Regulatory officials supporting the crypto industry, such as Mike Selig, stated that implementing new regulatory rules will prevent similar collapses like FTX from happening again.

Selig stated on Wednesday during the program “Varney & Co.” on Fox Business Channel that crypto exchanges will have the opportunity to register with the Commodity Futures Trading Commission (CFTC) of the United States in order to protect the digital asset spot market.

FTX used to be one of the most popular cryptocurrency exchanges, but due to poor management, it went bankrupt rapidly and suddenly in 2022. Its founder, Sam Bankman-Fried, is currently serving a 25-year prison sentence for fraud and other crimes, following the theft of $8 billion in customer funds.

Although U.S. congressmen prevented the long-awaited Clarity Act, CFTC last month, regulatory authorities are still pushing forward with the establishment of rules in the cryptocurrency sector.

Selig said, "Four years ago, we witnessed the collapse of Sam Bankman-Fried’s FTX, who stole over $8 billion in client funds. Such a thing could not have happened under our regulatory system."

He also stated, "In fact, all the funds of that subsidiary registered under CFTC under Sam Bankman-Fried are safe, as these funds are kept in isolation. Moreover, in terms of market regulation, we have some of the strictest requirements among federal agencies – and we hope to bring this set of regulations to the crypto world as well."

Selig added that some exchanges may choose to remain under the state-level regulatory system, while others will undergo federal registration.

CFTC is relying on its existing powers to regulate the crypto market. This institution is seeking public feedback this week on a framework that will establish a new federal registration category – "Crypto Asset Markets" – applicable to exchanges that offer leveraged, margin, or financing crypto transactions to retail customers.

Exchanges that do not offer leverage can continue to hold state-level licenses. However, the institution has a relatively broad definition of “leverage,” which means that even transactions with full payment may fall under its regulatory scope, unless customers actually withdraw their crypto assets.

Selig, who formerly served as the chief legal advisor to the SEC's (SEC) Cryptocurrency Task Force, stated last month that regulatory agencies are preparing for the market to transition to "around-the-clock, on-chain" operations.

Since U.S. President Donald Trump took office, both CFTC and SEC have adopted a more favorable attitude towards regulating the crypto industry.