Author: Jesse Hamilton

Compiled by: Tim, PANews

The US Congress has been trying to grant the CFTC (Commodity Futures Trading Commission) more direct jurisdiction over the crypto market, but the CFTC is still pushing forward with some related work in the absence of authorization. Currently, its acting chair, Caroline Pham, is in talks with regulated exchanges, and if all goes well, some spot products could be launched as early as next month.

Despite the current federal government shutdown delaying the progress of crypto policy in Washington, Pham has personally met with several exchanges interested in listing spot and futures contracts. It is understood that the CFTC is considering issuing further guidelines on the specific operational procedures for these transactions. Pham has previously stated publicly that the CFTC has sufficient legal authorization to intervene in the crypto market in this manner.

Pham is busy restructuring the CFTC's internal personnel and reforming its enforcement division, while also pushing for a tokenized collateral policy expected to be released early next year. However, the CFTC's most pressing policy priority is regulating new retail spot products on regulated exchanges in the absence of relevant legislation from Congress. Pham's position will ultimately be filled by Mike Selig, a new nominee of President Trump and an official in the SEC's cryptocurrency division.

A CFTC commissioner stated, “As we continue to work with Congress to bring clarity to these markets, we are also using our existing powers to rapidly implement the recommendations of the President’s Working Group on Digital Asset Markets report. I am excited about the new products that will be available for trading in the markets by the end of the year and am working to ensure a smooth transition for President Trump’s nominee for CFTC Managing Director.”

Spot trading, which refers to the immediate trading of physical assets (as opposed to futures trading), also includes the trading of crypto assets such as Bitcoin and Ethereum in this context. This has consistently been a core issue in industry policy lobbying in Washington. Several lawmakers and the former Democratic chairman of the CFTC have argued that Congress should authorize the CFTC to exercise regulatory power over the crypto industry. If current acting chairman Pham pushes for CFTC-regulated exchanges to offer leveraged trading in assets like Bitcoin and Ethereum, it would essentially circumvent some legal hurdles and could potentially increase institutional investor interest in the crypto space.

"Traditional institutions and other established market participants are likely to be more willing to gain or increase their cryptocurrency exposure if they can invest in these crypto products on regulated exchanges, as they prefer to trade these products in a familiar, regulated venue," said Kris Swiatek, a lawyer at Seward & Kissel, in an interview. Swiatek primarily advises asset management firms on digital assets.

Cryptocurrency leveraged trading

Crypto trading involving margin, leverage, or financing will take place on so-called Designated Contract Markets (DCMs), subject to full compliance with traditional commodity law regulatory frameworks. This is expected to provide further protection for investors and investment advisors. While the scope of trading is limited, ample room remains for eventual U.S. market structure legislation to further define the scope of crypto businesses and understand their internal workings.

While a spokesperson declined to name the exchanges that might be the first to launch the service, sources familiar with the negotiations indicate that designated contract markets, already deeply involved in the crypto space, are expected to be among the first to introduce the products. Currently, crypto-native companies such as Coinbase and Bitnomial, as well as prediction market platforms like Kalshi and Polymarket, have already obtained designated contract market qualifications.

Cody Carbone, CEO of the Digital Chamber of Commerce, a strong advocate for pro-crypto policies in Washington, said: “The CFTC’s recent work on spot market regulation is particularly encouraging. Regulatory progress largely depends on when Congress reopens the government, and until then, agencies must ramp up their oversight efforts in accordance with presidential executive orders and the working group’s recommendations.”

In recent years, it's become more widely known that the U.S. Securities and Exchange Commission (SEC) has attracted the majority of attention in the crypto space, primarily due to the SEC's previously tough stance on business practices and legal positions within the crypto industry. However, the relatively smaller CFTC likely has jurisdiction over the vast majority of crypto asset transactions. Even Paul Atkins, the SEC chairman appointed during President Trump's administration (and a supporter of cryptocurrencies), has pointed out that the vast majority of assets in the crypto market clearly do not fall under the category of securities and are effectively outside the SEC's jurisdiction. This places a significant portion of cryptocurrencies under the CFTC's regulatory purview.

However, the heads of the SEC and CFTC recently stated that they are jointly processing new product proposals and have instructed the exchanges they regulate that spot trading of certain cryptocurrencies is permitted, provided it is done properly and with consultation with regulators. It is understood that because Pham is not subject to current federal employee conduct rules, she can directly meet with and mentor private companies.

A prominent cryptocurrency investment firm, a16z, recently submitted a comment letter to the CFTC, stating that "the CFTC's public guidance represents a key step in de-offshoreization, allowing U.S. retail investors to access cryptocurrency leveraged products under a comprehensive regulatory framework while maintaining high standards of market integrity and investor protection in the U.S. derivatives market."

