The recent advisory from the Commodity Futures Trading Commission (CFTC) regarding offshore exchanges serving US residents under the Foreign Board of Trade (FBOT) framework has sparked discussions within the crypto community. Eli Cohen, general counsel at Centrifuge, a real-world asset tokenization company, believes that this guidance will not bring offshore crypto exchanges back to the US.
Cohen explained that the regulatory requirements for serving US clients under the FBOT framework are primarily designed for traditional financial institutions, making it challenging for crypto exchanges to comply. Additionally, only regulated exchanges outside the United States can apply for the FBOT, requiring a pre-existing regulatory framework in their home country. Many exchanges opt to operate in unregulated jurisdictions like Seychelles to avoid such stringent requirements.
To provide clarity for crypto exchanges, Cohen suggested passing a crypto market structure bill in Congress to codify regulations into law. This would create lasting change that is not subject to shifts in administration. By establishing clear regulations, the industry can operate with more transparency and compliance.
The CFTC’s “crypto sprint” initiative aims to overhaul crypto regulations to position the US as a global leader in the industry. Policy recommendations outlined in a report by the Trump administration propose joint oversight of crypto by the Securities and Exchange Commission (SEC) and the CFTC. Collaborative efforts between these regulatory agencies could lead to a 24/7 trading cycle across asset classes, a significant departure from traditional financial markets that have set operating hours.
As the regulatory landscape for crypto continues to evolve, it is crucial for stakeholders to stay informed and adapt to changes. By embracing regulatory clarity and fostering innovation, the crypto industry can continue to grow and thrive in the global marketplace.