The FBOT framework is a legacy regulatory route that requires settlement, clearing and licensed futures-commission merchant oversight, making it poorly suited to crypto exchanges. CFTC guidance narrows FBOT eligibility to highly regulated entities, so offshore exchanges are unlikely to return under current rules.
FBOT requires legacy settlement and FCM-style oversight, incompatible with most crypto exchanges.
Offshore exchanges often operate from unregulated jurisdictions to avoid FBOT-style obligations.
Expert: Eli Cohen stresses a legislative crypto market structure bill is the best path to durable clarity.
FBOT framework: CFTC guidance tightens eligibility for offshore exchanges; read expert analysis and next steps for exchanges. Learn what exchanges must do.
What is the FBOT framework and how does it affect crypto exchanges?
FBOT framework is a regulatory pathway that allows foreign boards of trade to serve U.S. customers only if they meet legacy clearing, settlement and licensed-futures intermediary standards. The CFTC’s recent guidance makes FBOT eligibility narrow, meaning most crypto exchanges cannot meet those traditional requirements.
How does the CFTC guidance change FBOT eligibility?
The CFTC guidance specifies that only entities with Licensed Futures Commission Merchant (FCM) capabilities or similarly regulated structures qualify to apply under FBOT rules. That requires comprehensive clearing and settlement systems built for legacy finance, which many crypto-native exchanges do not possess.
The Foreign Board of Trade (FBOT) framework is designed for the legacy financial system and is a poor fit for cryptocurrency exchanges.
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The recent Commodity Futures Trading Commission (CFTC) advisory on offshore exchanges serving U.S. residents under the FBOT framework is unlikely to bring most offshore crypto platforms back to the U.S., according to Eli Cohen, general counsel at real-world asset tokenization firm Centrifuge.
Cohen told reporters that settlement, clearing, and other regulatory requirements designed for the traditional financial system, required to serve U.S. clients under the FBOT framework, are not tailored for crypto exchanges and will be difficult or impossible to fulfill.
The CFTC’s guidance also stipulated that only Licensed Futures Commission (FCM) exchanges and other highly regulated entities are qualified to apply under the FBOT framework, Cohen said. He added:
Many exchanges choose to set up businesses in Seychelles or other unregulated jurisdictions to avoid FBOT-style obligations entirely, Cohen noted. Creating a domestic law that codifies crypto rules would provide longer-term clarity than administrative guidance.
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