CFTC Offers No-Action Relief to Passive Crypto Software Providers

The Commodity Futures Trading Commission (CFTC) has issued a no-action relief for passive crypto software providers that connect users with regulated derivatives markets. This move, outlined in CFTC Letter 26-25, provides clarity on the regulatory framework for these types of providers and their personnel.

According to the letter, qualifying providers and their associated persons will not face staff recommendations for enforcement over failing to register as introducing brokers or associated persons. However, this relief is conditional and does not unconditionally exempt them from the underlying registration framework.

The CFTC's approach has shifted beyond providing relief for a single company, with the broadly available no-action position applicable to passive software providers that meet specific conditions. These conditions include maintaining a direct relationship between users and regulated entities, avoiding custody of user assets, and not generating express buy or sell signals.

The new framework retains the same core dividing lines as an earlier company-specific position involving Phantom Technologies, which was granted no-action relief in March for its self-custodial wallet software. The CFTC's move is seen as expanding this approach to qualifying passive software providers more broadly.