On October 5, the Financial Crimes Enforcement Network (FinCEN) announced the withdrawal of two proposed rules that would have imposed requirements on financial institutions relating to convertible virtual currencies. The first proposal would have required recordkeeping, verification, and reporting obligations on certain transactions involving convertible virtual currencies and unhosted wallets, while the second would have imposed a special measure designating convertible virtual currency mixing as a class of transactions of primary money laundering concern under the USA PATRIOT Act. FinCEN stated that the withdrawals are due to public comment consideration, the Trump administration’s deregulatory agenda, and ongoing efforts to ensure that digital asset regulations are “fit-for-purpose.” While FinCEN acknowledged that criminals continue to use mixing services to impede investigations, the agency noted that commenters warned that the rules could have a “chilling” effect on legal activity, though it reserved the right to take appropriate steps in the future to address illicit finance concerns.
On October 5, the CFTC issued an Advanced Notice of Proposed Rulemaking (ANPRM) seeking public comment on a comprehensive regulatory framework for retail commodity transactions involving crypto assets under Section 2(c)(2)(D) of the Commodity Exchange Act. The ANPRM requests input on three key areas: preventing abusive practices in crypto asset transactions under a uniform national regime, providing market participants with crypto-specific compliance and best practice guidance, and codifying a new “crypto asset market” subcategory of designated contract market registration built for crypto asset transactions. Chairman Michael Selig commented that the rulemaking would establish a crypto asset regulatory framework under the CFTC’s existing authority, as directed by President Trump, to provide “clarity, certainty, and consumer protections” in crypto markets. Public comments are due 60 days after publication in the Federal Register.
On October 1, the New York State Department of Financial Services (DFS) and the Wyoming Division of Banking announced a memorandum of understanding (MOU) to help coordinate oversight of entities engaged in virtual currency and digital asset activities in both states. The MOU will strengthen regulatory coordination, which will allow each regulator to utilize the other’s expertise and supervisory insights. Under the agreement, the regulators will share analysis, subject matter reviews, and historical examination data to streamline the licensing and chartering application process for entities operating in both jurisdictions. The MOU also provides for coordinated examination schedules, joint examinations, and protocols for sharing supervisory reports, market trend data, and potential enforcement action notification.
On October 5, the CFTC’s Division of Market Oversight issued no-action relief to designated contract markets (DCMs), converting their existing perpetual-style broad-based security index futures contracts into true broad-based security index perpetual futures. Under the relief, DCMs may remove expiration dates from these contracts and implement the necessary amendments for conversion if certain customer protection and procedural conditions are satisfied. These conditions include soliciting feedback from market participants with open positions, providing advance notice and the ability to exit positions, and offering appropriate risk disclosures, though DCMs must also ensure that no other material contract terms are modified. Finally, DCMs must file the amendments under CFTC Regulation 40.5 or 40.6 and certify compliance with all conditions outlined in the letter. The no-action letter expires on October 20.