Crypto derivatives reporting already needs to be done under existing regimes.
Several top regulators are actively looking into the requirement of crypto regulations.
Analysis
Financial reporting requirements around trading instruments are crucial for compliance. However, when it comes to cryptocurrencies, this becomes complex.
Post-trade reporting requires a timebound publication of all trade-related data to regulators. The methods and technicality vary with asset classes. For Europe, these reporting requirements were defined under the EMIR and MiFIR regimes.
However, cryptocurrencies are an oddball to this system. These instruments came into existence a little more than a decade ago but have caught mainstream attention in recent years. Despite the global popularity of cryptocurrencies, regulations around them are still murky.
The lack of a proper definition of cryptocurrencies and its clarification have kept the requirement of their post-trade reporting out of the regulatory jurisdiction. However, the same does not apply to crypto derivatives, the instruments which are now listed on several mainstream trading venues.
“The main post-trade regulatory reporting requirements are for crypto derivatives that fall under existing derivative reporting regulation such as EMIR in the EU/UK, CFTC Dodd-Frank in the US and MAS and ASIC OTC Derivative Reporting rules on Singapore and Australia,” Ron Finberg, the Director of Global Regulatory Reporting Solutions at IHS Markit, explained to Finance Magnates.
In Europe, the European Securities and Markets Authority (ESMA) is yet to come up with a clear post-trade reporting regime for cryptocurrencies. However, a guideline issued by the pan-European agency in January 2019 still remains the only available reporting guidance.
The regulator then stated: “Our survey of NCAs highlighted that some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply. However, because the existing rules were not designed with these instruments in mind, NCAs face challenges in interpreting the existing requirements, and certain requirements are not adapted to the specific characteristics of crypto-assets.”
The guidance does not provide a clear picture of the crypto post-trade reporting regime, but it still is the basis of cryptocurrency post-trade reporting to date. However, the scope of it is only limited to crypto derivatives and not the underlying crypto assets.
For non-EEA and non-UK listed crypto derivative products, the post-trade reporting should be done under EMIR. The non-listed cryptocurrency derivatives, like crypto contracts for differences (CFDs), also need to be reported under the same regime.
Though there is a reporting requirement for UK and EEA-listed cryptocurrency derivatives, these products do not exist yet. Exchange-listed crypto derivatives are currently available on only two United States-based exchanges, Cboe and CME.
“Due to the fact the EMIR Reporting Rules were not designed with these instruments in mind, there isn’t a category that perfectly fits a cryptocurrency, and, therefore, some interpretation is required in order to report these instruments,” Quinn Perrott, the Co-CEO and Founder of TRAction, explained an earlier post.
“At this stage, the wider derivative industry and Trade Repositories suggest reporting under the commodity asset class as a cryptocurrency does not have an ISO standard currency code, which is required for it to be reported as a currency.”
Crypto Reporting Requirements Are Coming?
The growing size of the cryptocurrency market and the increasing demand on both the retail and institutional fronts have also spurred the demand for bringing cryptocurrency post-trade reporting, not only with derivatives but also with the trading of assets.
Additionally, a survey conducted by IHS Markit (now a part of the S&P Global) revealed that 51 percent of the participants are expecting cryptocurrency post-trade reporting regulations in the coming three years.
The participants of the survey include banks, asset managers and brokers along with various financial and non-financial institutions. Many of them see these regulations to be implemented in the United States, European Union, the United Kingdom, Switzerland and even Singapore.
Moreover, the expectation of the financial industry companies for crypto post-trade reporting was fueled by the listing of the digital asset investment instruments on mainstream platforms. The first Bitcoin ETF was launched by Purpose Investments in Canada in February 2021 and Proshares followed it with the first US launch in October.
“Cryptocurrencies remain largely unregulated around the world, but if their importance continues to grow at the pace they are sure to attract regulatory scrutiny,” the IHS Markit report stated.
Further, the recent collapse of the stablecoin project, Terra, is pushing the regulators to expedite their efforts to bring crypto regulations. The regulators in the United States and the United Kingdom are among the ones who are evaluating the market situation after the crash of the project.
“At the moment the SEC and CFTC are assessing the underlying cryptocurrencies and whether they fall under the designation as a security or derivative and would be under the scope for existing reporting regulations in the US,” Finberg added.
“Of specific interest to many is whether stablecoins will be designated as derivatives. If yes, as an OTC product it would trigger any transactions in them to fall under CFTC reporting, which will be a big challenge for firms to comply with.”
But How?
Despite the willingness of the regulators, implementing crypto regulatory regimes are not easy. The decentralized nature of the assets makes it hard to enforce controls. Also, the debate around properly classifying crypto assets remains.
