Regulatory Push for Leveraged Trading
Caroline Pham, Acting Chair of the US Commodity Futures Trading Commission (CFTC), is actively engaging with regulated US crypto exchanges to potentially launch leveraged spot crypto products as soon as next month. Pham confirmed this initiative in a recent X post, indicating a significant step towards offering more sophisticated trading options within the regulated US market.
Pham also stated that she has continued to meet with industry representatives even during the ongoing government shutdown. The regulator is reportedly considering issuing specific guidance for these leveraged spot crypto products, which would further clarify the operational framework for exchanges.
Background of CFTC's Spot Crypto Initiative
This development follows the CFTC's launch of an initiative in early August aimed at enabling the trading of "spot crypto asset contracts" on exchanges registered with the regulator. At the time of the announcement, Pham extended an invitation for public comment on the rules governing "retail trading of commodities with leverage, margin, or financing."
According to the Federal Register, the Commodity Exchange Act stipulates that a retail commodity transaction entered into with a retail person on a leveraged or margined basis falls under the Commission's jurisdiction. This is unless the transaction results in the actual delivery of the commodity within 28 days. Consequently, leveraged crypto spot positions would only be permissible if their duration is limited to 28 days; otherwise, they would be deemed illegal.
Crypto Regulation Continues Amidst Government Shutdown
A US government shutdown occurs when Congress fails to pass an annual spending bill or a short-term continuing resolution, leading to the suspension of many federal government operations. During such periods, non-essential services are paused, some federal employees are furloughed, and others may work without immediate pay.
The current shutdown, which began on October 1, appears to be nearing its conclusion as the Senate is expected to consider a continuing resolution to fund the government.
Reports from earlier in October had raised concerns about the potential impact of the government shutdown on the progress of US crypto regulation. The Securities and Exchange Commission (SEC) had announced that it would "not engage in ongoing litigation," with the exception of emergency cases, at the onset of the shutdown.
Despite these challenges, there were reports late in October indicating that many US senators were moving to advance a bill concerning crypto market structure rules, even with the shutdown in effect. Further information from earlier this month suggests that meetings regarding this bill are still occurring within the US Senate.