By: Turnkey Trading Partners

On February 28th the National Futures Association proposed Compliance Rule 2-51. This rule put in place requirements for NFA members engaged in activities involving digital asset commodities.  NFA has observed a large number of members reporting engagement in business activity related to digital assets. With the exception of Interpretive Notice 9073, NFA previously had no rules in place to address member activities in spot crypto currency. This rule for the first time gives NFA the jurisdiction and authority, to discipline member firms within this sector. NFA followed this up on March 29, 2023 with Notice to Member I-23-10 providing more color about what their expectations were with Rule 2-51.

It is important to also note that at this time NFA has defined digital asset commodities to cover only Bitcoin and Ethereum formally. These are the only two digital assets that have a related commodity interest contract certified under Part 40 of the CFTC’s Regulations. Bitcoin and Ethereum are also the two primary digital assets which have been most widely treated and discussed as being commodities. Although NFA has not specifically included by name other spot digital assets, this does not mean they are excluded from NFA’s oversight.  Rule 2-51 now places an obligation on member firms to abide by applicable anti-fraud provisions. NFA also expects all members to act with high standards of commercial honor when engaging investors.  NFA’s CPO/CTA, FCM, IB and Swap Participant Advisory Committees supported the adoption of NFA Compliance Rule 2-51, which was unanimously approved by the Board.

This is likely the official beginning of many regulatory changes coming to the digital asset landscape.  Turnkey expects widespread and uniform regulation to continue to gain traction within the United States with both the CFTC and NFA this year. To date Turnkey has assisted a number of digital asset firms in obtaining registrations with the CFTC. We also have a number of firms that are active NFA members with compliance policies, accounting, and promotional materials in place that have undergone audit scrutiny. If your firm is currently operating within this sector and you have questions about whether registration is right for you give us a call. We’d be more than happy to speak with you about the strategies we’ve been employing for our existing clientele. Now is the time to consider moving out of the shadows and becoming regulated.