CFTC Staff Withdraws Advisory on Virtual Currency Derivative Product Listings

On March 28, 2025, the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) announced in CFTC Letter 25-07 that they are withdrawing CFTC Staff Advisory 18-14 (the “Advisory”) in its entirety, effective immediately (the “Withdrawal Letter”).

The Advisory, originally issued on May 21, 2018, applied to the listing of derivatives referencing bitcoin and other virtual currencies classified as commodities. It was intended to clarify the CFTC staff’s priorities and expectations in the listing of these virtual currency derivatives on designated contract markets (DCM) or swap execution facilities (SEF) and the clearing of these derivatives by derivatives clearing organizations (DCO). In the Advisory, the DMO and the DCR stated that the risks of virtual currency markets justify close scrutiny by the CFTC staff and registered entities, citing the then-short history of trading combined with the volatility of these markets. The Advisory highlighted five areas applicable to listing a new virtual currency derivatives contract:

(1) enhanced market surveillance of the underlying virtual currency spot market (e.g., bitcoin);

(2) close coordination with the CFTC staff on a range of issues, including monitoring for potential manipulation or fraud, settlement process data, and timing of contract launches;

(3) application of the CFTC’s Large Trader Reporting System to virtual currency derivatives, including disclosure thresholds;

(4) outreach by DCMs and SEFs to stakeholders prior to listing virtual currency derivatives; and

(5) review by CFTC staff of the applicable DCO’s risk management policies and procedures, including margin requirements and governance processes.

In the Withdrawal Letter, DMO and DCR stated the Advisory was no longer needed given the CFTC staff’s increased experience with virtual currency derivative product listings and increasing market growth and maturity. The Withdrawal Letter emphasized that the standards and procedures set forth in the Commodity Exchange Act and CFTC regulations for the listing and clearing of derivative products, including virtual currency and other digital asset derivatives, remain in effect. Additionally, the CFTC specifically noted that its Large Trader Reporting System continues in effect.

The withdrawal of the Advisory is a further spotlight on the CFTC staff’s efforts to remove regulatory disparities between digital assets and more traditional derivative instruments, in an effort to address industry concerns that digital asset derivatives are subject to inconsistent regulatory oversight.