Crypto Alliance Recommends CFTC Issue Clear Guidance on Digital Assets

The Crypto Council for Innovation ("CCI"), an alliance of crypto industry leaders, asked the CFTC for "guidance clarifying the treatment of many digital assets as commodities, the applicability or non-applicability of registration requirements, and regulatory expectations of certain intermediaries" to "reduce ambiguity that currently hampers investment and adoption."

In a comment letter supporting recommendations contained in the President’s Working Group on Digital Assets Report (see previous coverage), the organization stressed the importance of regulatory consistency and urged the CFTC to coordinate with the SEC, FinCEN, and Treasury to ensure its actions complement ongoing congressional efforts to establish a comprehensive framework. The CCI argued for a technology-neutral approach that fosters institutional participation and provides the confidence necessary for firms to scale operations domestically rather than moving offshore.

The CCI recommended:

1. Recognition of digital assets as commodities. The CCI argued that the "vast majority" of digital assets fall under the Commodity Exchange Act’s definition of a commodity and do not function as securities. The organization emphasized that assets like Bitcoin and Ether generally lack profit-sharing rights tied to centralized managerial efforts and urged the CFTC to codify this distinction to provide market clarity.
2. Clarification on the treatment of perpetual derivatives. The CCI asked the CFTC to issue guidance classifying perpetual derivatives with no settlement date as futures rather than swaps. The organization warned that current uncertainty deters professional traders and suggested that, should these products be deemed swaps, the CFTC should clarify that anonymous protocol-based transactions do not trigger swap-dealer registration thresholds.
3. Adoption of a principles-based framework for DeFi. The CCI urged the CFTC to apply a technology-neutral framework to Decentralized Finance ("DeFi") that reflects the absence of centralized intermediaries. The council argued that software developers and ancillary service providers—such as validators—should not be subject to registration requirements or liability designed for traditional trading platforms.
4. Modernization of collateral and margin requirements. The CCI called on the CFTC to recognize permitted payment stablecoins as "cash" for margin and settlement purposes. The organization recommended withdrawing restrictive staff advisories and establishing pathways for digital assets to be used as collateral, which would enhance liquidity and facilitate 24/7 settlement.
5. Allowing vertical integration of services. The CCI advised the CFTC to allow the integration of brokerage, custody, and exchange functions within a single entity if conflicts are managed. The organization argued that blockchain technology mitigates traditional risks like counterparty credit exposure and that mandating the disaggregation of these services could "inadvertently increase systemic risk" and reduce efficiency.
6. Updating Customer Identification Programs. The CCI urged the CFTC to collaborate with FinCEN to validate the use of privacy-preserving technologies, such as zero-knowledge proofs and digital IDs, for AML compliance. The organization recommended supporting pilot programs to test these tools in live environments, arguing that outdated requirements currently inhibit the adoption of secure digital identity solutions.
7. Recognition of blockchain-based recordkeeping. The CCI also asked that the CFTC confirm that blockchain systems satisfy Rule 1.31 ("Regulatory records; retention and production") recordkeeping requirements, noting that distributed ledgers provide immutable, time-stamped, and independently verifiable audit trails that strengthen data integrity.