This “advisory” pertains only to the segregated cryptocurrency funds of customers engaged in trading physically-deliverable futures contracts or swaps. This may, or may not, apply to you.
But, it does not apply to the vast majority of traders in this forum, because it does not apply to customer funds held for forex trading.
Forex contracts are not physically-deliverable. Nor are they futures contracts, or swaps.
Furthermore, by federal law, customer funds held by brokers for forex trading cannot be segregated. Segregated funds have special legal protections under the bankruptcy laws of the U.S., and Congress has excluded forex funds from these protections.
Several years ago, Jason Rogers, who was the FXCM rep here on Babypips, explained it this way:
There seems to be a misunderstanding about the “Customers’ Assets in Seg” column in the CFTC’s
Financial Data for FCMs.None of the money you see in this column for any broker is set aside for forex accounts. That’s why you will see a value of $0 in this column for most forex brokers. The fact is that forex accounts are not given segregated status by US law. That means for any broker with money in the “Customers’ Assets in Seg” column, these funds are set aside for futures and other non-forex accounts, and are therefore not available to forex account holders during bankruptcy proceedings.
What does this mean for forex traders?
Since US law does not give segregated status to forex accounts, holders of these accounts don’t have secured creditor status in bankruptcy proceedings.
You can see the column headed “Customers’ Assets in Seg”, which Jason referred to, in the CFTC’s latest Selected Financial Data for FCM’s. Enlarge the image, and scroll to column (e).
If you scroll down, you will find IG Markets on line 30, and Interactive Brokers on line 31. Note that IG (designated as an RFED – Retail Foreign Exchange Dealer) has ZERO funds held in segregation, while Interactive Brokers (designated as an FCMBD – Futures Commission Merchant, also an SEC-regulated Broker-Dealer) has over $5 billion in customer funds in segregation.
None of the funds held in segregation by Interactive Brokers are forex trading funds.
I don’t know much about Interactive Brokers, but if any of the customer funds they hold in segregation are cryptocurrencies, then they (and some of their customers) will also be affected by the CFTC’s additional rule that cryptos held for trading can only be used to trade like-products. For example, bitcoin can be held for a customer trading BTC-pairs, but not other instruments.