

The proposal follows the failure of the Clarity Act, which would have established ground rules for most cryptocurrency activity in the U.S. The CFTC sent the framework to the White House for review in September and is now seeking public comments for 60 days once the notice appears in the Federal Register. The SEC has also been moving on a parallel track with its own regulatory proposals.