In response to the growing maturity of the crypto market, the U.S. Commodity Futures Trading Commission (CFTC) has recently withdrawn two crypto-related staff advisories. This move is part of the agency's effort to ensure that crypto derivative products are regulated in a manner consistent with other types of derivatives.

The first advisory, Staff Advisory No. 18-14 issued in May 2018, provided guidelines for virtual currency derivative product listings. It included requirements for reporting firms to cooperate closely with the CFTC surveillance group and set a threshold for large trader reporting at five bitcoins or their equivalent value in other cryptocurrencies. The CFTC justified its withdrawal by citing increased staff expertise and the expanding crypto market, which rendered the advisory obsolete.

The second advisory, Staff Advisory No. 23-07 from May 2023, focused on assessing risks related to expanding clearing of digital assets by DCOs. It stressed compliance with CFTC regulations due to heightened cyber and operational risks associated with digital assets. The withdrawal of this advisory aims to ensure fair treatment of crypto-related derivatives and their issuers compared to other products regulated by the CFTC.

While these changes align with the CFTC's efforts to overhaul its regulatory approach towards crypto, industry experts like Davis speculate that these adjustments could also be linked to broader restructuring within the organization amid ongoing initiatives like centralizing operations led by Pham at the Department of Government Efficiency (DOGE).

U.S CFTC Withdraws 2 Crypto Staff Advisories Citing ‘Market Growth and Maturity,’ Need for Fair Treatment

The agency is determined to treat crypto derivatives the same way it treats everything else.

• The CFTC withdrew two pieces of crypto-related guidance on Friday, citing increased market maturity and the need to treat crypto-related derivative products the same as other derivatives.
• The CFTC has been streamlining its regulatory approach to crypto.

The U.S. Commodity Futures Trading Commission (CFTC) withdrew two pieces of crypto-related staff guidance on Friday, further streamlining its approach to crypto regulation.

The first advisory rescinded on Friday was Staff Advisory No. 18-14, Advisory with Respect to Virtual Currency Derivative Product Listings. Originally published in May 2018, the advisory established guidelines for crypto-related derivatives, including requiring reporting firms to maintain “close coordination with [the] CFTC surveillance group” and establishing a large trader reporting threshold of five bitcoins (or the equivalent value for other cryptocurrencies), among other suggestions. On Friday, the CFTC published a letter saying that “additional staff experience” and “increasing market growth” had rendered the guidance unnecessary.

The second advisory, Staff Advisory No. 23-07, Review of Risks Associated with Expansion of DCO Clearing of Digital Assets, from May 2023, “emphasize[d] compliance” with CFTC regulations due to the “hieghtened cyber and other operational risks that may be associated with digital assets.” This guidance was withdrawn for another reason — to clearly treat crypto-related derivatives and their issuers fairly, the CFTC suggested. In a separate letter on Friday, the CFTC said it was rescinding Staff Advisory No. 23-07 “to ensure that it does not suggest that its regulatory treatment of digital asset derivatives will vary from its treatment of other products.”

But Davis also suggested that the changes could be tied to a larger restructuring going on at the CFTC.

“They’re probably undergoing a reorganization with everything that's going on with [the Department of Government Efficiency (DOGE)],” Davis said, adding that Pham’s ongoing efforts to “centralize” the CFTC’s operations could help facilitate a reorganization.