In an official statement, the United States National Futures Association (NFA), revealed its plans regarding crypto regulations. The agency said that in the absence of formal crypto regulation, it is working on setting up standards for its members that deal in digital asset commodities.
NFA is the industrywide, self-regulatory organization for the U.S. derivatives industry. Designated by the Commodity Futures Trading Commission (CFTC) as a registered futures association, NFA aims to safeguard the integrity of the derivatives markets, protect investors and ensure Members meet their regulatory responsibilities.
According to the official statement on the new rule, the agency said that it has more than 100 members involved in digital assets. Additionally, it said that the new rule is set to go into effect in around 2 months on May 31.
The NFA’s self-regulation of the derivatives industry grants it the right to impose standards on its members under penalty of fines and other punishment. Now with this new rule coming, the power would be extended more explicitly to the crypto sector.
Currently, the compliance rule is limited to involvement with Bitcoin (BTC) and Ether (ETH). However, it gives the NFA “the ability to discipline a member or take other action to protect the public if a member commits fraud or similar misconduct with respect to its spot digital asset commodity activities.”
The new compliance rule also mandates members to scrutinize their activity closely and adds that members involved in spot crypto commodity activity “must adopt and implement appropriate supervisory policies and procedures over these activities.”
Notably, the CFTC oversees the NFA and the wider industry but questions regarding the extent of its authority over digital assets remain. In the prevalent regulatory feud between the Securities and Exchange Commission (SEC) and CFTC, lawmakers have made consistent efforts to give the CFTC undeniable powers over crypto commodities and the spot market, but the bills haven’t produced any results.
According to a statement posted on CFTC’s website on Friday, Caroline Pham, CFTC Commissioner says that these new rules ensure customer protection and give NFA ample authority to oversee risks associated with trading spot Bitcoin and Ethereum.
This is a clear example of using existing authority to ensure that there are customer protections in place. These obligations will require NFA members and associates to explicitly disclose the risks associated with trading spot Bitcoin and Ether so that customers are fully informed before making any trading decisions.
While this new rule is to ensure consumer protection as CFTC says, what is worth noting is how swiftly the organization is claiming its jurisdiction over Bitcoin and Ethereum via NFA. In the past weeks, the two regulators i.e. SEC and CFTC have been found to be involved in indirect verbal rebuttals more often than not.
In May last year, Rostin Behnam, Chairman of the CFTC affirmed his perspective that Bitcoin and Ethereum are commodities and ought to fall under the CFTC remit. However, then he changed his stance and said that only Bitcoin is a commodity until early this year. In his appearance at the Congress, Behnam said that he views most stablecoins as commodities, barring a new law that could change their classification.
As a result, his perspective was not very well taken by Gary Gensler, SEC chief who himself has claimed that all crypto assets are securities except Bitcoin. The SEC chief has reiterated his opinion an endless number of times and has given various explanations as to why Ethereum and stablecoins must come under securities laws.