We know that the Commodity Futures Trading Commission (CFTC) considers virtual currencies, including bitcoin, to be commodities, meaning that they are subject to the CFTC’s oversight. And we know, based on recent statements and enforcement actions, that the CFTC is, in fact, paying close scrutiny to cryptocurrency transactions and the exchanges on which they are traded. In fact, the CFTC went so far as issuing *multiple* joint statements with the Securities and Exchange Commission (SEC), emphasizing that the two agencies will “address violations and bring actions to stop and prevent fraud” in the digital currency markets.
The CFTC’s key message regarding virtual currencies is aptly summed up in this 2015 statement – by then – Director of Enforcement, Aitan Goelman:
“While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets.”
And to really hit the point home, SEC Chair Jay Clayton and CFTC Chair J. Christopher Giancarlo want you to know that “Regulators are Looking at Cryptocurrency” in their so-named Wall Street Journal op-ed, subtitled “At the SEC and CFTC, we take our responsibility seriously.” I think they made their point, no? The digital currency markets are no longer the Wild West. The three pillars of transparency, investor protection, and market integrity apply not only to traditional securities and derivatives markets, but also to emerging digital currency markets. Got it!
Actually, the CFTC is only getting started. Here’s what the federal regulator has accomplished since the start of the year:
- Issued a Backgrounder on Oversight of and Approach to Virtual Currency Futures Markets
- Launched a virtual currency resource page and a customer advisory titled “Understand the Risks of Virtual Currency Trading”
- Hosted a Market Risk Advisory Committee Meeting, in which CFTC staff and industry panelists discussed the self-certification process for listing new products (including digital currency derivatives contracts, like bitcoin futures) on CFTC-regulated exchanges
- Announced a February 14 Technology Advisory Committee (TAC) meeting, in which CFTC staff and industry panelists will discuss the TAC’s plans for the coming year, particularly related to FinTech, virtual currencies and blockchain (an agenda is forthcoming)
- Filed three enforcement actions based on various acts of fraud and misappropriation related to virtual currencies:
And it’s only the beginning of February!
Michael Best’s Blockchain, Digital Currencies & Smart Contracts Practice is a multi-disciplinary team of blockchain law and policy experts who help businesses take full advantage of this exciting technology. With both the technological and legal expertise, we are uniquely positioned to help our clients compete, invest and succeed in their blockchain-related business ventures.
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