U.S. Regulators Seek Global Crypto Standards to Avoid Market Fragmentation

The U.S. Commodity Futures Trading Commission (CFTC) is rethinking its approach to foreign crypto platform regulations, particularly in relation to exchanges licensed under the European Union’s Markets in Crypto-Assets (MiCA) framework. Acting CFTC Chairman Caroline D. Pham, in remarks delivered before the UK All-Party Parliamentary Group on Blockchain Technologies, stated that the CFTC will explore whether MiCA-authorized venues could qualify under its long-standing cross-border recognition rules. This move reflects a broader effort to align U.S. regulatory frameworks with international standards and avoid market fragmentation.

Pham emphasized the need for the U.S. to adopt a pragmatic and technology-neutral approach to crypto regulation, drawing lessons from past regulatory missteps such as the Dodd-Frank Act. She argued that overly complex or technology-specific rules could hinder innovation and create regulatory barriers for new entrants. The CFTC’s approach, rooted in its existing cross-border frameworks dating back to the 1990s, seeks to allow non-U.S. exchanges operating under comparable regulatory regimes to gain recognition in the U.S. market.

A central focus of the CFTC’s ongoing efforts is its “Crypto Sprint,” an initiative launched to modernize crypto regulations in line with the Trump Administration’s broader digital asset strategy. As part of this effort, the CFTC is currently seeking public feedback on the regulation of listed spot crypto trading, with comments due by October 20. The agency is also engaging in a joint effort with the Securities and Exchange Commission (SEC) to streamline product definitions, data standards, and investor protections, reflecting a new era of inter-agency coordination.

However, not all experts are optimistic about the feasibility of using the Foreign Board of Trade (FBOT) framework for crypto exchanges. Eli Cohen, general counsel at Centrifuge, a real-world asset tokenization company, argued that the FBOT model—designed for traditional financial markets—does not align with the structure of most crypto exchanges. He noted that requirements such as settlement and clearing, which are standard for futures exchanges, are not easily applicable to crypto trading platforms. Additionally, Cohen highlighted that many exchanges avoid U.S. regulatory frameworks altogether by establishing operations in more permissive jurisdictions like Seychelles.

Despite these challenges, the CFTC’s recent advisory on offshore exchanges marks a significant step toward creating a more inclusive regulatory environment for crypto trading. The guidance suggests that only highly regulated, non-U.S. exchanges—such as those in the EU operating under MiFID or preparing for MiCA compliance—could potentially qualify for FBOT recognition. This approach aims to ensure that foreign platforms meet equivalent levels of oversight and investor protection as their U.S. counterparts.

The CFTC’s regulatory shift also underscores the importance of international collaboration in digital asset markets. Pham has been a vocal advocate for substituted compliance and mutual recognition agreements that would allow regulated foreign entities to operate in the U.S. without duplicative regulatory burdens. This strategy aligns with the broader U.S. goal of positioning itself as a global leader in digital financial technology and attracting innovation back to the domestic market.