The US Commodity Futures Trading Commission (CFTC) has issued a new advisory to futures commission merchants (FCMs) that hold digital currencies in segregated accounts. The regulator addressed how the Commodity Exchange Act’s customer protection provisions apply to digital currencies deposited by futures customers. In its press release, the US CFTC revealed that the new advisory would guide FCMs on holding and reporting “certain deposited digital currency from customers in connection with physically-delivered futures contracts or swaps.”
CFTC is committed to fostering responsible fintech innovation and improve regulations.
The US regulator issued the new advisory through its Division of Swap Dealer and Intermediary Oversight (DSIO). The division’s director Joshua Sterling stated, “the CFTC is committed to fostering responsible fintech innovation and improving the regulatory experience of registered firms where doing so is consistent with our rules. This advisory furthers these critical goals and will provide additional certainty on these issues as the Commission works to establish a holistic framework for digital asset derivatives.”
In an accompanying letter, the regulator delved into its view regarding the accepting and holding customers’ cryptocurrencies by FCMs. However, it clarified that the new advisory would not apply to cryptocurrencies held by FCMs on behalf of customers trading futures or options on foreign markets.
FCMs have to deposit customers’ digital currencies with a bank or trust company.
The US CFTC stated that holding a customer’s digital currency as segregated funds increases the risks for an FCM’s other customers. This is because digital currencies present a degree of risk beyond other depositories, such as banks and trust companies. The CFTC cited the billions of dollars’ worth of digital currencies that have been lost to hackers in the past few years. One of the guidelines that FCMs must comply with is depositing a customer’s digital currencies with a bank or trust company.