Crypto: CFTC and SEC Move Faster Toward a Federal Regulatory Framework

The CFTC launched, on October 5, a consultation on a federal framework for retail crypto transactions with leverage or margin. Meanwhile, the SEC is progressing on the custody of digital assets and tokenization. Washington thus seeks to attract innovation and capital, even if Congress retains the final say on part of this architecture.

The CFTC paves the way for a federal market

The move comes as Donald Trump urges the Senate to move forward on the CLARITY Act, notably in the face of international competition.

On October 5, the CFTC therefore launched a public consultation on a national framework for retail crypto transactions with leverage, margin or financing.

Two texts are involved. Regulation CTX would define the targeted transactions, while Regulation CAM would create a new category of platforms registered with the CFTC, called “crypto asset markets.”

These exchanges should notably prove their reserves and route retail orders through registered brokers. For Michael Selig, chairman of the CFTC, this setup would offer a federal option, without necessarily imposing its adoption on all players.

“For years, entrepreneurs on this new frontier of finance have doubted that a place would be reserved for them on our markets. We give them an answer,” he said. However, making federal registration mandatory would require a law.

The SEC advances on crypto custody

Meanwhile, the SEC is working on another key point: the custody of digital assets by advisers and regulated funds. Its project notably provides for self-custody under certain conditions, while recognizing state trust companies as custodians.

On October 1, Paul Atkins, chairman of the SEC, indicated that further proposals would follow. The stated goal is notably to prevent onchain markets from developing more abroad.

Moreover, several initiatives have already marked the year. In August, Regulation Crypto Assets proposed an exemption for certain investment offerings, while on September 17, the Innovation Exemption established a temporary regime for platforms offering tokenized shares.

Safeguards before any potential law

The CFTC also wants to strengthen controls. Its project notably provides proof of reserves for exchanges holding pooled client funds, measures against manipulation, and intervention of futures commission merchants, with the resulting anti-money laundering obligations.

Another notable point: a transfer to a non-custodial wallet within 28 days could constitute a valid delivery, without an obligation to go through a registered platform.

At the same time, the SEC continues to advance on crypto products. It notably opened the way for 3x leveraged Bitcoin and Ether ETPs.

However, the American regulatory architecture remains incomplete. Consultations proceed, generally for 60 days after their publication in the federal register. Above all, the CLARITY Act is still awaiting its vote in the Senate.

Without Congress intervention, regulators will therefore have to continue advancing within the limits of their current powers. Meanwhile, the American race for crypto leadership continues.