By: Turnkey Trading Partners

On September 29, 2021 the CFTC announced it had taken regulatory action against 14 Cryptocurrency firms for not being properly registered as FCMs. More specifically the majority of the companies have been offering to the general public the opportunity to purchase binary options based off the value of commodities like foreign currencies and cryptocurrencies including Bitcoin. These firms have also encouraged customers to transfer money or assets to them but have not registered as an FCM.

This action by the CFTC is telling. For the last couple of years, it has become apparent to Turnkey that the US government views Cryptocurrencies as “money”. This view places spot crypto currency trading squarely within the CFTC’s general purview as a regulator of retail currency activities. Similarly, many crypto firms have begun to explore the possibility of offering non-cash products to investors. In so doing they have inadvertently developed futures, forwards, and options contracts which also generally fall under CFTC jurisdiction.

A quick review of the NFA BASIC system shows that some of the world’s most well known and largest Crypto currency exchanges and firms are now beginning to pursue CFTC registration. For example, Coinbase recently made this decision on September 15, 2021 under the name “Coinbase Financial Markets, Inc.”

The days of unregulated crypto currency trading within the United States appear to be numbered. Turnkey believes this industry will be supervised in a manner and fashion similar to how the CFTC and NFA regulated (and ultimately cracked down) upon the retail US forex industry during the early to mid-2000’s.  Investors and believers in cryptocurrencies should be aware of this enormous development. The CFTC has signaled that it believes it has authority over this asset class. Market participants engaging in crypto advisory, crypto brokerage, or crypto exchange products would be well advised to reconsider their regulatory obligations within the United States against this new backdrop.

Crypto firms looking to learn more about CFTC or NFA regulation and how they might structure as a commodity trading advisor (“CTA”), introducing broker (“IB”), or Futures Commission Merchant (“FCM”) should contact Turnkey today for a consultation. To date we have helped a number of crypto firms obtain CFTC registration and NFA membership. We’d be happy to share more information with you regarding the process and our services.

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