CFTC Advances Crypto Regulations While FinCEN Withdraws Proposal
The Commodity Futures Trading Commission (CFTC) has taken significant steps to regulate crypto asset markets. On October 5, the CFTC proposed new rules to establish a federal framework for leveraged retail crypto transactions and markets. The proposed rules aim to clarify when a "covered offer" of leverage brings a transaction within the Commodity Exchange Act and define "actual delivery" as holding private keys to the wallet where the asset is stored.
The proposal also introduces a new registration category for crypto asset markets (Regulation CAM), adapted from the designated contract market (DCM) framework. Retail leverage could only be offered through arrangements run by a futures commission merchant (FCM) or a bank sponsored by an FCM. Exchanges that prefer to stay under state oversight could do so, and the CFTC is considering a de minimis exemption from CAM registration.
In another development, the Financial Crimes Enforcement Network (FinCEN) announced the withdrawal of proposed rulemaking from December 23, 2020, which sought to impose recordkeeping, verification, and reporting requirements for certain transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA). FinCEN stated that the withdrawal was part of an effort to make digital asset regulation "fit-for-purpose."
The Securities and Exchange Commission (SEC) released proposed rules on September 30 to expand the credentials by which an investor may qualify as an accredited investor. The proposed qualifications include passing a new accredited investor exam, being a U.S. certified public accountant, chartered financial analyst, certified financial planner, or holding the Series 79 or Series 86/87 license.
The CFTC’s Division of Market Oversight issued a no-action letter on October 3, allowing designated contract markets (DCMs) to remove expiration dates for existing perpetual-style futures on broad-based security indices. The letter follows previous regulatory steps on perpetual futures and includes conditions to protect traders with open positions.
The Independent Community Bankers of America (ICBA) filed a lawsuit against the Office of the Comptroller of the Currency (OCC) on October 2, challenging the OCC’s National Bank Chartering final rule and its interpretation that the OCC can charter national trust banks engaging in non-fiduciary activities. The ICBA argues that such charters allow crypto trust banks to avoid significant federal regulations and state consumer protection laws.