The recent advisory from the Commodity Futures Trading Commission (CFTC) regarding offshore exchanges serving U.S. residents under the Foreign Board of Trade (FBOT) framework is unlikely to bring those exchanges back to the U.S., according to Eli Cohen, general counsel at real-world asset (RWA) tokenization company Centrifuge.

Cohen explained that the settlement, clearing, and other regulatory requirements mandated by the FBOT framework, which are designed for traditional financial systems, are not well-suited for crypto exchanges and might be impossible for them to meet. He added that the CFTC's guidance specifies that only Licensed Futures Commission (FCM) exchanges, which act as broker-dealers for futures contracts, and other highly regulated entities are eligible to apply under the FBOT framework.

Cohen stated, "The main problem is that only regulated exchanges outside the United States can apply for the FBOT. So, you need to have an existing regulatory framework in your home country". Many exchanges choose to establish their businesses in jurisdictions with less regulation, such as Seychelles, to avoid such frameworks.

The CFTC's Division of Market Oversight (DMO) released Staff Advisory 25-27, reaffirming the CFTC's longstanding framework for foreign boards of trade (FBOTs). The FBOT framework allows certain non-U.S. exchanges already regulated by a non-U.S. regulator to provide direct access to traders in the United States by registering with the CFTC as FBOTs rather than as “designated contract markets” (DCMs). To qualify for registration as an FBOT, a foreign exchange must demonstrate compliance with the CFTC's FBOT rules (Part 48 of the CFTC rulebook), including being subject to regulatory oversight and market integrity rules, and being regulated by a regulator that has an information-sharing arrangement with the CFTC.

Acting Chairman Caroline Pham said that US-based clients have had the right to trade on registered offshore platforms since the 1990s under the FBOT registry, and the framework works for all asset classes. Pham said: “Starting now, the CFTC welcomes back Americans who want to trade efficiently and safely under CFTC regulations, and opens up US markets to the rest of the world. It's just another example of how the CFTC will continue to deliver wins for President Trump as part of our crypto sprint".

The CFTC's "crypto sprint" is an initiative to overhaul crypto regulations to fulfill US president Donald Trump's agenda of making the US the global leader in crypto. Several policy recommendations were proposed in the Trump administration's crypto report, including giving the Securities and Exchange Commission (SEC) and the CFTC joint oversight over crypto.

While the advisory applies to all offshore derivatives exchanges, Acting Chairman Caroline Pham’s accompanying statement underscores its immediate relevance to digital asset markets. Pham described the Advisory as providing “regulatory clarity” and a “path back to U.S. markets” for digital asset platforms, many of which were “forced to set up shop in foreign jurisdictions” to reengage with U.S. participants under the FBOT framework.

Cohen suggests that the most effective way to provide clarity for crypto exchanges is to pass a crypto market structure bill in Congress. This would codify crypto regulations into law and create lasting change that isn't subject to shifts between administrations.