Stablecoin collateral

Another CFTC policy shift allowing stablecoins to be used as permitted tokenized collateral in the vast derivatives market is expected to be finalized in the second quarter of next year. This policy will likely be piloted in US clearinghouses initially, with stricter oversight, requiring additional disclosure of position sizes, large traders, and trading volume, as well as requiring clearinghouses to provide operational reports.

Pham, who has long studied tokenized collateral, calls this the "killer app" for stablecoins.

When Pham took over earlier this year, she and several other federal agency heads witnessed massive government layoffs under Musk's Department of Efficiency. She immediately implemented sweeping personnel changes, canceled some high-paying service contracts, and didn't hesitate to launch policy initiatives as acting chair—such as her "Crypto Sprint." This crypto initiative aimed to accelerate crypto-asset policy and meet explicit demands from Trump. Pham also oversaw ongoing restructuring within the agency, including revitalizing the law enforcement division, which has focused on cryptocurrency cases in recent years.

This sweeping overhaul of the agency has sparked some discontent, and with many senior employees choosing to leave amid the Trump administration's buyout program for federal employees, the downsizing has created space for the CFTC to reshape its key functions. Sources say that in law enforcement, Pham aims to build a specialized team of eight or nine trial lawyers, potentially hiring former prosecutors from agencies such as the Department of Justice, bringing more trial experience to the CFTC.

The CFTC is considering hiring legal staff in areas with lower cost of living, such as Kansas City, to save on its budget.

Pham has discussed her departure plans with the government in recent months and agreed to remain in office until a successor to her chair is confirmed. Her term has been extended because Brian Quintenz, the president's initial nominee for former CFTC commissioner, was withdrawn after a public spat with Gemini CEO Tyler Winklevoss, and the Senate's deadlock due to the government shutdown could further delay the confirmation process.

According to sources within MoonPay, a US-based cryptocurrency infrastructure service provider, Pham had been planning to join the company as Chief Legal Officer and Chief Administrative Officer after leaving his previous position. This follows several other CFTC commissioners who have entered the digital asset space: former Republican CFTC commissioner Summer Mersinger, who worked with Pham, recently left to become CEO of the Blockchain Association; Quintenz has been responsible for policy development at a16z Crypto; and former chairman J. Christopher Giancarlo serves on the board of the Chamber of Digital Commerce and has published a book he calls "Crypto Dad."

SEC official Carbone stated, "Selig has been working for years in both the public and private sectors to develop sound digital asset policies." It remains unclear when the Senate will vote on Selig's appointment, so Pham may still have an opportunity to push for further reforms within the CFTC.

Sources familiar with the matter revealed that some recruitment negotiations were stalled earlier this year due to uncertainty surrounding leadership, but Pham is still actively pushing forward with its talent acquisition program, which aims to recruit senior managers with decades of experience in the financial sector for the CFTC. These individuals typically have the qualifications to lead a department within the company.

Acting Chairman with full power

The CFTC is supposed to have five commissioners, but Pham is currently in an unusual position as the only one in office. This effectively makes her the sole head of the CFTC, similar to the Consumer Financial Protection Bureau or the Office of the Comptroller of the Currency. Cryptocurrency lobbyists and lawyers have privately stated that there is uncertainty about the legal validity of policy decisions made unilaterally by a Republican chairman, and that the Trump administration is deliberately circumventing federal law requiring the adoption of opposition opinions, intending to suppress dissenting voices within federal agencies.

The only work the CFTC is currently working on is the development of cryptocurrency rules, which involves revising existing rules to make room for the application of blockchain technology. This technical work involves multiple regulations within the CFTC's jurisdiction.

Pham stated, "At the beginning of this administration's term, our focus is on pushing the CFTC back to its core functions, streamlining its operations, and preparing for stronger regulation of the digital asset sector." This statement was welcomed by crypto companies.

"She has put key workflows on track, and we are very pleased with that," Coinbase Chief Policy Officer Faryar Shirzad told CoinDesk. He added that Pham has made it clear that she welcomes input from companies like Coinbase into the CFTC's work.

Selig maintained contact with Pham throughout the confirmation process. If approved by the Senate, Selig is widely expected to continue his crypto-friendly policy, as he has been a key member of the SEC's "Crypto Initiative" and the CFTC's coordinating task force.

The industry has long hoped for a scenario where substantial investment capital is waiting on the sidelines, ready to enter the crypto space once it matures and is properly regulated. Over the past year, the government has strongly supported and promoted this process. Observers point out that this move could further boost market confidence.

Swiatek stated, "There's been a lot of discussion about this, usually from traditional players. This gives them an opportunity to compete with investors who want exposure to crypto assets without having to leave the traditional financial framework."

He predicted "massive changes in this field," noting that "all institutions are ultimately competing for a share of this expanding ecosystem."