CFTC withdraws 2 staff warnings on crypto derivatives to align oversight with TradFi

By aligning crypto regulation with traditional financial products, the CFTC is paving the way for increased institutional confidence and market participation.

Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.

The Commodity Futures Trading Commission (CFTC) has formally rescinded two staff advisories that previously imposed distinct regulatory expectations on digital asset derivatives, signaling a pivot toward harmonized treatment of crypto-based financial instruments with traditional derivatives.

According to an official statement released on March 28, the CFTC’s Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) jointly withdrew CFTC Staff Advisory No. 18-14, which provided guidance on the listing of virtual currency derivative products, and Advisory No. 23-07, which addressed the risks associated with expanded digital asset clearing by derivatives clearing organizations (DCOs).

Per CFTC Press Release 9059-25, the removals are effective immediately, stating,

“The Commodity Futures Trading Commission’s Division of Market Oversight and Division of Clearing and Risk announced they are withdrawing CFTC Staff Advisory No. 18-14, Advisory with Respect to Virtual Currency Derivative Product Listings, effective immediately.

As stated in the withdrawal letter, DMO and DCR determined that the advisory is no longer needed given additional staff experience with virtual currency derivative product listings and increasing market growth and maturity.”

The decision reflects both increased staff experience with crypto-related derivatives and the broader maturation of digital asset markets. The agency stated that the withdrawal aligns its oversight practices with those applicable to traditional financial products, removing additional scrutiny that had previously distinguished digital asset derivatives.

Path Toward Regulatory Parity

The withdrawal of these advisories spotlights the CFTC’s strategic move to eliminate regulatory disparities between digital assets and traditional financial instruments.

Staff Advisory No. 18-14, issued in 2018, had required exchanges listing crypto derivatives to provide heightened transparency and proactive risk assessments, reflecting early caution amid rising market interest.

The withdrawal letter states,

“The Advisory reflected ‘staff’s current thinking’ in 2018 ‘based on experience with virtual currency derivatives products to date.'”

Advisory No. 23-07, published in 2023, raised concerns about systemic risks posed by digital assets as DCOs began expanding clearing services to include novel tokenized products. The rescindment of both documents removes language that had implied heightened regulatory concern specifically tied to the digital nature of these assets.

“Given additional staff experience in the intervening years, as well as increasing market growth and maturity, DMO and DCR believe the Virtual Currency Listing Advisory is no longer needed. Accordingly, DMO and DCR have determined to withdraw the Advisory, effective immediately.”

The CFTC emphasized that digital asset derivatives will now be subject to the same regulatory review and risk protocols applied to derivatives based on commodities or financial indices, such as oil futures or interest rate swaps.

Impact on Market Participation and Institutional Engagement

By eliminating separate advisories, the CFTC is clearing a path for greater institutional participation in crypto derivatives markets. This change is expected to reduce compliance uncertainty for firms seeking to offer or clear digital asset-based products, particularly within established financial institutions that already engage with traditional derivatives markets.

The move addresses longstanding industry concerns about the lack of parity in regulatory treatment and aims to signal that digital asset derivatives will not be subject to ad hoc or inconsistent oversight.

While removing prescriptive directives, the CFTC noted that DCOs are still expected to conduct thorough risk assessments, especially given the volatility and unique custody mechanics of digital tokens. This is consistent with the agency’s broader approach of maintaining prudent oversight while encouraging innovation.

The decision mirrors broader regulatory shifts across US financial agencies. Other regulators, including the Office of the Comptroller of the Currency (OCC), have eased procedural requirements on digital asset services offered by banks. The OCC now permits US financial institutions to engage with stablecoins and custody services without prior approval, provided appropriate risk management structures are in place.

The CFTC’s pivot is part of a broader, multi-agency trend to remove artificial distinctions between TradFi and DeFi sectors as financial markets integrate blockchain infrastructure and tokenized products.

Per CFTC Chair Rostin Behnam, the agency remains committed to “principles-based oversight” that balances innovation and market integrity. Whether this model can scale effectively across the broader digital asset landscape will likely depend on future inter-agency collaboration and legislative clarity.