US Commodities Regulator Beefs Up Bitcoin Futures Review

The Commodity Futures Trading Commission (CFTC) is developing a "heightened review process" for cryptocurrency futures though it will continue to allow exchanges to self-certify products, Chairman J. Christopher Giancarlo announced last week.

As reported by Reuters, Giancarlo introduced a checklist during a conference speech in Florida pertaining to Designated Market Contracts (DMCs) and Derivatives Clearing Organizations (DCOs). The aim is to assist regulators as exchanges introduce new products around cryptocurrencies into the market.

The chairman's speech came after some pushback tied to the CFTC's handling of the December launch of bitcoin futures by the Cboe Global Markets and the CME Group, after which the Futures Industry Association (FIA) expressed concern over potentially having to pay for outstanding bitcoin futures contracts caused by the cryptocurrency's volatility. The Association claimed it wasn't sufficiently included in the process and criticized the Commission for allowing exchanges to self-certify their futures products.

Giancarlo's checklist requires that DMCs set "exchange large trader reporting thresholds at five bitcoins or less". It also mandates that they must enter into "information sharing agreements with spot market platforms to allow access to trade and trader data" in addition to agreeing to frequent communication with the CFTC regarding trade activities.

Beyond such measures, the CFTC will leave the self-certification process alone, according to Giancarlo.

He was quoted as saying:

"The CFTC's current product self-certification framework is consistent with public policy that encourages market-driven innovation that has made America's listed futures markets the envy of the world. Whatever the market impact of bitcoin futures, I hope it is not to compromise the product self-certification process that has served so well for so long".

Others have been scrutinizing the process as well, including some members of the U.S. Congress.

Yesterday, top Senate Agricultural Committee members sent a letter to Giancarlo requesting information on the CFTC's oversight of bitcoin futures and options markets. The senators specifically requested information regarding the Commission's market surveillance and its implementation of safeguards against bitcoin's volatility.

"American taxpayers deserve strong safeguards against fraud, manipulation, and abusive practices in the futures and options markets," the letter stated. "The CFTC plays a critical role in protecting customers and the markets from harm."

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