NFA Proposes to Regulate Members' Services in Digital Assets

NFA submitted for adoption CFTC Compliance Rule 2-51 ("Requirements for Members and Associates Engaged in Activities Involving Digital Asset Commodities") to implement anti-fraud, trading, and supervisory requirements for firms (i.e., Bitcoin and Ether) engaging in digital asset commodity activities.

Under the new Rule, NFA would, for the first time, have the jurisdiction to discipline member firms for fraud and similar misconduct relating to digital commodities. The rule would prevent firms from:

• cheating or deceiving other persons engaged in digital commodities;
• making a false report with regard to any transaction involving a digital commodity;
• making a communication that (i) operates as a fraud or deceit, (ii) utilizes a "high-pressure approach" or (iii) asserts in any way that digital commodities are "appropriate for all persons";
• disseminating false or misleading information meant to influence the price of a digital commodity;
• engaging in manipulative acts or practices concerning the price of a digital commodity; and
• embezzling for its own use any money or other assets received from any person in connection with a transaction involving a digital commodity.

The Rule would also impose new requirements for firms regarding (i) standards of commercial honor and just and equitable principles of trade, (ii) disclosure of activities involving Digital Commodities and (iii) employee supervision.

According to NFA, the Rule will become effective 10 days following receipt of submission by the CFTC unless the CFTC decides to review the proposal prior to approving.