New CFTC Guidance Urges Markets To Monitor Crypto Derivatives

On May 21, 2018, the U.S. Commodity Futures Trading Commission (CFTC) issued guidance explaining how self-regulatory organizations, such as exchanges and clearinghouses that are registered with the agency, should go about approving applications from entities seeking to list cryptocurrency-based derivatives. The guidance emphasized regulators' need for robust data from spot markets - where commodities are traded for immediate delivery - which are less developed for cryptocurrencies compared with more mature assets.

Speaking to Law360, Jeffrey Alberts, Co-Chair of Pryor Cashman's FinTech Group, explained that while the advisory nature of the CFTC's guidance doesn't alter existing regulations, it offers useful insight into the agency's thinking regarding its oversight of cryptocurrency derivatives.

For example, the CFTC has said it will assess an exchange's visibility into spot markets when it reviews that exchange's surveillance program. Visibility into spot markets depends upon, among other things, the extent to which virtual currency spot...

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