CFTC Issues Cryptocurrency Advice to Businesses

The US Commodity Futures Trading Commission has issued an advisory notice regarding cryptocurrency products.

Specifically, the agency’s Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) have offered CFTC-registered exchanges “guidance for listing virtual currency derivative products,” according to an official release dated 21.5.2018.

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What this means is advice on how to comply with CTFC rules when listing financial derivatives based on cryptocurrency. The information deals with a number of areas that require special attention. These are: enhanced market surveillance, close coordination with CFTC staff, trade reporting, and risk management and governance.

The notice explains that cryptopcurrency has been considered a commodity under US law since 2015, and is thus subject to the Commodity Exchange Act as enforced by the CFTC.

“CFTC staff generally believes that the advisory should help exchanges and clearinghouses effectively and efficiently discharge their statutory and self-regulatory responsibilities, while keeping pace with the unique challenges of emerging virtual currency derivatives,” it reads.

The agency has been active in shutting down illegal operations, but it also allows its employees to trade cryptocurrency as long as their activities are above board. Chairman J. Christopher Giancarlo became popular amongst cryptocurrency fans in February when he made positive comments on the subject at a congressional hearing.

DMO Director Amir Zaidi said: “The CFTC staff is committed to providing regulatory clarity as much as possible. As the virtual currency market continues to evolve, CFTC staff will seek to provide additional guidance to help market participants keep pace with innovation while complying with CFTC regulations.”

DCR Director Brian Bussey said: “CFTC staff is providing this information, in part, to aid market participants in their efforts to design risk management programs that address the new risks imposed by virtual currency products. In addition, the guidance is designed to help ensure that market participants follow appropriate governance processes with respect to the launch of these products.”