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#1 09-02-2020 17:36:11

johnedward
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From: Paris - France
Registered: 21-12-2009
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Do cryptocurrency CFDs have to be declared in the context of MiFIR?

Do cryptocurrency CFDs have to be declared in the context of MiFIR?


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One of the biggest hurdles in crypto trading is regulation and the general lack of clarity around the definition of virtual currencies. This has led to some confusion regarding crypto-asset rules.

One aspect of the regulation that has caused market uncertainty is that of contracts for difference (CFDs) in cryptocurrencies: should they be reported under EMIR and MiFID II (MiFIR) regulations?

Speaking about the ambiguity surrounding the regulation of cryptocurrencies, the CEO of TRAction Fintech says: "Because of the technology that often evolves faster than the regulations, there is still a lot of confusion about reporting of cryptos and their derivatives. It doesn't help that Brexit, leverage restrictions and SFTR have monopolised regulatory attention lately, leaving cryptocurrency issues somewhat overlooked".

Even the European Securities and Markets Authority (ESMA) recognises the difficulty of applying cryptographic assets to European regulations, because they were not designed with these instruments in mind.

In January 2019, Steven Maijor, President of ESMA, said: "Our survey of the NCAs revealed that certain encrypted assets could be considered as financial instruments within the meaning of the MiFID, in which case all EU financial rules would apply."

As pointed out by TRAction Fintech, a financial service provider specializing in reporting OTC derivatives transactions, to be able to be declared under the MiFIR directive, the instrument must be traded on a trading platform within the European Economic Area (EEA).

Currently, the only cryptocurrency listed on a marketplace is Bitcoin Future, and it is listed outside the EEA, on the CBOE and the CME. Therefore, the company does not currently consider that cryptocurrencies should be declared under the MiFIR directive.

Although not subject to European regulations, CFDs on cryptocurrencies are another story, as a CFD is a derivative. Derivatives must be declared under the EMIR Directive, CFDs on cryptocurrencies must therefore be declared.

"Since the EMIR reporting rules were not designed for these instruments, there is no category that fits perfectly with cryptocurrencies, so some interpretation is required to report these instruments."

"At this point, the broader derivatives industry and the Trade Repositories suggest declaring the instruments in the commodity asset category because a cryptocurrency does not (as of this writing) have a standard currency code ISO, which is required for it to be declared as a currency."

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