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FollowingThe CFTC launches new cryptocurrency regulation proposal to solicit public comment on CTX and CAM rules
After Congress recently failed to pass comprehensive cryptocurrency legislation, the U.S. Commodity Futures Trading Commission (CFTC) is embarking on a new federal regulatory framework for the cryptocurrency market.
New regulatory initiatives: CTX and CAM
The CFTC announced on Sunday the release of a "Prior Notice of Proposed Rulemaking"(ANPRM), opening a 60-day public comment period to collect industry feedback on two proposed regulatory structures: Regulation of Crypto Asset Trading (CTX) and Regulation of Crypto Asset Markets (CAM).
The move aims to use the agency's existing powers under the Commodity Exchange Act to outline specific regulatory rules for cryptocurrencies within its jurisdiction. The CFTC's action is a direct response to the current lack of federal standards, after lawmakers in Washington failed to reach broad consensus on cryptocurrency reform.
CFTC Chairman Michael Selig said the new initiative is a key milestone aimed at keeping the United States leading the global cryptocurrency space. According to Selig, formal rules have not yet been established and the committee is seeking feedback from industry stakeholders to inform the content of future regulations.
The CFTC plans to gather insights from industry participants and the public to shape the regulatory framework and emphasizes that formal cryptocurrency rules will take shape only after the comment period is over and additional rule-making steps are completed.
Once published in the Federal Register, ANPRM will trigger a 60-day window period for the cryptocurrency industry and the wider public to respond.
Three-tier market architecture
Chairman Selig proposed a vision for the U.S. cryptocurrency market in three main regulatory levels:
- Level 1: Covering traditional spot exchanges. At this level, the status quo will remain largely unchanged and state money carrier regulations will continue to be in effect. The CFTC reserves the power to intervene in fraud or market manipulation cases in this category.
- Level 2: focuses on providing retail users with a platform to trade cryptocurrencies using margin, leverage or other forms of financing. The agency calls these transactions CTX and plans to develop specific new requirements for them.
- Level 3: Includes exchanges that promote derivative products such as futures and perpetual swaps. The CFTC's existing Designated Contract Market (DCM) regulations have been applied to these entities.
This restructuring signal suggests that regulators are paying more attention to investor protection mechanisms, especially for trading activities that pose higher financial risks to retail participants.
Glossary
CFTC (Commodity Futures Trading Commission): A U.S. federal agency responsible for regulating derivatives markets, including futures, swaps, and certain cryptocurrency activities within the scope of the Commodity Exchange Act.
Legislative background
The CFTC's regulatory actions follow the U.S. Senate's veto of the Clarity Act. The bill is the latest proposal aimed at defining the legal structure of cryptocurrencies nationwide. The bill was blocked because it required at least 60 votes to move forward, and four Republicans joined Democrats in opposing it.
If the bill is passed, the Clarity Act would expand the CFTC's role in overseeing digital asset markets, creating clearer authority for the regulator in areas where jurisdictional overlap disputes often occur, particularly with the U.S. Securities and Exchange Commission, the SEC.
Currently, as Congress debates the future outlines of federal cryptocurrency regulation, the CFTC is working within its current statutory authority.
