CFTC Writes Own Crypto Rules After Senate Rejects Clarity Act

The Senate recently failed to advance the CLARITY Act, which aimed to provide a federal framework for regulating digital assets. Despite this setback, the Commodity Futures Trading Commission (CFTC) has moved forward with its own rulemaking package, submitting it to the White House's Office of Information and Regulatory Affairs.

The CFTC's proposal, titled 'Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets,' is currently at the prerule stage. This means there is no published rule text, comment deadline, or effective date yet. However, the filing did not come out of nowhere, as CFTC Chairman Michael S. Selig had previously directed staff to explore rules that could create a CFTC market structure for crypto assets under existing authority.

The proposed rules would allow current registrants and crypto exchanges to seek designation as a type of designated contract market (DCM) for crypto trading done on margin or with borrowed money. This is a narrower approach than what the CLARITY Act would have achieved, but it still represents a significant step towards regulating digital assets.

The CFTC's move comes after the SEC had already proposed its own Regulation Crypto Assets, which was published in the Federal Register on August 21 with comments due October 20. The industry is now facing a queue of regulatory proposals, rather than a single clear framework for crypto regulation.