FBOT Framework Unlikely to Attract Offshore Crypto Exchanges to US, Says Attorney

FBOT Framework Not Suited for Offshore Crypto Exchanges, Legal Expert Says

The Commodity Futures Trading Commission’s (CFTC) recent advisory on the Foreign Board of Trade (FBOT) registration framework is unlikely to encourage offshore cryptocurrency exchanges to return to the US market, according to Eli Cohen, general counsel at Centrifuge, a company specializing in real-world asset tokenization.

Cohen explained to Cointelegraph that the FBOT framework is tailored for legacy financial institutions and imposes settlement, clearing, and regulatory requirements that crypto exchanges find challenging or impractical to satisfy. These requirements were developed for traditional markets and do not align with the operational models of cryptocurrency platforms.

He further clarified that only foreign exchanges with existing robust regulatory structures in their home countries—specifically Licensed Futures Commission Merchants (FCMs) or similarly regulated entities—are eligible to apply under the FBOT framework. This restricts access primarily to highly regulated entities outside the US.

“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,” Cohen said.

Many crypto exchanges prefer to establish themselves in jurisdictions like Seychelles, which lack comprehensive regulation, thereby avoiding the constraints imposed by frameworks like FBOT.

Call for Legislative Action to Clarify Crypto Regulation

Cohen emphasized that the most effective path forward for regulatory clarity in the crypto sector is through Congressional legislation that codifies crypto market structures into law. Such legislation would provide consistent, long-term regulatory certainty beyond the fluctuations of administrative policies.

Meanwhile, the CFTC has launched a “crypto sprint” initiative aimed at revising crypto regulations to position the US as a global leader in the sector. This effort includes proposals for joint oversight of crypto assets by the CFTC and the Securities and Exchange Commission (SEC), as well as exploring the possibility of perpetual financial markets operating 24/7— a departure from traditional markets that close during nights, weekends, and holidays.

These initiatives reflect ongoing efforts to modernize the regulatory environment but have yet to resolve the specific challenges posed by frameworks like FBOT for offshore crypto exchanges.