CFTC Staff – Issues Advisory on Virtual Currency for Futures Commission Merchants

October 22, 2020 – CFTC staff issued an advisory on virtual currency for futures commission merchants (FCMs) regarding the holding of virtual currency in segregated accounts. Issued by the division of swap dealer, intermediary oversight (DSIO) of the CFTC. Advisory provided guidance to FCMs on how to hold, report certain deposited virtual currency from customers connected with physically-delivered futures contracts and swaps.

Provided guidance that FCMs should follow when designing, maintaining risk management programs concerning the acceptance of virtual currencies as customer funds.

Advisory Highlights

DSIO reminded FCMs that virtual currency held as customer funds by FCM must be deposited only with a bank, trust company, another FCM, or with a clearing organization that clears virtual currency futures, options on futures, or cleared swap contracts.

Virtual currency must be available for withdrawal from the depository on demand of FCM. DSIO determined that receiving virtual currency from a customer, holding currency as segregated funds create additional risks for the other customers in the same origin.

DSIO specifically determined virtual currencies present a degree of custodian risk beyond what is currently present with depositories, such as banks and trust companies. FCM should limit the acceptance of virtual currency in segregated and cleared swaps accounts.

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