The U.S. Commodity Futures Trading Commission (CFTC) has announced the withdrawal of two crypto-related staff advisories as part of an initiative to simplify its regulatory framework for cryptocurrencies. This move aims to make the agency’s rules clearer and easier to follow, particularly in the realm of crypto derivatives.
The first advisory, Staff Advisory No. 18-14, issued in May 2018, outlined guidelines for the handling of crypto derivatives, including the requirement for firms to collaborate with the CFTC’s surveillance division and establish a reporting threshold for traders holding five or more bitcoins. However, the CFTC has stated that this advisory is now outdated, given the significant growth of the crypto market and the increasing experience gained within the sector.
The second advisory, Staff Advisory No. 23-07, was introduced in May 2023. It addressed the potential risks associated with the expansion of digital asset clearing by Digital Clearing Organizations (DCOs), with a focus on cyber risks and the need for firms to adhere to CFTC regulations. This advisory was also withdrawn to ensure that crypto derivatives are treated like other financial products without special provisions.
The withdrawal of these advisories is part of a broader effort by Acting Chair Caroline Pham to streamline the CFTC’s operations and bring the agency “back to basics.” This includes reducing unnecessary rules and focusing on the agency’s core responsibilities. Additionally, the CFTC has restructured its enforcement division, consolidating it into two specialized teams to enhance efficiency and avoid “regulation by enforcement”—a practice where new rules are created in response to specific cases.
Experts suggest that these changes reflect a larger restructuring of the CFTC, aimed at centralizing operations and improving overall effectiveness. Liz Davis, a former CFTC attorney, believes that these adjustments will enhance the agency’s regulatory approach and better address the evolving cryptocurrency landscape.
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