In the absence of formal crypto rules from U.S. government agencies, the National Futures Association is setting up standards for its members that deal in digital-assets commodities.
The NFA – which as a so-called self-regulatory organization occupies a space between the federal government and industry – has more than 100 members involved in digital assets, the organization said in a statement on the new rule, which is set to go into effect on May 31. The NFA's self-regulation of the derivatives industry allows it to impose standards on its members under penalty of fines and other punishment, and this rule extends that power more explicitly to the crypto sector.
The compliance rule – now limited to involvement with bitcoin (BTC) and ether (ETH) – gives the NFA “the ability to discipline a member or take other action to protect the public if a member commits fraud or similar misconduct with respect to its spot digital asset commodity activities,” the group said in the statement on Wednesday. It also requires members to supervise their activity closely and says that members involved in spot crypto commodity activity “must adopt and implement appropriate supervisory policies and procedures over these activities.”
The Commodity Futures Trading Commission oversees the NFA and the wider industry, though questions remain about the extent of its authority over digital assets. A number of legislative efforts in Congress have sought to give the CFTC undeniable powers over crypto commodities and the spot market, but the bills haven’t produced any results.
“This is a clear example of using existing authority to ensure that there are customer protections in place,” CFTC Commissioner Caroline Pham said Friday in a statement posted on the CFTC website. “These obligations will require NFA members and associates to explicitly disclose the risks associated with trading spot bitcoin and ether, so that customers are fully informed before making any trading decisions.”
UPDATE (March 31, 2023, 18:11 UTC): Adds comment from CFTC Commissioner Pham.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.