U.S. CFTC Revokes 2 Crypto Staff Advisories, Citing ‘Market Evolution’ and the Importance of Fairness

Key Points to Know:

• The CFTC removed two crypto-related guidance documents on Friday, citing the growing maturity of the market and the need to treat crypto derivatives the same as other derivatives.

• The agency has been simplifying its regulatory approach to cryptocurrency.

On Friday, the U.S. Commodity Futures Trading Commission (CFTC) withdrew two crypto-related staff advisories, further simplifying its regulatory stance on cryptocurrency.

The first advisory withdrawn on Friday was Staff Advisory No. 18-14, which provided guidelines for virtual currency derivative product listings. Published in May 2018, it outlined requirements for crypto-related derivatives, such as ensuring reporting firms maintained “close coordination with the CFTC surveillance group” and setting a large trader reporting threshold of five bitcoins (or the equivalent in other cryptocurrencies). In its statement on Friday, the CFTC explained that "additional staff experience" and "growing market maturity" had made the guidance unnecessary.

The second advisory withdrawn, Staff Advisory No. 23-07, titled "Review of Risks Associated with Expansion of DCO Clearing of Digital Assets," was released in May 2023. It highlighted the importance of compliance with CFTC regulations, particularly due to the "increased cyber and operational risks" associated with digital assets. The advisory was rescinded to ensure that crypto-related derivatives and their issuers are treated fairly. In a separate letter, the CFTC clarified that it was removing this advisory to avoid any implication that digital asset derivatives would be subject to different regulatory treatment compared to other products.

While the SEC's overhaul of crypto regulation has attracted more attention, the CFTC is also undergoing its own transformation. Under Acting Chair Caroline Pham’s leadership, the CFTC is streamlining its regulatory approach, focusing on core principles. Along with the withdrawal of the two crypto advisories, the agency has rescinded several other non-crypto-related advisories and restructured its enforcement division. This restructuring has consolidated multiple specialized enforcement teams into just two, with the agency stating that a simplified division will improve efficiency and end “regulation by enforcement.”

Liz Davis, a Washington, D.C.-based partner at Davis Wright Tremaine LLP and former chief trial attorney in the CFTC's Division of Enforcement, believes the withdrawal of the two crypto guidance documents aligns with Pham’s "back to basics" approach to leading the agency.

However, Davis also speculated that these changes might be part of a larger restructuring effort within the CFTC.

“They’re probably undergoing a reorganization given everything that’s going on with [the Department of Government Efficiency (DOGE)],” Davis remarked, adding that Pham’s ongoing efforts to "centralize" the CFTC’s operations could help facilitate this restructuring.