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On February 28, 2023, the National Futures Association (NFA) submitted the proposed adoption of NFA Compliance Rule 2-51 to the Commodity Futures Trading Commission (CFTC). The new compliance rule will apply to NFA members, including commodity pool operators (CPOs) and commodity trading advisors (CTAs), engaged in activities involving digital asset commodities. For purposes of the…

By Keith Miller, Kari Larsen and Sarah Howland

The Commodity Futures Trading Commission (CFTC) Settlements Timeline serves as an interactive compilation of select CFTC guidance, enforcement actions, and speeches relating to the application of the federal securities laws to digital assets. Beginning with the Order filed in September, 2015 by the CFTC requiring Coinflip and…

In Episode 4 of our Podcast Series, Todd Zerega and Andrew Cross discuss the use of derivatives on cryptocurrencies by institutional investors. Specific attention is given to regulatory and product development considerations for registered investment advisors and fund sponsors, as well as technical considerations related to exchange-traded futures on bitcoin and other similar listed…

By Andrew Cross and Kari Larsen

Original post is from 12/18 in the Virtual Currency Report.

The Commodity Futures Trading Commission (CFTC) recently released a Digital Assets Primer that provides updated information to the public about emerging concepts in digital assets. The primer is part of a series issued by the CFTC’s innovation office, LabCFTC,…

This post is the second in a series that outlines key considerations for investment funds and their advisers regarding the application of the U.S. commodity laws to cryptocurrency derivatives. This posting is intended to be a primer on the topic and is not legal advice. You should consult with your counsel regarding the application of the U.S. commodity laws to your particular facts and circumstances.

In Part 1, we focused on the status of cryptocurrencies as commodities and how that status relates to the jurisdiction of the U.S. Commodity Futures Trading Commission (the “CFTC”). Here, in Part 2, we provide an overview of the regulation of commodities and the commodity markets under the Commodity Exchange Act (the “CEA”).…

Continue Reading Cryptocurrency Derivatives, Funds and Advisers: Key Considerations Under U.S. Commodity Laws (Part 2: The Regulation of Commodities – Quite Substantial, Even If Not Substantive)

In this multi-part posting, we outline key considerations for investment funds and their advisers regarding the application of the U.S commodity laws to cryptocurrency derivatives.  This posting is intended to be a primer on the topic and is not legal advice.  You should consult with your counsel regarding the application of the U.S. commodity laws to your particular facts and circumstances.

First, a few words about our use of the word “cryptocurrency”… In this series of postings, we use the word cryptocurrency (and often the term “crypto”) to refer to traditional virtual currencies, like BTC and ETH, as well as tokens related to a particular software product development initiative (i.e., “coins” sold in an initial coin offering or “ICO”).  We recognize that there are different classifications of cryptos among different groups of market participants; however, when we say “crypto,” we mean cryptocurrency in the broadest sense (inclusive of virtual currencies and tokens).

Having dealt with the initial definitional matter, we now turn to the substance of this Part 1 – Cryptos are Commodities (Except When They Are Not).…

Continue Reading Cryptocurrency Derivatives, Funds and Advisers: Key Considerations Under U.S. Commodity Laws (Part 1 – Cryptos Are Commodities (Except When They Are Not))

On October 18th, a cryptocurrency platform provider (Poloniex, Inc.) issued a press release announcing that it filed a request for no-action relief with the Commodity Futures Trading Commission (the “CFTC”) seeking request with respect to the CFTC’s laws as they relate to margin and lending transactions.  To our knowledge, this is first time that a cryptocurrency platform provider has publicized the submission of such a request and, for that reason alone, the development is noteworthy.  A detailed review of the request or underlying law is beyond the scope of this posting.  Rather, in this posting we focus on what we consider to be two practical and fundamental observations regarding the potential scope of any hypothetical relief granted in response to such request.  …
Continue Reading Cryptocurrency Platform Provider Seeks No-Action Relief from CFTC: Two Observations