The U.S. Commodity Futures Trading Commission (CFTC) is moving to create a new regulatory framework for cryptocurrency exchanges and said it aims to prevent a recurrence of a major collapse like FTX. FTX was once considered one of the world’s major virtual asset exchanges, but went bankrupt in 2022 after misuse of customer funds was revealed.

Bitcoin Magazine reported on Oct. 7 that CFTC Commissioner Michael S. Selig (마이클 S. 셀리그) appeared on Fox Business Network’s “Varney & Co” and said he would create a path for cryptocurrency exchanges to register with the CFTC to protect the digital asset spot market.

Selig cited the FTX case as a representative example of why a new regulatory framework is needed. “Four years ago, Sam Bankman-Fried’s FTX collapsed and stole more than $8 billion of customer funds,” he said. “That cannot happen under our system,” he said. FTX founder Sam Bankman-Fried (샘 뱅크먼-프리드) is serving a 25-year prison sentence on charges including fraud.

Selig stressed that customer funds at an FTX affiliate registered with the CFTC were kept segregated and safely protected. “Sam Bankman-Fried’s CFTC-registered subsidiary was safe because the funds were segregated,” he said. “It has the strictest market requirements among federal agencies, and we are trying to bring that to the crypto market,” he said. The CFTC also explained that customer assets held at FTX’s CFTC-registered subsidiary were segregated and protected.

The CFTC is pressing ahead with rulemaking using its existing authority even after legislation on the Clarity bill, a cryptocurrency market structure bill, failed in Congress. On Oct. 5, the CFTC began seeking public comment on a proposed rule targeting platforms that offer cryptocurrency trading to retail customers through leverage, margin or financing. It included a plan to create a new federal registration category called a “crypto asset market.”

Under the new system, exchanges that register with the CFTC could be covered by a federal regulatory framework. Exchanges that do not provide leverage could remain under state licensing systems. The CFTC, however, broadly interprets the scope of leverage and actual delivery, meaning even fully paid trades could be subject to regulation until customers take direct delivery of the cryptocurrency.

Selig has said he is preparing for a shift last month as markets move to a “24/7, on-chain” model. The CFTC’s stance is to use its existing authority to regulate financial markets to establish a supervisory framework that fits the trading structure of the crypto market.

Selig said some exchanges could remain under state regulatory systems while other exchanges could choose federal registration. As a result, exchanges may choose different paths between state and federal regulation depending on their business models.