On May 21, 2018, the U.S. Commodity Futures Trading Commission (CFTC) issued guidance explaining how self-regulatory organizations, such as exchanges and clearinghouses that are registered with the agency, should go about approving applications from entities seeking to list cryptocurrency-based derivatives. The guidance emphasized regulators' need for robust data from spot markets - where commodities are traded for immediate delivery - which are less developed for cryptocurrencies compared with more mature assets.
Speaking to Law360, Jeffrey Alberts, Co-Chair of Pryor Cashman's FinTech Group, explained that while the advisory nature of the CFTC's guidance doesn't alter existing regulations, it offers useful insight into the agency's thinking regarding its oversight of cryptocurrency derivatives.
For example, the CFTC has said it will assess an exchange's visibility into spot markets when it reviews that exchange's surveillance program. Visibility into spot markets depends upon, among other things, the extent to which virtual currency spot market operators comply with anti-money laundering and know-your-customer regulations, which are designed to increase transparency of financial transactions.
But expecting spot market operators to comply with know-your-customer and anti-money laundering regulations could be challenging, Alberts said, pointing out that many spot markets for virtual currencies are based outside the U.S. and in many cases represent a "pretty sizable chunk of overall volume" in a specific cryptocurrency. Such platforms, he noted, simply may not be motivated to comply with regulations required by the CFTC.
To view the article in full click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