“There is plenty of existing reporting regulation that regulators can lean on to use for cryptos, and there is no need to ‘reinvent the wheel’ for cryptos,” Finberg said. “But, what is needed are clear examples from regulators on how to report crypto transactions within the existing framework. For example, clear guidance if they fall under the commodity or FX asset class. If the latter, how should currency codes be entered since cryptocurrencies don’t have an approved ISO 4217 currency code.”
The introduction of crypto regulations now looks imminent. The only question that remains is how the regulators would implement the regulation in an industry that is decentralized. Furthermore, the requirement of post-trade reporting on crypto assets (not derivatives) would also address the issue of wash trading on exchanges, making the industry more transparent.
Financial reporting requirements around trading instruments are crucial for compliance. However, when it comes to cryptocurrencies, this becomes complex.
Post-trade reporting requires a timebound publication of all trade-related data to regulators. The methods and technicality vary with asset classes. For Europe, these reporting requirements were defined under the EMIR and MiFIR regimes.
However, cryptocurrencies are an oddball to this system. These instruments came into existence a little more than a decade ago but have caught mainstream attention in recent years. Despite the global popularity of cryptocurrencies, regulations around them are still murky.
The lack of a proper definition of cryptocurrencies and its clarification have kept the requirement of their post-trade reporting out of the regulatory jurisdiction. However, the same does not apply to crypto derivatives, the instruments which are now listed on several mainstream trading venues.
“The main post-trade regulatory reporting requirements are for crypto derivatives that fall under existing derivative reporting regulation such as EMIR in the EU/UK, CFTC Dodd-Frank in the US and MAS and ASIC OTC Derivative Reporting rules on Singapore and Australia,” Ron Finberg, the Director of Global Regulatory Reporting Solutions at IHS Markit, explained to Finance Magnates.
In Europe, the European Securities and Markets Authority (ESMA) is yet to come up with a clear post-trade reporting regime for cryptocurrencies. However, a guideline issued by the pan-European agency in January 2019 still remains the only available reporting guidance.
The regulator then stated: “Our survey of NCAs highlighted that some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply. However, because the existing rules were not designed with these instruments in mind, NCAs face challenges in interpreting the existing requirements, and certain requirements are not adapted to the specific characteristics of crypto-assets.”
The guidance does not provide a clear picture of the crypto post-trade reporting regime, but it still is the basis of cryptocurrency post-trade reporting to date. However, the scope of it is only limited to crypto derivatives and not the underlying crypto assets.
For non-EEA and non-UK listed crypto derivative products, the post-trade reporting should be done under EMIR. The non-listed cryptocurrency derivatives, like crypto contracts for differences (CFDs), also need to be reported under the same regime.
Though there is a reporting requirement for UK and EEA-listed cryptocurrency derivatives, these products do not exist yet. Exchange-listed crypto derivatives are currently available on only two United States-based exchanges, Cboe and CME.
“Due to the fact the EMIR Reporting Rules were not designed with these instruments in mind, there isn’t a category that perfectly fits a cryptocurrency, and, therefore, some interpretation is required in order to report these instruments,” Quinn Perrott, the Co-CEO and Founder of TRAction, explained an earlier post.
“At this stage, the wider derivative industry and Trade Repositories suggest reporting under the commodity asset class as a cryptocurrency does not have an ISO standard currency code, which is required for it to be reported as a currency.”
Crypto Reporting Requirements Are Coming?
The growing size of the cryptocurrency market and the increasing demand on both the retail and institutional fronts have also spurred the demand for bringing cryptocurrency post-trade reporting, not only with derivatives but also with the trading of assets.
Additionally, a survey conducted by IHS Markit (now a part of the S&P Global) revealed that 51 percent of the participants are expecting cryptocurrency post-trade reporting regulations in the coming three years.
The participants of the survey include banks, asset managers and brokers along with various financial and non-financial institutions. Many of them see these regulations to be implemented in the United States, European Union, the United Kingdom, Switzerland and even Singapore.
Moreover, the expectation of the financial industry companies for crypto post-trade reporting was fueled by the listing of the digital asset investment instruments on mainstream platforms. The first Bitcoin ETF was launched by Purpose Investments in Canada in February 2021 and Proshares followed it with the first US launch in October.
“Cryptocurrencies remain largely unregulated around the world, but if their importance continues to grow at the pace they are sure to attract regulatory scrutiny,” the IHS Markit report stated.
Further, the recent collapse of the stablecoin project, Terra, is pushing the regulators to expedite their efforts to bring crypto regulations. The regulators in the United States and the United Kingdom are among the ones who are evaluating the market situation after the crash of the project.
