NFA reminded futures commission merchants ("FCMs"), introducing brokers ("IBs"), CPOs and CTAs of their ongoing disclosure and reporting requirements when engaging in virtual currency activities.
NFA stated that FCMs, IBs, CPOs and CTAs must:
- comply with customer disclosure requirements under NFA Notice 9073; and
- immediately notify NFA after it solicits or accepts orders in, or executes transactions involving, virtual currencies by amending the NFA Annual Questionnaire.
Commentary Conor Almquist
In the years since NFA has implemented virtual currency-related disclosure and notification requirements, there has been relatively limited enforcement activity. This reminder may be NFA's way of putting firms on notice that there will be additional scrutiny of virtual currency activities in the future. While there is not currently standardized disclosure language relating to virtual currencies, firms should ensure that disclosure documents address, when relevant, (i) the unique features of virtual currencies, (ii) price volatility, (iii) challenges in valuation and liquidity risk, (iv) cybersecurity issues, (v) opaque underlying or spot virtual currency markets and related asset verification challenges, (vi) new, untested and potentially unregulated intermediaries, custodians, exchanges and vendors, (vii) regulatory uncertainty, (viii) technological risks, and (ix) potential fluctuations in transaction fees.
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