CFTC Moves to Address Industry Concerns Over Virtual Currencies -- 2nd Update
05 January 2018 - 7:41AM
Dow Jones News
By Gabriel T. Rubin
WASHINGTON -- The top U.S. derivatives regulator is moving to
address financial-industry concerns over its oversight
responsibilities for virtual currencies and related futures
products.
Two Commodity Futures Trading Commission advisory committees,
which include both regulators and industry participants, will meet
in late January to address issues related to policing activity on
virtual-currency exchanges, the clearing of bitcoin futures and the
unique risk of fraud and manipulation related to virtual
currencies.
"Ignoring virtual-currency trading will not make it go away. Nor
is it a responsible regulatory strategy," said Chairman J.
Christopher Giancarlo in a statement announcing the meetings.
In addition to the announcement, the CFTC also released a fact
sheet further elaborating on its approach to regulating virtual
currencies. It pushed back on criticism leveled by powerful
institutional investors, including billionaire Thomas Peterffy and
the Futures Industry Association, who have opposed to the CFTC's
approach to bitcoin futures. They have raised concerns in recent
weeks about whether clearing bitcoin futures alongside other, more
traditional derivatives products might introduce unwanted risks
into the clearing process.
The FIA, in a letter to Mr. Giancarlo, questioned whether the
CFTC could have done more to solicit public input or delay the
launch of bitcoin futures by exchanges run by CME Group Inc. and
Cboe Global Markets Inc.
"Neither statute nor rule would have prevented CME and [Cboe
Futures Exchange] from launching their new products before public
hearings could have been called," according to the CFTC. "Even if
the CFTC could have held public hearings or requested public input,
it is unlikely that the outcome would have changed," the commission
added, saying its staff has determined the bitcoin futures
applications comply with commodities laws and regulations.
A spokesman for the FIA didn't immediately respond to requests
for comment.
In response to calls for segregating the clearing of bitcoin
futures from other derivatives, the commission noted that the
process used by the exchanges to bring the contracts to market
didn't allow regulators to mandate separate clearing.
The CFTC has labeled bitcoin a commodity, but as with other
commodities, it mostly lacks jurisdiction over a product's primary
market, as it has taken pains to remind investors. The CFTC can,
however, regulate bitcoin markets that lend traders money to
increase their bets, known as leveraged trading.
Mr. Giancarlo has been more willing to embrace virtual
currencies than other regulators and has spoken favorably about
regulators and the financial industry making use of blockchain, the
technology that underpins bitcoin. He also has said proper
enforcement of bitcoin and its related products would increase
transparency and limit wrongdoing, making virtual currencies safer
for the stampede of customers who have rushed into virtual currency
markets in recent months.
Even if they could have legally blocked the launch of bitcoin
futures contracts, the CFTC "would not have stemmed interest in
bitcoin or other virtual currencies nor their spectacular and
volatile valuations," the commission said.
Other regulators continue to warn investors about the risks
associated with virtual currencies. The North American Securities
Administrators Association, a group of state market regulators,
told investors on Thursday to "go beyond the headlines and hype to
understand the risks associated with investments in
cryptocurrencies, as well as cryptocurrency futures contracts and
other financial products."
The Securities and Exchange Commission, which has previously
issued its own warnings on cryptocurrencies and initial coin
offierngs, also chimed in on Thursday, commending NASAA for its
"timely and thoughtful reminder to Main Street investors to
exercise caution."
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com
(END) Dow Jones Newswires
January 04, 2018 15:26 ET (20:26 GMT)
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