Interpretation of the new US CFTC regulations: The scope of supervision includes crypto activities involving leverage, margin or financing, and lacks jurisdiction over the spot market

According to BlockBeats news, on October 6, the U.S. Commodity Futures Trading Commission (CFTC) proposed two new rules on Monday to establish a U.S. cryptocurrency regulatory framework based on its power to regulate leverage and margin trading to fill the regulatory uncertainty left by Congress’s failure to complete encryption legislation.

Agency officials said that the CFTC is advancing two regulatory paths with the intention of forming a "comprehensive regulatory framework": one that directly handles transactions, the "Crypto-Asset Trading Regulation" (Regulation CTX); the other regulates the companies that carry these activities, the "Crypto-Asset Market Regulation" (Regulation CAM). The latter will establish a new class of platforms called “crypto asset markets” (CAMs).

Under the proposed rules, crypto activities involving leverage, margin, or financing would be subject to CFTC regulation. This means that if traders use borrowed funds to expand their positions, they will be regulated by the agency.

“These rules will codify a path that will allow crypto-asset trading platforms to operate under unified national oversight by the CFTC, under the same statutory powers that the previous administration used to regulate through enforcement,” CFTC Chairman Mike Selig said in prepared remarks at Fordham Law School’s annual Blockchain Regulation Symposium.

Still, the effort may leave significant gaps. The CFTC lacks comprehensive regulatory authority over the spot market – which refers to the direct trading of cryptocurrencies in which assets change hands in their original form at current market prices, with no leverage or margin involved. This includes the direct buying and selling of the largest range of crypto tokens such as Bitcoin and Ethereum. There is one important exception: The CFTC can still combat fraud and manipulation in these markets.

The agency's new initiative cannot touch or supersede state funds transmission regulations as the governing rules for direct transactions. But CFTC officials said companies looking to offer more complex products will do so through tailored, CFTC-regulated platforms. Officials said they are not yet sure how big the remaining spot market will be until they hear more from the industry during a 60-day public comment period, but suggested consumers may prefer to do business in a federally regulated space.