NFA issues new rule for digital asset commodities

The National Futures Association (NFA), the self-regulatory organization for derivatives markets in the United States, has issued a new compliance rule for its members engaged in digital asset commodities. The rule, which takes effect on May 31, is aimed at addressing fraud and misconduct committed by the over 100 NFA members involved in activities related to Bitcoin and Ether.

The NFA submitted the proposed new rule to the secretary of the Commodity Futures Trading Commission (CFTC) in a letter dated Feb. 28, 2023. The organization explained that while it has over 100 members engaged in activities with digital asset commodities, it had no way to address fraud or misconduct committed by those members. The new rule is designed to complement the requirements issued in 2018 and is modeled on the NFA’s antifraud rules for exchange-traded futures, swaps transactions, and retail foreign exchange.

As the only registered self-regulatory organization with delegated authority from the CFTC, the NFA has an analogous status to the Financial Industry Regulatory Authority with the Securities and Exchange Commission. Under the new rule, NFA members engaged in digital asset commodities will be subject to guidance on fraud, trade principles, and employee supervision.

Currently, the NFA only imposes disclosure requirements on its members engaged in spot commodity activities with digital assets. These requirements are detailed in a single document. However, with the new rule, members will be subject to more comprehensive guidelines that aim to promote fair and ethical conduct in the digital asset commodities market.

It's important to note that the new rule applies only to Bitcoin (BTC) and Ether (ETH), as they are the only digital assets with related commodity interests certified by a registered entity for listing under Part 40 of CFTC Regulations. The NFA hopes that the new rule will help protect investors in the rapidly growing digital asset commodities market.