“At the moment the SEC and CFTC are assessing the underlying cryptocurrencies and whether they fall under the designation as a security or derivative and would be under the scope for existing reporting regulations in the US,” Finberg added.
“Of specific interest to many is whether stablecoins will be designated as derivatives. If yes, as an OTC product it would trigger any transactions in them to fall under CFTC reporting, which will be a big challenge for firms to comply with.”
But How?
Despite the willingness of the regulators, implementing crypto regulatory regimes are not easy. The decentralized nature of the assets makes it hard to enforce controls. Also, the debate around properly classifying crypto assets remains.
“There is plenty of existing reporting regulation that regulators can lean on to use for cryptos, and there is no need to ‘reinvent the wheel’ for cryptos,” Finberg said. “But, what is needed are clear examples from regulators on how to report crypto transactions within the existing framework. For example, clear guidance if they fall under the commodity or FX asset class. If the latter, how should currency codes be entered since cryptocurrencies don’t have an approved ISO 4217 currency code.”
The introduction of crypto regulations now looks imminent. The only question that remains is how the regulators would implement the regulation in an industry that is decentralized. Furthermore, the requirement of post-trade reporting on crypto assets (not derivatives) would also address the issue of wash trading on exchanges, making the industry more transparent.
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
Binance Trial on Ice in Nigerian Court as Lawyers Demand Missing Documents
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
👍 Facebook: https://www.facebook.com/FinanceMagnatesEvents
📸 Instagram: https://www.instagram.com/fmevents_official
🐦 Twitter: https://twitter.com/F_M_events
🎥 TikTok: https://www.tiktok.com/@fmevents_official
▶️ YouTube: https://www.youtube.com/@FinanceMagnates_official
Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
👍 Facebook: https://www.facebook.com/FinanceMagnatesEvents
📸 Instagram: https://www.instagram.com/fmevents_official
🐦 Twitter: https://twitter.com/F_M_events
🎥 TikTok: https://www.tiktok.com/@fmevents_official
▶️ YouTube: https://www.youtube.com/@FinanceMagnates_official
Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
👍 Facebook: https://www.facebook.com/FinanceMagnatesEvents
📸 Instagram: https://www.instagram.com/fmevents_official
🐦 Twitter: https://twitter.com/F_M_events
🎥 TikTok: https://www.tiktok.com/@fmevents_official
▶️ YouTube: https://www.youtube.com/@FinanceMagnates_official
Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/showcase/financemagnates-events/
👍 Facebook: https://www.facebook.com/FinanceMagnatesEvents
📸 Instagram: https://www.instagram.com/fmevents_official
🐦 Twitter: https://twitter.com/F_M_events
🎥 TikTok: https://www.tiktok.com/@fmevents_official
▶️ YouTube: https://www.youtube.com/@FinanceMagnates_official
Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/company/financemagnates/
👍 Facebook: https://www.facebook.com/financemagnates/
📸 Instagram: https://www.instagram.com/financemagnates_official
🐦 X (Twitter): https://twitter.com/financemagnates/
📡 RSS Feed: https://www.financemagnates.com/feed/
▶️ Telegram: https://t.me/financemagnatesnews
Don't miss out on our latest videos, interviews, and event coverage.
🔔 Subscribe to our YouTube channel for more!🔔
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/company/financemagnates/
👍 Facebook: https://www.facebook.com/financemagnates/
📸 Instagram: https://www.instagram.com/financemagnates_official
🐦 X (Twitter): https://twitter.com/financemagnates/
📡 RSS Feed: https://www.financemagnates.com/feed/
▶️ Telegram: https://t.me/financemagnatesnews
Don't miss out on our latest videos, interviews, and event coverage.
🔔 Subscribe to our YouTube channel for more!🔔
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/company/financemagnates/
👍 Facebook: https://www.facebook.com/financemagnates/
📸 Instagram: https://www.instagram.com/financemagnates_official
🐦 X (Twitter): https://twitter.com/financemagnates/
📡 RSS Feed: https://www.financemagnates.com/feed/
▶️ Telegram: https://t.me/financemagnatesnews
Don't miss out on our latest videos, interviews, and event coverage.
🔔 Subscribe to our YouTube channel for more!🔔
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
🔗 LinkedIn: https://www.linkedin.com/company/financemagnates/
👍 Facebook: https://www.facebook.com/financemagnates/
📸 Instagram: https://www.instagram.com/financemagnates_official
🐦 X (Twitter): https://twitter.com/financemagnates/
📡 RSS Feed: https://www.financemagnates.com/feed/
▶️ Telegram: https://t.me/financemagnatesnews
Don't miss out on our latest videos, interviews, and event coverage.
🔔 Subscribe to our YouTube channel for more!🔔