US CFTC Issues Guidelines on the Issuance of Virtual Currency Derivatives
US CFTC Issues Advisory on Crypto-Currency Derivatives
The U.S. Commodity Futures Trading Commission (CFTC) has released an advisory statement regarding the listing of virtual currency derivative products.
The CFTC is acting in accordance with the law in offering these guidelines to help manage the cryptocurrency industry. The new guidelines were issued by CFTC’s Division of Clearing and Risk (DCR) and Division of Market Oversight (DMO). The main aim of releasing the new guidance is to help CFTC staff manage the virtual currency market better as they perform their duties.
Mr. Amir Zaidi director of CFTC said:
“The virtual currency market is new and is still evolving. The new guidelines have been put in place to help guide the market participants .
Moreover, the guidelines will help CFTC provide market participants with the best guidance when they are trading on virtual currency derivatives. In the wake of pyramid schemes and scammers in the cryptocurrency industry, these guidelines have come at the right time. The guidelines will aid market participants design risk management programs. These will take care of the risks associated with virtual currency products.
Key areas on the advisory
The advisory released touched on some particular key areas in offering new virtual currency derivatives contract. Some of the areas are derivatives clearing organization risk management and governance, outreach to member and market participants, large trader reporting, close coordination with CFTC staff, and enhanced market surveillance. The CFTC and its partners hope the advisory released cushions all market participants from scammers. Besides the CFTC, the US Security Exchange Commission is also working on educating investors on warning signs of fraudsters and scammers. The SEC recently launched a mock ICO website to help investors differentiate between genuine and fake ICOs.
Many investors have found themselves in traps of fake ICOs and hackers who prey on investors. Through the new guidelines, the CFTC in conjunction with other regulatory bodies’ primary role is to help protect market participants. CFTC recently stated that they would like to see more harmony among the various regulatory bodies. The laws will also help different regulatory bodies keep track with the changes that come with digital currency.