SEC And CFTC’s New Joint Crypto Initiative–What You Need To Know

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On Tuesday, the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) issued a significant joint statement that clarifies the regulatory landscape for spot crypto products. 

Spot Crypto Trading Regulations

The statement stems from a collaborative initiative between the SEC’s Division of Trading and Markets and the CFTC’s Divisions of Market Oversight and Clearing and Risk as part of the SEC’s Project Crypto and the CFTC’s Crypto Sprint, aimed at streamlining the trading of specific spot crypto asset products. 

The collaboration aligns with recommendations from the President’s Working Group on Digital Asset Markets, which advocates for a coordinated regulatory approach to ensure that the United States remains a leader in blockchain innovation and crypto markets.

Key to this initiative is the recognition that existing laws do not prohibit SEC- or CFTC-registered exchanges from facilitating the trading of these spot crypto products. By coordinating their efforts, the two agencies aim to enhance the trading options available to market participants in the US. 

The joint statement encourages exchanges to engage with SEC and CFTC staff as they prepare to submit necessary registrations and proposals for trading these products.

The regulatory framework established by the Commodity Exchange Act requires certain leveraged, margined, or financed retail commodity transactions to be conducted on designated contract markets (DCMs) or foreign boards of trade (FBOTs) registered with the CFTC. 

However, there is an exception for retail transactions listed on SEC-registered national securities exchanges (NSEs). The divisions have clarified that DCMs, FBOTs, and NSEs are permitted to facilitate the trading of specific spot crypto asset products, which could lead to increased market activity.

Enhanced Trading Opportunities Ahead

The SEC’s Division of Trading and Markets is ready to assist SEC-registered clearing agencies interested in participating, while the CFTC’s Division of Clearing and Risk is prepared to address inquiries from registered derivatives clearing organizations. 

Additionally, the statement emphasizes the importance of public dissemination of trade data, which can provide valuable insights to the market. The agencies are committed to fostering fair and orderly markets, believing that transparency and efficient executions will enhance competition and trading opportunities for all participants.

A spokesperson for the CFTC told Crypto In America that the agency’s previous enforcement actions, which had sent a clear message that certain innovative activities in the crypto space would face scrutiny. 

However, the spokesperson asserts that this recent staff statement clarifies that such activities are permissible under current laws and that both agencies are willing to collaborate with registrants to facilitate their market entry.

Featured image from DALL-E, chart from TradingView.com

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