Offshore Crypto Exchanges Say "No Thanks" to FBOT Framework
The Commodity Futures Trading Commission (CFTC) recently issued guidance inviting offshore platforms to serve U.S. residents under the Foreign Board of Trade (FBOT) framework. But legal experts are already calling it a dead-end for crypto exchanges.
Eli Cohen, General Counsel at real-world asset tokenization platform Centrifuge, argues that the FBOT structure was built for traditional finance—not the dynamic world of blockchain and crypto.
“The settlement, clearing, and regulatory systems required by FBOT just don’t work for crypto,” Cohen told Cointelegraph. “It’s not designed for this kind of market.
Only Highly Regulated Entities Need Apply
Under the new CFTC advisory, only licensed Futures Commission Merchants (FCMs) and other well-regulated platforms are eligible to apply. That creates a major roadblock for many crypto exchanges, especially those based in Seychelles, Panama, or similar jurisdictions known for light-touch regulation.
“To apply under FBOT, an exchange must already operate in a country with a regulatory framework comparable to the U.S.,” Cohen explained.
This disqualifies a significant portion of the offshore crypto world right off the bat.
Why Offshore Exchanges Won’t Bite
The FBOT pathway essentially asks offshore crypto firms to operate like traditional Wall Street players—an impossible ask for decentralized, 24/7 crypto trading platforms.
Most exchanges have deliberately chosen offshore jurisdictions precisely to avoid entanglement with complex U.S. regulatory layers. Re-entering under FBOT would involve navigating:
- Legacy financial systems
- Costly compliance requirements
- Strict clearing and settlement processes
It’s not just cumbersome—it’s fundamentally incompatible with how crypto works.
The Real Fix? Crypto Regulation Through Legislation
Instead of reworking legacy rules, Cohen says Congress needs to pass a proper crypto market structure bill. This would provide a permanent legal foundation for digital asset markets—one that doesn’t change with every new administration or agency directive.
“We need codified crypto regulation. Not patchwork guidance,” said Cohen.
Such legislation could finally offer clarity on jurisdiction between the SEC and CFTC, define crypto asset classifications, and create a compliant path forward for legitimate offshore platforms.
Final Thoughts: FBOT = Legacy Thinking
The FBOT registry, while well-meaning, reflects a dated approach to a space that moves at breakneck speed. Offshore exchanges are unlikely to comply with frameworks that feel like square pegs in round holes.
Until Congress acts, expect most crypto platforms to remain offshore, unregistered, and out of reach—even as U.S. demand for digital assets continues to grow.
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