The Commodity Futures Trading Commission (CFTC) has officially rescinded two staff advisories that previously established specific regulatory expectations for digital asset derivatives. This move signifies a shift towards a more unified treatment of crypto-based financial instruments, akin to traditional derivatives.
On March 28, the CFTC announced in an official statement that its Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) have jointly withdrawn CFTC Staff Advisory No. 18-14, which outlined guidance for listing virtual currency derivative products, along with Advisory No. 23-07, which discussed the risks associated with expanded digital asset clearing by derivatives clearing organizations (DCOs).
According to a press release, the rescissions are effective immediately, stating,
“The CFTC’s Division of Market Oversight and Division of Clearing and Risk have withdrawn CFTC Staff Advisory No. 18-14, Advisory Regarding Virtual Currency Derivative Product Listings, effective immediately.
The withdrawal letter indicated that DMO and DCR concluded the advisory is no longer necessary due to increased staff experience with virtual currency derivative product listings and the rising growth and maturity of the market.”
This decision mirrors both the expanded staff expertise in crypto derivatives and the overall development of digital asset markets. The agency highlighted that the withdrawal aligns its oversight methods with those used for traditional financial products, thereby eliminating additional scrutiny that had previously characterized digital asset derivatives.
Move Towards Regulatory Equality
The removal of these advisories emphasizes the CFTC’s strategic intent to close regulatory gaps between digital assets and traditional financial instruments.
CFTC Staff Advisory No. 18-14, introduced in 2018, required exchanges listing crypto derivatives to enhance transparency and conduct proactive risk assessments, reflecting a cautious stance as market interest surged.
The withdrawal letter states,
“The Advisory represented ‘staff’s current thinking’ in 2018 ‘based on experience with virtual currency derivatives products to that point.’”
Advisory No. 23-07, which was issued in 2023, raised alarms about systemic risks associated with digital assets as DCOs began to expand clearing services to include innovative tokenized products. The rescindment of both advisories eliminates language that suggested heightened regulatory scrutiny specifically associated with the digital nature of these assets.
“Considering the additional staff experience in the subsequent years, as well as the growing market maturity, DMO and DCR believe the Virtual Currency Listing Advisory is no longer necessary. Thus, DMO and DCR have decided to withdraw the Advisory, effective immediately.”
The CFTC underscored that digital asset derivatives will now be subjected to the same regulatory evaluations and risk protocols that apply to derivatives based on commodities or financial indices, such as oil futures or interest rate swaps.
Effects on Market Participation and Institutional Interest
By eliminating separate advisories, the CFTC is facilitating increased institutional engagement in the crypto derivatives market. This adjustment is anticipated to lessen compliance ambiguity for firms aiming to offer or clear digital asset-based products, especially within well-established financial institutions already active in traditional derivatives markets.
This action addresses long-standing industry concerns regarding the imbalance in regulatory treatment and signals that digital asset derivatives will not face arbitrary or inconsistent oversight.
Although prescriptive guidelines have been removed, the CFTC emphasized that DCOs are still expected to perform comprehensive risk assessments, particularly in light of the volatility and unique custody dynamics of digital tokens. This aligns with the agency’s broader philosophy of maintaining responsible oversight while promoting innovation.
The CFTC’s approach reflects wider regulatory changes across U.S. financial agencies. Other regulators, including the Office of the Comptroller of the Currency (OCC), have relaxed procedural requirements for digital asset services provided by banks. The OCC now allows U.S. financial institutions to engage with stablecoins and custody services without prior approval, so long as appropriate risk management frameworks are put in place.
The CFTC’s shift is part of a larger trend among multiple agencies to erase artificial distinctions between traditional finance (TradFi) and decentralized finance (DeFi) sectors as financial markets integrate blockchain technology and tokenized products.
According to the CFTC Chair, the agency remains dedicated to a “principles-based oversight” approach that harmonizes innovation with market integrity. Whether this model can effectively scale across the broader digital asset landscape will likely hinge on future inter-agency cooperation and clear legislative guidelines.