US NFA Issues New Crypto Disclosure Rules

US NFA issues new crypto disclosure rules which will apply to futures commission merchants, introducing brokers, commodity pool operators and commodity trading advisors. 

10 August, AtoZ Markets – The National Futures Association (NFA) in the US has informed the public that it plans to announce new disclosure requirements for firms that are engaging in cryptocurrency activities. 

US NFA Issues New Crypto Disclosure Rules

Specifically, starting from October 31, 2018, members of the US regulator stated that these companies will need to disclose certain data, including the risks of investing in cryptocurrencies. 

The new disclosure requirements will also apply to futures commission merchants, introducing brokers, commodity pool operators and commodity trading advisors. It is worth to note that the firms will be required to meet these requirements in case they engage in activities linked to cryptocurrencies and crypto derivatives. 

The upcoming requirements are emerging from the interpretive notice. The NFA’s board of directors has decided that since the virtual currency market attracts more investors, the NFA needs to increase the protection levels for them. The regulator notes that investors might not entirely understand the nature of the cryptocurrency market. 

NFA advisory notes

Following on this, starting from October, FCM and IB members will need to give customers that are trading cryptocurrency derivatives two advisory notes. The notes must be given at or before the time clients trading the asset. These notices include NFA Investor Advisory – Futures on Virtual Currencies Including Bitcoin and the CFTC Customer Advisory: Understand the Risks of Virtual Currency Trading.

Additionally, in case a customer has traded a cryptocurrency derivative with the firm before the October deadline, the company is required to still provide these notes to them ahead of November 30, 2018. 

The CPO and CTA related requirements appear more extensive – these firms will need to provide in-depth disclosures to their clients. The information would need to address pools, exempt pools, and their trading programs. 

In addition, these companies will also need to provide a standardized disclosure to customers which mention that NFA has a limited oversight of spot market cryptocurrencies. 

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