CFTC restricts the acceptance, storage and use of cryptocurrency assets by FCMs

The United States’ Commodity Futures Trading Commission (CFTC) has restricted the acceptance, storage and use of cryptocurrency assets by Futures Commission Merchants (FCMs). The agency explained the necessity for the new rules with the risks involved with holding onto such assets – they are vulnerable to hackers, in particular the $150 million theft from the cryptoexchange KuCoin.
Another reason for it was the fact that such assets are held in unregulated or underregulated institutions. As such the CTFC introduced a requirement according to which FCMs have to store client cryptocurrency assets separate from their other ones in a bank, another FCM or a trust company.
Another new rule involves the deposit and trade of cryptos – a client has to deposit a crypto and then trade the same crypto. They cannot, for example, deposit Bitcoin and use it to trade Litecoin.
KuCoin’s hack was bound to lead to more regulation, but this seems a little excessive.

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Great news for retail clients. Great news for trust companies and custodians. They already have the infrastructure and necessary security apparatus in place to make this work. Of course for FCMs, it’s a bit more work, and takes assets outside of their own domain, but I can only imagine a hack that leads to theft of retail client funds on the cyrpto and non-crypto asset sides would be more costly than taking these precautions because of the regulation. There were bound to be partnerships forming already between FCMs and strictly crypto based exchanges and asset management companies.