Regulators Push Crypto Clarity, Firms Seek Easier Paths

The Commodity Futures Trading Commission’s (CFTC) recent advisory on the Foreign Board of Trade (FBOT) framework for offshore crypto exchanges has sparked mixed reactions within the industry. According to Eli Cohen, general counsel at Centrifuge, the framework is ill-suited for cryptocurrency exchanges due to its design for the traditional financial system. Cohen emphasized that regulatory requirements such as settlement, clearing, and compliance under the FBOT are not tailored for the crypto sector, making it difficult for exchanges to fulfill them [1]. The advisory outlines that only regulated exchanges outside the United States are eligible to apply for the FBOT framework, requiring them to operate under a home country’s regulatory oversight [1]. This has led to many exchanges opting for unregulated jurisdictions like Seychelles instead of returning to U.S. markets [1].

The CFTC’s advisory aims to clarify the FBOT registration pathway for non-U.S. crypto exchanges, reinforcing its longstanding framework established in the 1990s [5]. Acting Chairman Caroline Pham highlighted the advisory’s role in providing regulatory clarity and facilitating the return of offshore trading activity to the U.S., noting that current CFTC-regulated entities could begin trading crypto on day one [1]. However, Centrifuge’s Cohen argues that this framework does not address the structural differences between traditional and crypto markets, suggesting that Congress should pass a crypto market structure bill to establish a more suitable regulatory environment [1].

The advisory also reflects a broader regulatory shift by the CFTC and the Securities and Exchange Commission (SEC) in response to the White House’s July digital asset report. This report emphasized interagency coordination and outlined policy recommendations such as joint oversight of crypto markets [1]. The CFTC’s “crypto sprint” initiative and the SEC’s “Project Crypto” are part of these efforts to modernize regulations and align with the global digital economy [2]. The agencies also announced plans to explore a 24/7 trading environment for capital markets, which could enhance market accessibility but introduce new risks, particularly for retail traders [2].

Critics, however, point to the limitations of the FBOT framework. For instance, it does not allow retail U.S. customers to trade swaps unless they are listed on a Designated Contract Market (DCM) [3]. This restriction persists despite the advisory, leaving certain cryptocurrency derivatives inaccessible to U.S. traders. Furthermore, the CFTC’s advisory contrasts with recent enforcement actions, such as those against Falcon Labs and Binance, which targeted unregistered access to U.S. customers [3]. The advisory signals a softer regulatory approach, aiming to reduce uncertainty and promote compliance without stifling innovation.

The CFTC’s broader strategy includes technological modernization, such as adopting Nasdaq’s surveillance platform to enhance fraud detection and market oversight [6]. Additionally, the agency has initiated a new crypto sprint to implement recommendations from the President’s Working Group on Digital Asset Markets. These efforts underscore the CFTC’s commitment to adapting to the evolving crypto landscape while balancing regulatory oversight with market efficiency [6].

Source:

[1] CFTC Issues Advisory to Clarify FBOT Registration Framework for Non-U.S. Crypto Exchanges to Access U.S.-Based Participants (https://www.mondaq.com/unitedstates/commoditiesderivativesstock-exchanges/1674154/cftc-issues-advisory-to-clarify-fbot-registration-framework-for-non-us-crypto-exchanges-to-access-us-based-participants)

[2] SEC CFTC Statement 24/7 Capital Markets (https://cointelegraph.com/news/sec-cftc-statement-24-7-capital-markets)

[3] 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)

[4] Derivatives, Legislative and Regulatory Weekly Update (https://www.gibsondunn.com/derivatives-legislative-and-regulatory-weekly-update-september-5-2025/)

[5] CFTC Issues Advisory to Clarify FBOT Registration (https://www.jdsupra.com/legalnews/cftc-issues-advisory-to-clarify-fbot-9824759/)