The Commodity Futures Trading Commission’s (CFTC’s) Division of Clearing and Risk (DCR) announced it is withdrawing its staff advisory review of risks associated with expansion of derivatives clearing organizations (DCO) for the clearing of digital assets.

The rescission of the advisory, Staff Advisory No. 23-07, Review of Risks Associated with Expansion of DCO Clearing of Digital Assets, is effective immediately, the agency said.

As stated in its withdrawal letter, “DCR determined to withdraw the advisory to ensure that it does not suggest that its regulatory treatment of digital asset derivatives will vary from its treatment of other products.”  

The agency also announced that the CFTC’s Division of Market Oversight and DCR said they are withdrawing CFTC Staff Advisory No. 18-14, Advisory With Respect to Virtual Currency Derivative Product Listings, effective immediately.

No more extra scrutiny

What the Staff Advisory No. 23-17, issued in May 2023, had done was to acknowledge the increased industry interest in new clearing activities related to digital assets, and it had stated that in connection with these activities, “DCO registrants and applicants should expect that DCR will be placing emphasis on the potential risks and DCO core principles related to system safeguards, physical settlement procedures, and conflicts of interest.”

And then the advisory had elaborated on those areas of emphasis, stating that DCO registrants and applicants should expect that DCR will be placing emphasis on the potential risks and DCO core principles related to system safeguards, physical settlement procedures, and conflicts of interest.

CFTC Staff Advisory No. 18-14, issued in May 2018, clarified (at the time) the CFTC’s priorities and expectations in its review of new virtual currency derivatives to be listed on a designated contract market, or swap execution facility, or to be cleared by a derivatives clearing organization.

Other crypto developments

The CFTC announcements come as the Federal Deposit Insurance Corp. (FDIC) provides new guidance saying that FDIC-supervised institutions can engage in cryptocurrency-related activities now without receiving prior FDIC approval, provided they adequately manage the risks.

Under prior guidance that the FDIC formally rescinded on Friday, the banking regulator required prior notification of crypto-related activities.

In January, the SEC rescinded Staff Accounting Bulletin 121, which required banks and other publicly traded entities to treat digital assets held in custody as liabilities on their balance sheet.

And last month it released a statement clarifying that crypto mining activities do not constitute securities offerings, a statement intended to boost confidence for PoW (Proof-of-Work) cryptocurrency investors.

Right after his inauguration, President Donald Trump issued an executive order on cryptocurrency that seeks to make the US “the crypto capital of the planet.” It called for the formation of a cryptocurrency working group to propose new digital asset regulations and to look into the creation of a national cryptocurrency stockpile, possibly from cryptocurrencies seized by the federal government through law enforcement efforts.

President Trump has called for US dollar dominance and vowed to make America a crypto superpower.