A New Chapter for Crypto: The CFTC’s Initiative and the Path to Institutional Maturity
- Nirup Ramalingam
- Sep 22
- 4 min read
By Nirup Ramalingam, CEO
Published in TabbForum
September 22, 2025 – The CFTC's "Listed Spot Crypto Trading Initiative" aims to establish a clear regulatory framework and market structure for institutional crypto in the U.S, but it has also created divided opinions on how the industry should move forward, writes Nirup Ramalingam, CEO and Co-Founder of BridgePort. The debate centers on whether to use the CFTC's existing powers under the Commodity Exchange Act or pass new, comprehensive legislation, explains Mr. Ramalingam.
With maturation in institutional crypto comes a pressing need for regulatory clarity and a market structure that can support the scale, integrity, and stability of traditional finance. The Commodity Futures Trading Commission (CFTC), through its “Listed Spot Crypto Trading Initiative,” is stepping up to address this challenge, sparking a comprehensive debate among industry stakeholders on the best path forward for American digital asset markets.
The submissions to the CFTC reveal a strong consensus: the U.S. must establish a clear regulatory framework to foster innovation and maintain its leadership in financial technology. Yet, while the objective is shared, the proposed methods to achieve it diverge significantly, presenting the Commission with a complex but crucial set of choices.
THE DEBATE: EXISTING POWERS VS NEW LEGISLATION
A central theme emerging from the submissions revolves around the CFTC’s existing authority to oversee spot crypto markets. Some, including Bitnomial, OKX, and Coinbase, argue that the Commodity Exchange Act (CEA) already provides a plausible framework for listing leveraged or financed spot crypto on CFTC-regulated Designated Contract Markets (DCMs). They point to CEA Section 2(c)(2)(D), which subjects certain leveraged or margined retail commodity transactions to futures regulations, effectively requiring them to trade on DCMs. This framework, they contend, is a natural fit for many crypto products and avoids the regulatory patchwork that currently exists.a16z echoes this sentiment, asserting that this approach could help repatriate trading volume that has been driven to offshore platforms due to a lack of domestic options.
However, other key industry groups, including the Futures Industry Association (FIA) and EDX Markets, urge caution. They highlight that the CEA’s authority over pure spot transactions is limited to anti-fraud and anti-manipulation enforcement, not comprehensive regulation. These groups strongly advocate for new, comprehensive legislation such as the CLARITY Act as the most durable and legally sound solution. This legislative approach, they argue, would establish clear registration categories for digital commodity exchanges and brokers, providing a solid legal foundation for long-term growth.
Kraken, while supporting the CFTC’s immediate efforts, similarly emphasizes the ultimate necessity of comprehensive legislation.
INNOVATING STANDARDS AND DECENTRALIZATION
Beyond the question of regulatory authority, stakeholders have put forth a variety of proposals to enhance transparency, efficiency, and safety in digital asset markets.
Leveraging Existing Infrastructure: tastyfx LLC suggests extending the CFTC’s proven forex regulatory framework to spot crypto trading, allowing registered Retail Foreign Exchange Dealers (RFEDs) and Futures Commission Merchants (FCMs) to offer crypto pairs like Bitcoin/USD. They highlight the “functional similarity” between fiat and cryptocurrencies and believe existing forex safeguards offer comprehensive customer protections. EDX Markets also champions enabling FCMs to offer spot digital assets, believing it provides a more “normalized market structure” and immediate access for investors through regulated intermediaries.
Standardized Identifiers: The Digital Token Identifier (DTI) Foundation and the ISO/TC 68 Standards Advisory Group advocate for the DTI, a globally recognized ISO standard, to uniquely identify crypto assets. They argue this would eliminate ambiguity and errors, simplify reporting, and boost international interoperability. The ISO group also notes that the LEI (Legal Entity Identifier) is already used in CFTC reporting and can be integrated with digital credentials via the vLEI (verifiable LEI) to provide a high level of assurance about the identity of market participants.
Embracing Decentralized Finance (DeFi): Paradigm Operations LP makes a bold case for the CFTC to permit retail trading of leveraged spot crypto assets directly on DeFi protocols. They argue that DeFi inherently aligns with the CEA’s objectives by empowering users through self-custody and ensuring atomic, instant settlement which reduces counterparty default risk. They believe this approach prevents the “offshoring” of next-generation markets. Similarly, Douro Labs proposes that the CFTC clarify that decentralized oracle networks can be used for pricing data in financial contracts, arguing they offer comprehensive and trustworthy data by aggregating information from a diverse set of market participants globally.
KEY SAFEGUARDS FOR A ROBUST MARKET
Regardless of the regulatory pathway, nearly all participants underscore the importance of robust customer protection and market integrity.
Operational Readiness: OKX emphasizes the need for “additional digital-asset-specific conditions and considerations” for DCMs listing spot digital assets, including robust AML, fraud risk, and real-time surveillance capabilities. Kraken also stresses that “custody of spot digital assets…is informed by top industry standards” and that the unique technical aspects of operating a spot exchange must be studied.
Conflicts of Interest and Best Execution: EDX highlights the need to address conflicts of interest, especially when an exchange controls multiple functions like brokerage and market making, and suggests a best execution requirement for FCMs dealing in spot commodities.
Clearing and Settlement Challenges: EDX raises critical questions about how spot trades on DCMs would be cleared, given that the CEA definition of DCO activity “excludes… the ‘settlement, netting, or novation of obligations resulting from a sale of a commodity in a transaction in the spot market for the commodity'”. Coinbase echoes this, arguing that spot crypto’s “atomic settlement” and immediate payment make traditional DCO clearing requirements both “unnecessary and not suited” to the activity.
The CFTC’s initiative has ignited a comprehensive debate on the future of digital asset regulation in the U.S. While there’s broad consensus on the need for clarity, American leadership, and robust protections for market participants, the means to achieve these goals are varied. Whether through adept application of existing statutes, the enactment of new legislation, or the embrace of decentralized technologies, the dialogue underscores a shared commitment to fostering innovation responsibly. The path ahead remains complex, but the ongoing engagement between regulators and industry leaders is a crucial step toward building a resilient and transparent digital financial ecosystem.
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Nirup Ramalingam is the CEO of BridgePort, the institutional coordination layer for the off-exchange settlement of crypto through credit allocation and post-trade facilitation designed to address the capital inefficiency, credit risk, and fragmented liquidity that currently exists in crypto markets. Prior to becoming CEO of Bridgeport, Nirup, spearheaded the institutional crypto trading platform at CME owned EBS and most recently served as the COO of NEX SEF responsible for managing CME’s SEF and MTF platforms for FX and IRS derivatives.
Reposted from Source: TabbForum
