The SEC’s Division of Trading and Markets and the CFTC’s Division of Market Oversight and Division of Clearing and Risk (collectively, the “Divisions”)[1] are announcing a cross-agency initiative in furtherance of the SEC’s Project Crypto and the CFTC’s Crypto Sprint to coordinate efforts regarding the process for enabling the trading of certain spot crypto asset products.
The President’s Working Group on Digital Asset Markets report on “Strengthening American Leadership in Digital Financial Technology” (the “PWG Report”) recommends that the SEC and CFTC coordinate to make America the best place in the world to innovate with blockchain technology and participate in crypto asset markets.[2] Specifically, the PWG Report recommends that the agencies should use their existing authorities to promote “regulatory clarity that best keeps blockchain-based innovation within the United States.” As part of this effort, the Divisions are coordinating to issue guidance “regarding the listing of leveraged, margined, or financed spot retail commodity transactions on digital assets” to implement the PWG Report recommendations.
This joint statement provides the Divisions’ view that current law does not prohibit SEC- or CFTC-registered exchanges from facilitating trading of these spot crypto asset products. As contemplated by the PWG Report, the Divisions’ coordination will promote trading venue choice and optionality for market participants within the United States. In line with these goals, the Divisions stand ready to support consideration by their respective agencies of exchange trading in certain spot crypto asset products.
Absent an exception or other appropriate relief, the Commodity Exchange Act (CEA) requires that certain leveraged, margined, or financed “retail commodity transactions”[3] be conducted on a CFTC-registered designated contract market (DCM) or on a CFTC-registered foreign board of trade (FBOT).[4] One such exception is for retail commodity transactions listed on an SEC-registered national securities exchange (NSE).[5] Today, the Divisions provide their view that DCMs, FBOTs, and NSEs are not prohibited from facilitating the trading of certain spot crypto asset products. Market participants are invited to engage with SEC staff or CFTC staff, as needed.
The Divisions will promptly review filings and requests by DCMs, FBOTs, and NSEs seeking to facilitate trading of certain spot crypto asset products. As market participants prepare to submit any necessary registrations, proposals, or requests for appropriate relief to the SEC and/or CFTC, the Divisions stand ready to engage regarding any questions. The following considerations are relevant to market participants seeking to operate markets and trade spot crypto asset products:
For further information regarding this joint initiative, please contact the respective offices of each Division below:
