The CFTC’s Advisory on Offshore Exchanges
The recent advisory issued by the Commodity Futures Trading Commission (CFTC) concerning offshore exchanges catering to US residents within the Foreign Board of Trade (FBOT) framework is unlikely to result in the return of offshore crypto exchanges back to the US, according to Eli Cohen, general counsel at the real-world asset (RWA) tokenization firm Centrifuge.
Cohen explained that the settlement, clearing, and other regulatory requirements designed for the traditional financial system—which need to be met to serve US clients under the FBOT framework—are not suited for crypto exchanges and would be challenging, if not impossible, to satisfy.
According to Cohen, the CFTC’s guidance also specified that only Licensed Futures Commission (FCM) exchanges, acting as broker-dealers for futures contracts, along with other highly regulated entities, are eligible to apply under the FBOT framework. He remarked:
“Many exchanges opt to establish their operations in Seychelles or other unregulated jurisdictions to bypass such a framework altogether,” Cohen added.
Creating Clarity for Crypto Exchanges
Cohen stated that the most effective way to offer clarity to crypto exchanges is by passing a crypto market structure bill in Congress. This would enshrine crypto regulations into law, fostering sustainable change that does not fluctuate with each administration.
The CFTC’s “crypto sprint” initiative aims to reformulate crypto regulations to align with US President Donald Trump’s goal of establishing the US as the leading global force in the crypto space.
Within the Trump administration’s crypto report released in July, several policy recommendations were suggested, including granting the Securities and Exchange Commission (SEC) and the CFTC joint oversight of crypto.
Both regulatory bodies have proposed a number of collaborative policy initiatives, which include the possibility of financial markets transitioning to a perpetual model, enabling a 24/7 trading cycle across various asset classes.
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This proposed change would mark a notable shift from traditional financial markets, which presently do not operate during nights or weekends and cease operations on certain holidays.
