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Proposed Principles for Crypto Market Structure Legislation and DeFi

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Summary

This document sets out proposed principles for legislation governing crypto market structure, with an emphasis on preserving DeFi and open innovation. It proposes treating most crypto assets as digital commodities while leaving tokenized securities within SEC jurisdiction, and it calls for excluding decentralized protocols from major centralized-finance registration regimes. The principles distinguish custodial trading facilities from decentralized exchanges, which they describe as public, permissionless, non-custodial code without a person or group able to control transactions.

The proposals assign the CFTC a central role in regulating crypto trading venues and custodians, while specifying consumer protections such as recordkeeping, asset segregation, cybersecurity, and safeguards against manipulation. They also address bankruptcy treatment, NFTs, enforcement, and government restrictions on DeFi. The document says its framework draws on a 2023 legislative proposal and presents policy principles for discussion, not enacted law or a neutral assessment of regulatory options. Some listed provisions and definitions are incomplete or broad, so the text alone does not settle how they would apply to particular protocols or assets.

Key ideas

  • The proposal would generally classify crypto assets as commodities while reserving tokenized securities for SEC jurisdiction.
  • It distinguishes custodial crypto exchanges from non-custodial decentralized exchanges and proposes exempting the latter from registration.
  • It assigns the CFTC a central role in crypto venue oversight while excluding securities and NFTs from its jurisdiction.
  • It proposes custody, segregation, recordkeeping, cybersecurity, and anti-manipulation protections for regulated firms.
  • The document offers principles for legislative discussion rather than settled law or comprehensive implementation guidance.

Tags

CryptoDeFiMarket microstructureRisk managementSpot markets

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.