The U.S. Commodity Futures Trading Commission (CFTC) retracted two pieces of staff guidance related to cryptocurrency on Friday, further refining its strategy regarding crypto regulation.
The first piece of guidance rescinded was Staff Advisory No. 18-14, Advisory Regarding Virtual Currency Derivative Product Listings, which was initially released in May 2018. This advisory laid out parameters for crypto derivatives, including a mandate for reporting firms to work closely with the CFTC’s surveillance team and setting a large trader reporting threshold at five bitcoins (or the equivalent value in other digital currencies), among other recommendations. In a letter issued on Friday, the CFTC stated that “additional staff experience” and “rapid market growth” had made this guidance unnecessary.
The second advisory, Staff Advisory No. 23-07, Review of Risks Associated with Expansion of DCO Clearing of Digital Assets, dated May 2023, had focused on ensuring compliance with CFTC regulations due to the “heightened cyber and other operational risks that may arise with digital assets.” This guidance was revoked for a different reason— to ensure fair treatment of crypto derivatives and their issuers, as suggested by the CFTC. In a separate communication on Friday, the agency remarked that it was rescinding Staff Advisory No. 23-07 “to clarify that its regulatory guidance on digital asset derivatives will not differ from its approach to other products.”
The CFTC’s counterpart, the U.S. Securities and Exchange Commission (SEC), has revamped its crypto regulatory framework since President Trump took office in January. Under the leadership of Acting Chair Mark Uyeda, the SEC has formed a Crypto Task Force that has played a key role in this transformation, engaging with industry stakeholders and stepping back from numerous lawsuits and investigations into crypto firms initiated during former Chair Gary Gensler’s tenure.
While the SEC’s swift evolution might be more notable, the CFTC is undergoing its own transformation, honing its regulatory strategies as part of Acting Chair Caroline Pham’s initiative to “get back to the basics.” Alongside the two withdrawn crypto-related advisories, the agency has also rescinded other non-crypto advisories and revamped its enforcement division, reducing numerous specialized enforcement teams to just two, committing to a more streamlined enforcement approach and aiming to eliminate “regulation by enforcement.”
Liz Davis, a partner at a D.C.-based law firm and a former chief trial attorney in the CFTC’s Division of Enforcement, indicated that the two rescinded crypto advisories align well with Pham’s “back to basics” direction for the agency.
However, Davis posited that these alterations might also be part of a broader reorganization taking place at the CFTC.
“They seem to be going through a reorganization as a result of developments within the Department of Government Efficiency (DOGE),” Davis noted, suggesting that Pham’s ongoing efforts to “centralize” the CFTC’s operations could aid in facilitating this restructuring.