US commodities regulator proposes new federal crypto oversight rules

By Hannah Lang

Oct 5 (Reuters) - ‌The U.S. commodities ​regulator ​on Monday proposed a new federal framework for cryptocurrency exchanges that offer leveraged digital asset trading, in a move to ‌bring parts of the spot crypto market under federal oversight ⁠weeks after Congress failed to advance comprehensive crypto regulation.

The U.S. Commodity Futures Trading Commission's ‌proposed rules would effectively allow ‌U.S crypto exchanges to opt into a federal regulatory regime instead of relying primarily on a patchwork of state money-transmitter licenses, the ​agency said.

Exchanges that opt into the new framework would comply with a uniform set of federal rules instead of complying with different ⁠regulatory regimes on a state-by-state basis, which many have previously argued is overly burdensome.

The proposed rules make ​use of a specific authority the CFTC has to oversee margined or leveraged spot assets. The CFTC has long ​sought authority to regulate the spot ‌cryptocurrency markets -- which currently operate in a regulatory grey area -- but only Congress has the ability provide the regulator ⁠with that purview.

"For years, entrepreneurs building on the new frontier of finance faced uncertainty about whether there was a place for them in our markets. We ⁠are giving them an answer," said CFTC Chair Michael Selig in a speech Monday ​at an event held by Fordham University's law school.

Under the proposed rules, the CFTC would establish a new category of CFTC-regulated trading venues called a "crypto asset market" ‌for exchanges that offer leveraged or margined trading to retail customers. Those platforms would be subject to specific ‌requirements including anti-market manipulation controls and a "proof of reserves" obligation.

The CFTC is also ⁠proposing that customer trades on ‌the new category of ​exchanges be intermediated through registered futures commission merchants.

(Reporting by Hannah Lang and Ismail Shakil; editing by Michelle Nichols and ‌Michelle Price)

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