Pro-crypto regulator Mike Selig stated that advancing new regulations will prevent a repeat of the FTX collapse.
Appearing Wednesday on the Fox Business Network program Varney & Co., the Commodity Futures Trading Commission Chair explained that digital asset spot markets will be protected by allowing crypto exchanges the opportunity to register with the regulator.
FTX, formerly one of the leading cryptocurrency exchanges, experienced a sudden and rapid bankruptcy in 2022 driven by mismanagement. Following the theft of $8 billion in customer money, founder Sam Bankman-Fried was sentenced to 25 years in prison for fraud and additional offenses.
Regulators including the CFTC are continuing to advance rulemaking for the cryptocurrency sector, even though lawmakers blocked the anticipated Clarity Act last month.
“Four years ago, we saw the collapse of Sam Bankman-Fried’s FTX, where he stole over $8 billion in customer funds. That can’t happen under our regime,” Selig noted.
“Actually, Sam Bankman-Fried’s subsidiary that was CFTC registered, all the funds were safe and secure because they were segregated, and we have some of the most stringent requirements of any federal agency when it comes to markets — we want to bring that to the crypto world,” he continued.
Selig mentioned that certain exchanges might opt to stay under state regulatory frameworks, while others will pursue federal registration.
To oversee crypto markets, the CFTC is leveraging its existing authority. This week, the agency requested public feedback on a proposed framework that would establish a new federal registration tier termed a “crypto asset market.” This category is intended for platforms that provide retail clients with leveraged, margined, or financed cryptocurrency transactions.
Platforms that do not provide leverage may remain operating under state licenses. However, because the agency interprets “leverage” in a wide sense, oversight could potentially extend to fully paid transactions unless users take actual delivery of their digital assets.
Last month, CFTC Chair Selig — previously the chief counsel for the SEC’s Crypto Task Force — remarked that the agency was getting ready for markets transitioning to operate “24-7, on-chain.”
Since U.S. President Donald Trump assumed office, both the CFTC and the Securities and Exchange Commission have adopted a more accommodating stance toward regulating the cryptocurrency sector.
Frequently Asked Questions
What is the goal of the new CFTC crypto rulemaking?
The CFTC aims to prevent another FTX-style collapse by introducing new registration rules and stringent requirements to protect digital asset spot markets.
Why did FTX collapse?
FTX collapsed in 2022 due to severe mismanagement, resulting in the theft of over $8 billion in customer funds and a 25-year prison sentence for founder Sam Bankman-Fried.
Do all crypto exchanges have to register federally under the new plan?
No, exchanges can choose to remain under state regimes, while others may opt for federal registration.
How does the CFTC define leverage under the proposed framework?
The agency applies a broad definition to “leverage,” which could potentially bring fully paid crypto trades under federal oversight unless customers take direct delivery of their assets.
