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On May 11, the Securities Exchange Commission’s (SEC) Division of Investment Management (IM) staff issued a Public Statement (Statement) strongly encouraging any investor interested in investing in mutual funds exposed to the Bitcoin futures market to carefully consider the risks involved with such investments.
Continue Reading SEC Division of Investment Management Staff Publishes Public Statement on Funds Registered Under Investment Company Act Investing in Bitcoin Futures Market

On October 21, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission issued an advisory to futures commission merchants (FCMs) regarding the holding of virtual currency in segregated accounts. The advisory, Letter No. 20-34, provides guidance to FCMs on how to hold and report certain deposited virtual currency from customers in connection with physically delivered futures contracts or swaps and how to maintain appropriate risk management programs concerning the acceptance of virtual currencies as customer funds.
Continue Reading CFTC Staff Issues Advisory on Virtual Currency for Futures Commission Merchants

On September 15, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) granted no-action relief to Tassat Derivatives LLC, a CFTC-registered swap execution facility (SEF), from SEF reinstatement requirements under CFTC Regulation 37.3(d). The no-action relief set out in CFTC Letter No. 20-27 is subject to certain conditions.
Continue Reading CFTC Staff Provides No-Action Relief to Registrant from SEF Reinstatement Requirements

On February 26, Commissioner Hester Peirce of the Securities and Exchange Commission filed a dissent to the SEC’s decision to reject a proposed rule change from NYSE Arca that would have allowed it to list shares of an exchange-traded fund backed by bitcoin and US Treasury bills. In her dissent, Commissioner Peirce argued that the…

As part of its LabCFTC initiative, the Commodity Futures Trading Commission issued a Request for Input (RFI) to deepen the CFTC’s understanding of the technology, mechanics, and markets for Ether and its use on the Ethereum Network. In particular, the RFI seeks to understand similarities and distinctions between Ether and Bitcoin (as well as other…

The Securities and Exchange Commission, acting through authority delegated to the Division of Trading and Markets (Division), disapproved proposals by the New York Stock Exchange Arca Exchange and the Chicago Board Options Exchange (Cboe) BZX Exchange to list bitcoin exchange-traded products (ETPs) for trading. Both exchanges previously filed proposals to list ETPs that invest in bitcoin futures and/or related derivative instruments.
Continue Reading SEC Disapproves Bitcoin Exchange-Traded Products

On July 26, the Securities and Exchange Commission disapproved a Bats BZX Exchange proposed rule change that would have permitted the listing and trading of shares of the Winklevoss Bitcoin Trust (Trust) on BZX. This is the SEC’s second disapproval of the proposed rule change as it has previously disapproved the exchange’s original proposal in March 2017. Notably, Commissioner Hester Peirce dissented from the SEC’s most recent disapproval.
Continue Reading SEC Disapproves BZX Proposed Rule Change to List Shares of Bitcoin-Based Exchange-Traded Product

On May 21, the Commodity Futures Trading Commission released a staff advisory that provides guidance to designated contract markets (DCMs) and swap execution facilities (SEFs) that plan to list virtual currency derivatives for trading and clearing organizations (DCOs) intending to clear virtual currency derivatives. The advisory notes that the CFTC’s recommendations are informed by the unique characteristics of virtual currencies that make obtaining information about the spot market difficult, including the fact that the commercial uses for virtual currencies are less developed than the commercial uses of other products underlying derivatives, and there is less price verification. The advisory addresses the need for enhanced market surveillance, coordination and communication with CFTC staff, large trading reporting, outreach to relevant stakeholders and risk management of DCOs.
Continue Reading CFTC Issues Virtual Currency Advisory for Exchanges and Clearinghouses

On July 25, the Securities and Exchange Commission issued a Report of Investigation cautioning that certain offers and sales of digital assets of virtual organizations (e.g., “coin offerings” or “token sales”) could be deemed securities offerings and therefore subject to the federal securities laws. More details relating to the Report of Investigation are available in…

The Commodity Futures Trading Commission has issued an order granting LedgerX LLC registration as a derivatives clearing organization (DCO). As specified in the order, LedgerX is permitted to clear fully collateralized digital currency swaps. A transaction will be fully collateralized if LedgerX holds, at all times, funds in the form of the required payment sufficient to cover the maximum possible loss a counterparty could incur upon liquidation or expiration of the contract.
Continue Reading CFTC Grants DCO Registration to LedgerX