CFTC proposes crypto framework after Senate fails to advance CLARITY Act

CFTC Chair Michael Selig announced proposed crypto regulations at the Fordham Law Blockchain Regulatory Symposium on Monday. The proposals would give certain crypto companies the option to operate under CFTC oversight rather than individual US state regulations. Selig said the agency will advance crypto regulation at President Donald Trump's direction with or without legislation from Congress.

According to written remarks, Selig said the CFTC had issued an advance notice of proposed rulemaking for companies offering retail crypto trading on a margined, leveraged or financed basis. Selig called the regulation CTX. Selig said the agency planned to establish a new designated contract market (DCM) category called a crypto asset market (CAM). Certain exchanges would have the option to register as either a DCM or a CAM. Selig said the rules would establish a pathway for crypto asset exchanges to operate under uniform national CFTC oversight. Selig said the agency would use the same statutory authorities that the prior administration used to regulate through enforcement.

The proposed rules would not extend to what Selig called ordinary spot crypto exchanges. Ordinary spot crypto exchanges are generally regulated under state money transmission laws. The CFTC would retain authority to enforce anti-fraud and anti-manipulation regulations against companies offering spot trading in crypto assets such as Bitcoin.

The proposals came a few weeks after US senators failed to approve passage of the Digital Asset Market Clarity (CLARITY) Act. The bill had been expected to give the CFTC more authority to oversee and enforce crypto regulations. The Securities and Exchange Commission announced its own proposed tailored securities offering regime for crypto assets in August, before the failed CLARITY vote. The SEC proposal created an expectation that both agencies would advance regulation without congressional legislation codifying the rules.

Selig said Trump promised to deliver a crypto asset regulatory market structure with or without legislation. Selig said regulators will help Trump fulfill that promise using existing statutory authorities. ProChain Capital's David Tawil said on Monday that CLARITY opponents may not have anticipated the executive branch's apparent readiness to act without legislative constraints.

Friday was SEC Commissioner Hester Peirce's last day at the agency after eight years of service. Peirce's planned departure came just ahead of the 18-month extension for her second term. The departure leaves the SEC with two commissioners. Selig leads the CFTC as its sole commissioner and chair. A White House official said last week that Trump intended to nominate commissioners to both agencies in the near future. The administration had not announced replacements for Peirce or the other six commissioner seats as of Monday.