CFTC Clears Path for Offshore Crypto Exchanges—But Hurdles Remain

The regulatory landscape for offshore cryptocurrency exchanges seeking access to U.S. markets remains complex, with recent developments from the Commodity Futures Trading Commission (CFTC) offering some clarity but not a comprehensive solution. The CFTC recently issued an advisory reaffirming that non-U.S. exchanges can provide U.S. participants access to trading by registering as Foreign Boards of Trade (FBOTs) under the CFTC’s oversight. This framework, in place since the 1990s, is intended to facilitate compliance for offshore platforms while enabling U.S. traders to participate in derivative markets, including those involving digital assets. The advisory aims to eliminate ambiguity regarding whether offshore exchanges should register as Designated Contract Markets (DCMs) or FBOTs. It concludes that the FBOT registration is the appropriate and more streamlined pathway for exchanges operating outside the U.S. [1].

Acting CFTC Chairman Caroline D. Pham emphasized the advisory’s role in encouraging U.S.-based crypto trading by reducing regulatory uncertainty. The advisory aligns with broader efforts by the CFTC, known as the "Crypto Sprint," to modernize regulatory approaches to digital assets. The CFTC also highlighted that U.S. participants can benefit from greater market liquidity and access if offshore exchanges return to onshore operations by navigating the FBOT framework. However, the advisory does not extend to retail U.S. traders, who remain restricted from trading certain types of swaps unless they are listed on DCMs. This limitation persists despite the advisory's focus on digital asset markets, as some crypto derivatives traded on offshore platforms are classified as swaps under U.S. law [2].

Critics argue that the FBOT framework is ill-suited for the unique operational model of cryptocurrency exchanges. Eli Cohen, general counsel at Centrifuge, pointed out that the regulatory requirements under the FBOT structure—such as settlement and clearing obligations—are designed for traditional financial systems and may be impractical for crypto platforms. Cohen noted that only regulated exchanges outside the U.S. can apply for FBOT status, and many crypto exchanges have chosen to operate in jurisdictions like Seychelles to avoid such regulatory constraints. He advocated for a legislative approach, such as a crypto market structure bill, to provide a long-term solution that aligns with the industry’s needs [3].

In a related development, the CFTC and the Securities and Exchange Commission (SEC) jointly issued a statement on September 2, 2025, clarifying that registered exchanges are not prohibited from facilitating spot crypto asset trading under current law. This joint effort, part of the SEC’s “Project Crypto” and the CFTC’s “Crypto Sprint,” aims to promote innovation and provide clarity to market participants. The statement emphasized that exchanges must still comply with existing legal and regulatory requirements, and while it does not introduce new rules or exemptions, it signals a more open regulatory stance. Both agencies pledged to support and expedite reviews of proposals for spot crypto trading, provided they meet market integrity and investor protection standards [4].

The joint statement also outlined potential areas of regulatory cooperation between the SEC and CFTC, including harmonizing product definitions, streamlining reporting standards, and enabling portfolio margining across jurisdictions. These measures could enhance efficiency and reduce capital inefficiencies for market participants. The CFTC and SEC also proposed a joint roundtable on regulatory harmonization to be held on September 29, 2025, to discuss further steps toward aligning their approaches. Such collaboration aims to prevent regulatory “no man’s lands” and promote U.S. leadership in digital financial innovation [5].

Despite these efforts, regulatory barriers remain a challenge for offshore crypto exchanges seeking to serve U.S. participants. The CFTC and SEC’s recent statements and advisory underscore a shift toward fostering innovation and competition in the U.S. market. However, industry experts and regulators alike acknowledge that further legislative and policy reforms are necessary to create a regulatory environment that supports the unique characteristics of digital asset markets. As these discussions continue, market participants are encouraged to engage with regulators to shape the evolving landscape and explore opportunities for onshore trading of crypto products. [6]

Source:

[1] CFTC Issues New Advisory on FBOT Registration Framework (https://www.jonesday.com/en/insights/2025/09/cftc-issues-new-advisory-on-fbot-registration-framework)

[2] U.S. CFTC Staff Issues Advisory on Foreign Boards of Trade Registration, Clarifying U.S. Access for Offshore Digital Asset Exchanges (https://www.sidley.com/en/insights/newsupdates/2025/09/us-cftc-staff-issues-advisory-on-foreign-boards-of-trade-registration-clarifying-access-for-offshore)

[3] FBOT registry won't bring offshore crypto exchanges to U.S. (https://cointelegraph.com/news/fbot-won-t-bring-offshore-crypto-exchanges-us)

[4] SEC and CFTC Staff Clear Path for Spot Crypto Trading on Regulated Exchanges (https://www.aoshearman.com/en/insights/ao-shearman-on-fintech-and-digital-assets/sec-and-cftc-staff-clear-path-for-spot-crypto-trading-on-regulated-exchanges)

[5] Joint Statement from the Chairman of the SEC and Acting Chairman of the CFTC (https://www.cftc.gov/PressRoom/SpeechesTestimony/phamatkinsstatement090525)

[6] SEC and CFTC Staff Issue Joint Statement on Trading Certain Spot Crypto Asset Products (https://www.sec.gov/newsroom/press-releases/2025-110-sec-cftc-staff-issue-joint-statement-trading-certain-spot-crypto-asset-products)