CFTC to submit cryptocurrency regulatory rules for White House consideration, congressional clarity bill stalled

Key facts

The Commodity Futures Trading Commission (CFTC) opted to move forward with regulation of the crypto market through executive rules after the US Senate failed this week to pass the Clarity Act. On Thursday, the CFTC submitted a new proposal to the White House Office of Management and Budget (OMB), details of which were not disclosed.

The proposal is still a black box.

It is unclear what crypto asset the proposal covers, what conditions exchanges will need to meet in order to be compliant, what restrictions it would place and where the CFTC believes its regulatory authority limits itself. These key issues are likely to become clear before a draft goes through the follow-up process.

According to the U.S. administrative rule-making process, after completion of an OMB review, the draft will be returned to the CFTC for a vote and open public consultation before it can go into effect through another round of voting. This means that there is still some time until the rules are finalized, even if the process goes smoothly.

Echoes with SEC same-day action

Notably, on the same day (Thursday), the US Securities and Exchange Commission issued an innovation exemption policy providing a five-year pathway for eligible platforms to offer on-chain trades of partial or fully diluted shares without registering as stock exchanges.

SEC and the CFTC are two key agencies for crypto regulation in the United States: SEC , which is primarily responsible for determining whether an asset belongs to a securities class, while the CFDTC oversees commodity derivatives and futures markets. The goal of the Market Clarification Act was precisely to delineate the boundaries between their responsibilities through legislation, but it failed on the Senate floor this week, leaving the regulatory framework explicitly reliant only on executive means authorized by existing law.

Follow-up

The two agencies have indicated that they will continue to collaborate within their existing mandates in order to provide clearer rules for the crypto industry. Next points of interest include: when OMB completes its review of CFTC's proposal, what specific provisions are contained after the draft is made public and which platforms apply for an exemption from brick-and-mortar innovation once it has actually landed on the ground.