CFTC Offers Guidance Around Listing Cryptocurrency Derivatives

On May 21, the US Commodity Futures Trading Commission (CFTC) issued new guidelines for financial institutions planning to offer cryptocurrency derivatives (i.e., financial products that go up or down in value depending on changes in cryptocurrency prices).

The regulator identified two key concerns with regard to the offering of cryptocurrency derivatives. First, “virtual currency platforms present heightened concerns about potential impacts on CFTC-regulated markets, including potential market manipulation, because they lack the transparency and robust regulation as U.S. derivatives platforms.”

Second, the agency cautioned that because cryptocurrency trading is a relatively new phenomenon and prices in the space are relatively volatile, exchanges and other crypto marketplaces may not be able to “adequately assess the inherent risk of virtual currency contracts in setting margin levels for these contracts.“

Among the document’s recommendations: platforms offering cryptocurrency derivatives should “regularly discuss with Commission staff a wide range of issues related to the surveillance of virtual currency derivatives contracts, and provide surveillance information as requested by Commission staff.”

According to an introductory note, the guidance was published after CFTC staff worked with personnel from the Chicago Mercantile Exchange and the CBOE Futures Exchange to review those marketplaces’ bitcoin futures.

In past coverage, ETHNews has described a possible scheme to manipulate the benchmark price against which existing bitcoin futures are evaluated. 

Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam is a full-time staff writer for ETHNews and holds value in Ether, Bitcoin, and Monero.

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