The Commodity Futures Trading Commission (CFTC) has made a significant decision to rescind two staff advisories that previously imposed separate regulatory expectations on digital asset derivatives. This move signals a shift towards a more unified treatment of crypto-based financial instruments in line with traditional derivatives.
On March 28, the CFTC’s Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) jointly withdrew CFTC Staff Advisory No. 18-14 and Advisory No. 23-07. These advisories had provided guidance on the listing of virtual currency derivative products and addressed risks associated with expanded digital asset clearing by derivatives clearing organizations (DCOs).
According to a press release from the CFTC, the removal of these advisories is effective immediately. The agency stated that the decision was made in light of increased staff experience with crypto-related derivatives and the overall maturation of digital asset markets. This withdrawal aligns the oversight practices of digital asset derivatives with those applicable to traditional financial products, removing the additional scrutiny that had previously distinguished digital asset derivatives.
This strategic move by the CFTC highlights the agency’s commitment to eliminating regulatory disparities between digital assets and traditional financial instruments. Staff Advisory No. 18-14, issued in 2018, required exchanges listing crypto derivatives to provide heightened transparency and proactive risk assessments. The withdrawal of these advisories removes language that implied heightened regulatory concern specifically tied to the digital nature of these assets.
The rescindment of both documents signifies that digital asset derivatives will now be subject to the same regulatory review and risk protocols applied to derivatives based on commodities or financial indices. This change is expected to pave the way for greater institutional participation in crypto derivatives markets, reducing compliance uncertainty for firms seeking to offer or clear digital asset-based products.
While removing prescriptive directives, the CFTC emphasized that DCOs are still expected to conduct thorough risk assessments, especially given the unique characteristics of digital tokens. This move by the CFTC is part of a broader trend towards removing artificial distinctions between traditional and digital financial sectors as blockchain infrastructure and tokenized products become more integrated into financial markets.
Overall, the CFTC’s decision to rescind these staff advisories reflects a commitment to principles-based oversight that balances innovation and market integrity. This move, along with similar regulatory shifts by other US financial agencies, is aimed at fostering a more inclusive and streamlined regulatory environment for digital asset derivatives.