The CFTC has issued new guidance for crypto derivatives markets that hold customer funds, much of which boils down to "Be very, very careful."
Per guidance released Wednesday evening, the Commodity Futures Trading Commission is advising businesses trading in crypto derivatives to hold customer funds very carefully.
The new guidance continues the CFTC's interest in carving out rules for custodianship of virtual currencies - an area obviously distinct from any other asset class.
"Custodians of virtual currencies are typically not subject to a system of comprehensive federal or state regulation and oversight, which includes safeguarding of these novel assets, and this raises potential risks to the protection of customer funds held at such custodians."
The specific provisions of the guidance limit the locations that a "Futures commission merchant" can deposit customer virtual currency at to "a bank, trust company, or another FCM, or with a clearing organization that clears virtual currency futures."
The CFTC warns FCMs that they need to keep any such deposits in accounts clearly marked as customer funds, and will not allow gains in one account to make up for losses in another.
Effectively, the guidance seems most determined that customer crypto funds remain safe and untouched, barring FCMs from trading such funds in order to make collective gains.
How big of a problem FCM trading of crypto deposits has shown itself to be goes unaddressed, but you can certainly imagine some catastrophic results of a crypto futures dealer deciding to play some volatile markets using crypto funds.
The CFTC has been busy trying to assemble a holistic framework for crypto assets.
At the beginning of this month, the commission promised to protect the "Burgeoning market" for these assets, an announcement that came immediately after the announcement of their pursuit of BitMEX for operating an unregistered derivatives exchange in the U.S..
US crypto derivatives merchants need to leave customer funds alone, says CFTC
Published on Oct 21, 2020
by Cointele | Published on Coinage
Coinage
Recent News
View All
Blockchain Bites: Bitcoin's Run, Uniswap's Hemorrhaging Value, Anchorage's Banking Bid
Bitcoin is nearing all-time highs in price and market cap last set three years ago.
Japan's megabanks to lead experiment with digital yen
We have, in order, Cheese Bank with a $3.3 million theft, Akropolis with its $2 million loss, Value DeFi with a whopping $6 million exploit and finally Origin Protocol's loss of $7 million.
Number of new Bitcoin addresses spikes amid growing FOMO
Japan's three largest banks, as part of a group of 30 private sector actors, are set to collaborate on an experiment with a digital yen.
Not just Wall Street: Quant trader explains why Bitcoin price is going up
Sam Trabucco, a quantitative trader at Alameda Research, believes four general factors are pushing up the price of Bitcoin.