What Brokers Need to Know about EMIR Reporting of Cryptocurrency CFDs

A number of online brokers have been offering trading on Bitcoin CFDs (contracts for difference) for a few years already. However, the recent surge in prices, adoption and media attention have led many more to adopt the instruments and expand to other Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term as well.

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As this is the case, many players in the industry, including regulators, are now trying to figure out how these offerings fit into the established legal framework. For OTC brokers in the EU, the most relevant legislation is the European Market Infrastructure Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term (EMIR).

Cappitech is a financial technology boutique offering bespoke solutions to both the buy- and sell-side supporting EMIR, MiFID and ASIC derivative reporting regulation. In its blog today the company tackled the issue of cryptocurrency CFDs reporting under EMIR and came to an interesting conclusion.

Based on relevant EMIR and ESMA (European Securities and Markets Authority) definitions that the company details, it is Cappitech’s understanding that: until ESMA expands the definition of currencies to include non-ISO 4217 listed currencies; or ESMA defines cryptocurrencies as commodities and not currencies; or cryptocurrencies receive an ISO 4217 code, "bitcoins and other cryptocurrencies are not under scope for EMIR Reporting."

Moreover, the company writes: "Cappitech doesn’t believe they are under scope and there are risks if a broker goes ahead and reports them." These risks include increased rejections from Trade Repositories that EMIR reports are submitted to, which can cause getting flagged by ESMA and a local regulator as a potential violator of EMIR Reports.