The U.S. Commodity Futures Trading Commission (CFTC) took a significant step in streamlining its approach to cryptocurrency regulation by withdrawing two noteworthy pieces of staff guidance on Friday. This move signals a shift in how the agency is positioning itself in the evolving crypto landscape.
The first advisory rescinded was Staff Advisory No. 18-14, which initially provided guidelines for virtual currency derivative product listings when it was published in May 2018. This advisory mandated that reporting firms closely coordinate with the CFTC’s surveillance group and established a large trader reporting threshold of five bitcoins (or its equivalent in other cryptocurrencies). In its recent communication, the CFTC noted that “additional staff experience” alongside “increasing market growth” rendered this guidance outdated and unnecessary.
The second piece of guidance withdrawn was Staff Advisory No. 23-07, issued in May 2023, which emphasized compliance with CFTC regulations amid heightened cyber and operational risks associated with digital assets. The CFTC has clarified that the withdrawal of this advisory was part of a broader effort to ensure fair regulatory treatment of crypto-related derivatives, indicating that their oversight will align with that of other financial products.
The change at the CFTC comes as its counterpart, the U.S. Securities and Exchange Commission (SEC), also pivots its regulatory focus under new leadership. Since President Trump’s tenure began, the SEC, now led by Acting Chair Mark Uyeda, has launched a Crypto Task Force that aims to collaborate more effectively with the crypto industry while retracting several lawsuits initiated by former Chair Gary Gensler.
While the SEC’s swift transformation may attract more attention, the CFTC is concurrently undergoing significant changes of its own. Acting Chair Caroline Pham’s strategy to guide the agency back to its foundational principles is reflected in the withdrawal of these two crypto-related advisories. Additionally, the agency has streamlined its enforcement division, reducing specialized teams to just two, thereby moving towards a more efficient regulatory framework that seeks to eliminate what has been described as “regulation by enforcement.”
Industry expert Liz Davis, a Washington, D.C.-based partner at Davis Wright Tremaine LLP and former chief trial attorney at the CFTC, commented on the rescinded guidance as being indicative of Pham’s commitment to a “back to basics” approach. However, she suggested that these changes might be part of a larger organizational restructuring at the CFTC in tune with initiatives from the Department of Government Efficiency (DOGE), aimed at centralizing operations.
As the regulatory environment for cryptocurrencies continues to evolve, the CFTC’s recent actions highlight a pivotal moment in its approach, signaling an intent to foster a clearer, more consistent regulatory framework for digital assets.
