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 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 (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.
