CFTC Expands Relief for Passive Crypto Software Providers

The Commodity Futures Trading Commission (CFTC) has issued a new no-action letter that expands relief for passive crypto software providers. This means that such providers can link customers to derivative contracts in a regulated environment without registering as introducing brokers, provided they comply with certain conditions.

The distinction between technology and actively participating software is crucial here. The qualified provider will be allowed to provide software that acts as a link between users and registered futures commission merchants, introducing brokers, or designated contract markets. However, the provider must not venture into areas that make the software take part actively in the trading process.

This implies that the technology cannot manage customer assets, provide trading instructions, or discretionary trades for users. The March Phantom letter laid the foundation of this basic principle, which was extended in September for qualifying passive software providers.