CFTC’s NFA Brings New Rules For Members Operating Digital Assets

• CFTC members are now to follow NFA rules. 
• They are in effect from March 31 onwards.

Members of the CFTC are to abide by new rules issued by the National Futures Association (NFA) for handling digital assets. These new standards follow the agency’s strict rules for retail foreign exchange, swap transactions and ETFs. The rules are in effect from March 31 onwards wherein they will primarily focus on Bitcoin and Ethereum. 

Commodities and Futures Trading Commission (CFTC) has issued new rules for its members through NFA, a registered Self-regulatory Organization (SRO) for the derivatives market and a delegated authority from CFTC. It has more than 100 members working in digital asset commodities. 

CFTC and NFA Bring New Rules

In a letter on February 28, the derivatives market SRO sent to CFTC secretary Christopher Kirkpatrick said that the organization is not equipped to handle the misconduct committed by its members. The letter was annexed to a proposal with new rules waiting for approval.

The latest development confirms that the proposal is now approved, and after its implementation, the members will be governed accordingly. 

The Role of NFA

These rules are tailored to NFA’s antifraud rules and in accordance with the requirements issued in 2018. The mandate dictates that the NFA should be considered next to the Financial Industry Regulatory Authority (FINRA) of the country’s financial watchdog, the Securities and Exchange Commission (SEC).

Right the powers that lie with the NFA are regarding the imposition of a disclosure requirement for the members who engage in spot digital asset commodity activities with digital assets. All this has been written in a detailed document, now added with standards of conduct. 

The New NFA Rules and CFTC Authority

In effect from March 31, these rules require the members to follow certain guidelines on trade principles, fraud and the provision of staff. 

• It must be known that, for now, the rules apply only to Bitcoin and Ethereum. 
• The reason behind naming them is they are the only two market-leading related commodities interests which are certified by the registered entity and are to be listed under part 40 of CFTC regulations. 

CFTC commissioner Caroline Pham released a statement applauding new rules and commenting on the development, saying:

“This is a clear example of using existing authority to ensure that there are customer protections in place because registration with the NFA required that firms and individuals comply with NFA rules.”

She also cited that the NFA can alter the future rules to engulf other digital asset commodities so that it would not be limited only to BTC and ETH. 

What’s Next From CFTC & Possible Implication?

CFTC officials are to link the NFA rules to foreign exchange herald, or it may backdate their mandate granted by Congress to regulate the foreign exchange market. Commissioner believes that it must be obvious that the start would involve everything in hand and everything required for a regulatory framework to be levied upon spot digital asset commodity markets. 

Certain bad events in the industry highlighted the requirement for crypto regulations. Lawmakers and agencies worldwide are trying to reach a solution that would benefit every involved party. These rules may or may not be what the world wants, but they are a start. Regulations could push mass adoption to the desired level, benefiting the industry in the long run.  

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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