CFTC Chair Cites $6.3B Binance Hack in Push for Exchange Registration

CFTC Chairman Michael Selig said Friday that the roughly $6.3 billion Binance theft "proves our exact point" for the agency's plan to let crypto exchanges register with it. Public comments on that plan are due Dec. 14.

Selig spoke in a CNBC interview the day after the hack, Yahoo Finance reported. "The real issue here is that these are unregulated offshore exchanges, and they don't have the same sorts of safeguards that we have in our financial markets here in the U.S.," he said.

An option for exchanges

The plan is an advance notice of proposed rulemaking the CFTC published Oct. 13. It covers two sets of rules, Regulation Crypto Asset Transactions (CTX) and Regulation Crypto Asset Markets (CAM).

How it works: an advance notice is the earliest step in federal rulemaking. It asks the public for input before the agency writes an actual proposed rule, which then needs its own comment period before anything becomes final. Nothing in this notice binds an exchange today.

In a Wall Street Journal op-ed posted by the CFTC, Selig said the rules wouldn't force crypto trading onto CFTC-registered platforms. The agency lacks that power without Congress, he wrote. Exchanges that opt in could offer retail customers margined, leveraged or financed trading, which state-licensed venues can't, he wrote. On Friday he said registered venues would face "the same sorts of cybersecurity safeguards that we have in our markets today."

Tracing the money

Selig also said the public blockchain record gives investigators "a very good shot" at following the stolen funds, even through mixers such as Tornado Cash, and that the CFTC would help law enforcement. He said the attack hit the systems around the blockchain, while the blockchain itself held up.

Binance has said it reserved more than $6.34 billion of company money to cover users' losses.

In our opinion: the timing gives the CFTC its strongest case yet, but the limit is written in its own op-ed: registration stays optional until Congress acts. The stake is plain enough, with $6.3 billion gone from a platform outside U.S. market rules. The next date that counts is Dec. 14, when comments close, and the bigger test is whether any large offshore venue says it will opt in.