CFTC Proposes Rules for Crypto Exchanges Leaving Self-Custody Out of Reach

The Commodity Futures Trading Commission (CFTC) has proposed new rules for crypto exchanges that would tighten oversight of custodial platforms while leaving self-custody and on-chain trading largely untouched. The plan, outlined in an advance notice of proposed rulemaking, introduces two frameworks: Regulation CTX and Regulation CAM. The public has 60 days to comment once the notice is published in the Federal Register.

Under Regulation CTX, exchanges offering leverage could face CFTC oversight if crypto assets remain on the platform rather than in the customer’s wallet. The agency suggests that holding private keys or using on-chain trading protocols might exempt trades from this oversight. The proposal also considers proof-of-reserves requirements and standards against listing manipulated tokens, but these are not yet finalized.

The new rules would create a clear divide in the US market. Exchanges keeping customer assets on their books and offering leverage would need a federal license, modeled after futures exchanges. These trades would involve futures commission merchants and brokers subject to anti-money laundering rules. Exchanges without leverage could continue operating under state money transmitter licenses.

The CFTC’s approach marks a shift from its past enforcement actions against platforms like Kraken, Ooki DAO, and Uniswap. The agency aims to prevent fraudulent schemes like FTX through proactive regulation. The SEC is also working on parallel rules, including its own Regulation Crypto Assets, but how the two frameworks will align remains uncertain.