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US CFTC issues new guidance for cryptocurrency derivative products

The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) have jointly issued a new guidance for listing cryptocurrency derivative products.

Targeted at the exchanges and clearinghouses registered with the CFTC, the guidance highlights certain key areas that require particular attention while listing a new cryptocurrency derivatives contract. These include enhanced market surveillance, close coordination with CFTC staff, large trader reporting, outreach to member and market participants, and Derivatives Clearing Organization risk management and governance.

“The CFTC staff is committed to providing regulatory clarity as much as possible,” said DMO Director Amir Zaidi. “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.”

In December 2017, the CFTC published a proposed interpretation on its authority over retail commodity transactions involving digital currencies, such as bitcoin. Back in 2015, the agency had declared that Bitcoin and other virtual currencies are “commodities” covered by the Commodity Exchange Act.

Commenting on the advisory, CFTC Commissioner Rostin Behnam said the guidance is another step aimed at providing the public with greater transparency on process of listing of new products pursuant to the Commodity Exchange Act and Commission Regulations.

“While this staff advisory clarifies expectations, it does not equate a change to the regulatory process. Such changes require a more fulsome and formal process, subject to Commission deliberation and public notice and comment,” Behnam said.

Last month, CFTC Chairman J. Christopher Giancarlo released a white paper on Swaps Regulation, which underscores the potential of blockchain technology in this area.

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