The CFTC issues stringent guidelines for FCMs seeking to custody digital assets in connection with physically delivered futures contracts or swaps.
The US Commodity Futures Trading Commission’s (CFTC’s) Division of Swap Dealer and Intermediary Oversight (DSIO) issued CFTC Staff Letter No. 20-34 (the Advisory) on October 21, 2020, clarifying its views on the acceptance, holding, and reporting of virtual currency (e.g., bitcoin or ether) in segregated accounts by futures commission merchants (FCMs) and the development of appropriate risk management programs in relation thereto.
Specifically, the Advisory relates to virtual currencies deposited by customers with FCMs in connection with physically delivered futures contracts or swaps. Due to the “custodian risk” associated with holding virtual currency as segregated funds, the Advisory lays out specific guidance for FCMs on virtual asset acceptance and custody, and their responsibility to implement appropriate policies, procedures, and oversight programs. The Advisory does not address virtual currency held by FCMs on behalf of customers trading derivatives on markets outside of the US, or virtual currency held by FCMs on their own behalf, including in a proprietary account. Continue Reading