CFTC to Tighten How It Reviews Bitcoin-Related Product Launches
January 19 2018 - 1:14PM
Dow Jones News
By Gabriel T. Rubin
The top U.S. derivatives regulator said Friday that his agency
doesn't plan to change the way virtual-currency derivatives come to
market, but will put in place stricter protocols to deal with the
challenges such products pose for regulators.
Commodity Futures Trading Commission Chairman J. Christopher
Giancarlo said that he had asked his staff to craft a "heightened
review" process for virtual-currency derivatives such as bitcoin
futures, and laid out an eight-point checklist for regulators to
follow when exchanges launch a new product. The CFTC used most of
that checklist in its review of CME Group Inc. and Cboe Global
Markets Inc.'s recent rollout of bitcoin futures.
The CFTC has limited power to constrain growth of cryptocurrency
derivatives. Exchanges can effectively launch new products without
the CFTC's approval by declaring they have controls to guard
against manipulation. The CFTC has emergency authority to halt
trading of futures but has used it only five times in its 43-year
history.
Mr. Giancarlo, giving a speech at an industry conference in
Florida, pushed back on criticisms that the CFTC could have done
more to limit the launch of new products, given exchanges' ability
to self-certify such launches. Though labeling himself neither an
"apologist nor an opponent" of self-certification, he made a point
to say that he didn't believe congressional action to change the
self-certification process was necessary.
The new checklist includes enhanced information-sharing
agreements between exchanges and the CFTC, as well as agreements
between exchanges to coordinate product launches.
"In crafting its process of 'heightened review' for compliance
with core principles, CFTC staff prioritized visibility and
monitoring of markets for bitcoin derivatives and underlying
settlement reference rates," said Mr. Giancarlo, a Republican.
Mr. Giancarlo's bolstering of the new product-review process
comes as the CFTC has been at the center of a flurry of activity
involving virtual currencies. On Thursday, the agency brought three
cases against individuals and firms it accused of virtual
currency-related fraud.
Mr. Giancarlo said his agency's response to the rise of virtual
currencies has been "balanced" overall, adding that some criticisms
leveled by market participants have been off the mark.
In particular, he responded to a letter sent by the Futures
Industry Association in December that called on the CFTC to solicit
more input from the public before allowing new virtual-currency
products to come to market. Mr. Giancarlo said he recognized those
concerns, and said it was "right that interested parties,
especially clearing members, have an opportunity to raise
appropriate concerns for consideration by regulated platforms
proposing virtual currency derivatives." He said that part of the
CFTC's "heightened review" process would be to ask exchanges
whether they had sought public comment before launching their
products.
"The CFTC's current product self-certification framework is
consistent with public policy that encourages market-driven
innovation that has made America's listed futures markets the envy
of the world," he said, adding, "whatever the market impact of
bitcoin futures, I hope it is not to compromise the product
self-certification process that has served so well for so
long."
The CFTC will hold an advisory committee meeting on the
self-certification process on Jan. 31, chaired by Democratic
Commissioner Russ Behnam.
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com
(END) Dow Jones Newswires
January 19, 2018 12:59 ET (17:59 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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