The United States CFTC solicits public opinions on the encryption trading rules under the frameworks of CTX and CAM.
The Commodity Futures Trading Commission (CFTC) of the United States has launched a public consultation on two crypto regulatory frameworks – Regulation CTX and Regulation CAM. Written comments must be submitted within 60 days after they are published in the Federal Register.
- CFTC is seeking feedback on encryption trading rules that are geared towards retail customers and involve leverage, margin, or financing.
- Regulation CAM will establish a dedicated category for crypto assets within the designated contract market registration system of that institution.
- CFTC Chairman Michael Selig stated that to compel all crypto exchanges to register, action from Congress is required.
- Prior to the release of this consultation, the White House received the relevant submission documents on September 17th, yet the Senate's vote on CLARITY Act was not passed.
On October 5th, CFTC announced that it was seeking public comments on a set of federal guidelines under Section 2(c)(2)(D) of the Commodity Exchange Act regarding its proposed rules. According to the agency, these guidelines pertain to retail commodity transactions involving crypto assets, which CFTC refers to as crypto asset transactions ( crypto asset transactions ), commonly known as CTX.
In the announcement, the committee stated that these comments will be used to guide potential future actions, including the formulation of formal rules, rather than immediately putting a complete framework into effect. The agency requested written comments to be submitted within 60 days after the notice is published in the Federal Register, and the received comments will be posted on the Regulations.gov website.
CFTC Encryption rules will provide a federal registration option.
In a commentary published on October 5th, Chairman Michael Selig stated that Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets would set requirements for registered exchanges that provide crypto trading. He described this framework as an option for enterprises seeking to be regulated by a single federal market regulatory authority.
According to Selig, exchanges participating in this framework can offer retail customers crypto trading services with margin, leverage, or financing; he specifically distinguishes these activities from ordinary spot trading on state-licensed platforms.
When discussing the issue of mandatory registration, Selig wrote:
"Without action taken by Congress, we have no authority to impose such requirements."
The chairman stated that institutional regulations can fill some gaps in the structure of the crypto market, but they cannot indefinitely replace the framework established by Congress. In his words, the remittance business laws vary from state to state and were originally designed for payment services; in contrast, federal trading regulations address issues such as market manipulation, conflicts of interest, a orderly market, and customer funds.
Taking FTX as an example, Selig indicates that its founder misappropriated approximately $8 billion in client funds. He compared the bankrupt offshore entities and state-regulated entities with the subsidiaries registered under FTX by CFTC, claiming that the client assets of the latter are still isolated and secure.
Regulation CAM will customize exchange requirements according to the characteristics of the crypto market.
In a speech at the Blockchain Regulation Seminar of the Faculty of Law at Fudanmou University on October 5th, Selig explained the registration methods for different trading platforms.
For exchanges that have registered as designated contract markets ( designated contract markets ), the chairman stated that the customized rules would allow them to conduct CTX transactions. If a company only seeks to provide CTX, they can apply for regular designated contract market registration or apply for the proposed crypto asset market category, which is CAM.
According to the description of Selig, the CAM exchange will follow the statutory core principles of the designated contract markets, but the relevant rules will be adjusted for crypto transactions. Exchanges that provide futures, options, or swap trading will still apply the existing framework of the designated contract markets.
For American customers, Selig indicates that this model will clarify the platform's protective measures. He stated that ordinary spot exchanges are usually governed by state-level remittance laws and are also subject to the enforcement powers of CFTC in terms of fraud and manipulation.
During the discussion on listing guarantees, Selig pointed out that token distribution, centralized holding, lock-up arrangements, ownership timelines, programmed issuance, and buybacks are all factors related to manipulation risks. He also stated that the proposed rules include a reserve certification obligation, which applies to exchanges that hold customer assets in the form of pooled accounts.
Public feedback will influence the design of transaction protection measures.
Through this consultation, CFTC is asking how a national regulatory system can prevent abuse in the crypto market. The committee is also seeking opinions to understand which information specific to the crypto sector would help market participants comply with the requirements related to CTX.
The institution stated that, based on its regulatory experience since 2014, it wishes to understand practices that are widely accepted in the industry and that it believes will help meet regulatory compliance requirements. Another part of the notification asks how to establish the registration subcategory CAM through rule-making.
This measure entered the administrative review phase last month. As reported by crypto.news on September 18th, CFTC submitted its framework to the White House Office of Information and Regulatory Affairs ( OIRA ) on September 17th.
According to this report, the title of this submitted document is “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets”. OIRA is subordinate to the Management and Budget Office (OMB), and is responsible for conducting reviews before the release of major regulatory actions.
In an earlier report on August 20th, the media stated that the encryption rules planned by CFTC could be implemented under the existing authorities, even if legislators failed to pass legislation on market structure. The report distinguished between CFTC's regulatory powers over derivatives and its law enforcement powers over the spot market, which are different from the comprehensive regulation of spot exchanges envisioned by CLARITY Act.
CLARITY Act encounters obstacles in the procedural voting of the Senate
In reports on the failed vote in the Senate on September 16, the media stated that senators voted 49 to 50 to reject a motion to proceed with a procedural vote to terminate debate on H.R.3633 ( cloture ). This motion required 60 votes to pass; the Senate did not vote on the final passage of the bill.
According to the report, this bill was intended to divide the regulatory responsibilities for digital assets between the U.S. Securities and Exchange Commission (SEC) and CFTC), and to establish registration pathways for exchanges, brokers, and traders. J. Christopher Giancarlo, the former chairman of CFTC, stated to journalist Eleanor Terrett on September 16 that both regulatory agencies could continue to advance their respective frameworks under the existing authorities.
The report also stated that after the voting, French Hill, the chairman of the House Financial Services Committee, and Glenn Thompson, the chairman of the House Agriculture Committee, supported regulatory agencies in taking action based on current laws. However, they also noted that only Congress can provide lasting legal certainty.
The same report also mentioned that Senator Thom Tillis changed his vote in order to retain the possibility of a reconsideration, so this legislation, which has already been passed by the House of Representatives, remains on the Senate's agenda.
