Eli Cohen, the chief legal officer at Centrifuge, a firm specializing in the tokenization of real-world assets (RWAs), believes that the Commodity Futures Trading Commission’s (CFTC) recent guidance concerning offshore exchanges and their ability to serve American clients under the Foreign Board of Trade (FBOT) structure is unlikely to incentivize these exchanges to return to the United States.
Cohen explained to Cointelegraph that the requirements for settlement, clearing, and other regulatory aspects, primarily designed for conventional finance, are a prerequisite to catering to U.S. customers via the FBOT framework. These standards aren’t readily adaptable to cryptocurrency exchanges, potentially making compliance difficult, if not impossible.
Cohen highlighted that the CFTC’s official statement specifies that only licensed Futures Commission Merchants (FCMs), which act as broker-dealers for futures contracts, along with other heavily regulated entities, are eligible to apply under the FBOT parameters. He elaborated:
“The core issue is that only regulated exchanges operating outside of the United States can pursue FBOT registration. Consequently, a pre-existing regulatory structure within the exchange’s home country is essential.”
Cohen pointed out that many exchanges strategically choose to base their operations in jurisdictions like Seychelles or other loosely regulated areas specifically to circumvent such frameworks.
Cohen suggests the most effective way to achieve regulatory clarity for cryptocurrency exchanges is to enact comprehensive crypto market structure legislation through Congress. This would enshrine crypto regulations into law, fostering durable reform that isn’t subject to change with each new administration.
CFTC’s “Crypto Sprint” Aims to Provide Clarity and Revamp the Financial System
The CFTC’s “crypto sprint” is an initiative intended to modernize crypto regulations, supporting the US president’s ambition to establish the United States as a global leader in the crypto space.
The previous administration’s crypto report, released in July, outlined numerous policy recommendations, including granting both the Securities and Exchange Commission (SEC) and the CFTC shared oversight of crypto assets.
The regulatory agencies have suggested various collaborative policy efforts, including the possibility of financial markets operating continuously, potentially leading to 24/7 trading across all asset classes.
This proposed shift would represent a considerable divergence from traditional financial markets, which are not currently operational during evenings, weekends, or specific holidays.
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