CFTC targets leveraged crypto exchanges

WASHINGTON: The Commodity Futures Trading Commission (CFTC) has unveiled a proposal to regulate digital asset transactions and markets, drawing on the agency’s existing authority after crypto market structure legislation was blocked last month.

If finalised, the measure would regulate leveraged crypto trades offered to retail customers.

It would also establish a new category for crypto exchanges offering the leveraged trades to register with the agency.

Leveraged, financed or margin trading allows traders to borrow funds to potentially multiply their gains along with possible losses.

“The American people deserve clarity, certainty, and consumer protections in the crypto asset markets and the agency is committed to delivering this by incorporating crypto asset transactions into its uniform national market regulatory framework,” CFTC chairman Michael Selig said in a statement about the early-stage proposal.

Some experts also said the measure indicates companies that offer both spot and margin trading, and become regulated by the CFTC, might be able to shift out of the current state licensing regime for spot crypto trading as well.

The CFTC’s rule appears to be developing a “textual case for state preemption of spot trading”, with the goal of crafting a relatively permissive federal regime for digital asset trading, said Aaron Brogan, founder and managing attorney at Brogan Law, a boutique law firm specialising in digital asset and other regulated fintech companies. — Bloomberg