US Self-Regulatory Organization Implements Crypto Compliance Rule for Members
The National Futures Association (NFA), the United States self-regulatory organization for derivatives markets, has issued a new compliance rule for its members engaging in activities with digital asset commodities, including Bitcoin and Ethereum.
The new rule complements requirements issued in 2018 and is designed to address fraud or misconduct committed by its members.
@CFTCpham applauds the National Futures Association (CFTC-designated SRO for derivatives industry) for establishing supervision and disclosure requirements for the trading of digital commodities.
✅ Importantly, the NFA (and Pham) reinforce ETH’s https://t.co/uu0Vc3WD7F…
— Alexander Grieve (@AlexanderGrieve) March 31, 2023
NFA’s need for rule changes
The NFA has “well over 100” members involved in digital asset commodities activities, but it lacks the means to address fraud or misconduct by those members, the organization explained in a letter to the secretary of the Commodity Futures Trading Commission (CFTC), Christopher Kirkpatrick, as it submitted the proposed new rule for approval.
Compliance rule for conduct
The new compliance rule is modeled on the NFA’s antifraud rules for exchange-traded futures, swaps transactions, and retail foreign exchange. When the new rule comes into effect on May 31, members will be subject to guidance on fraud, trade principles, and employee supervision.
The NFA is the only registered self-regulatory organization with delegated authority from the CFTC, giving it an analogous status to the Financial Industry Regulatory Authority with the Securities and Exchange Commission.
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Disclosure rules for members
Currently, the NFA only imposes disclosure requirements on its members engaged in spot commodity activities with digital assets, which are detailed in a single document. However, when the new rule comes into effect on May 31, members will have to adhere to new standards of conduct as well.
Standards of conduct for members
The new rule applies only to Bitcoin and Ethereum, as they alone “have related commodity interests certified by a registered entity for listing under Part 40 of CFTC Regulations.” The rule will require members to comply with the NFA’s rules to ensure that there are customer protections in place.
Future changes to the rule
CFTC Commissioner Caroline Pham released a statement praising the new rule, saying that the NFA “can modify this rule in the future to include other digital asset commodities” besides Bitcoin and Ethereum. She noted that NFA rules on foreign exchange preceded the CFTC’s authority granted by Congress to regulate that market by five years. “I believe it is common sense to start with what we have and what works in order to extend our regulatory framework over spot digital asset commodity markets,” she added.
Andrey Kunev
Reporter at CoinsPress
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