New Guidance on Cryptocurrency Derivatives by the FTC.docx

The cryptocurrency market has been coming under a great deal of fire lately, especially due to accusations of its securities-like nature. Now though, not only are securities a target, but so are their derivatives. In a new ruling the Commodities Future Trading Commission (CFTC), it has released a set of “best practices” that investors may want to follow as they develop and launch cryptocurrency derivative products.

A few of the FTC’s recommendations include that trading venues should be able to monitor the integrity of underlying spot markets supplying pricing data, they should be able to coordinate with staff closely, and to solicit comments from partners in the industry before they engage in trading. Each of these recommendations may be able to provide a higher level of clarity and better market oversight as well.

As the FTC explains,

the “CFTC staff is committed to providing regulatory clarity as much as possible.” Further, as “the virtual currency market continues to evolve, CFTC staff will seek to provide additional guidance to help market participants keep pace with innovation while complying with CFTC regulations.”

Additionally,

“CFTC staff is providing this information, in part, to aid market participants in their efforts to design risk management programs that address the new risks imposed by virtual currency products,” and “in addition, the guidance is designed to help ensure that market participants follow appropriate governance processes with respect to the launch of these products.”

The FTC may have released its new guidance protocol due to the mounting pressure the industry has faced in recent months. These regulations may provide the market with a long-due correction.

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