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"Actual delivery" is an important regulatory concept that provides a critical component of the statutory basis for the [[U.S. Commodity Futures Trading Commission]]'s (CFTC) exception of certain leveraged or margined retail [[cryptocurrency]] transactions from its definition of futures contracts. The exception permits those transactions to occur away from regulated futures trading platforms known as designated contract markets pursuant to the U.S. Commodity Exchange Act. According to the CFTC's Final Interpretive Guidance on Retail Commodity Transactions Involving Certain Digital Assets,<ref>{{cite web|url=https://www.cftc.gov/PressRoom/PressReleases/8139-20|name=Final Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets|org=Commodity Futures Trading Commission|date=March 25}}</ref>  
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The [[U.S. Commodity Futures Trading Commission]]'s (CFTC) published final guidance on what constitutes "actual delivery" of [[cryptocurrency]] under its rules on March 24, 2020.
  “actual delivery” has occurred within the context of virtual currency when:
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With regard to transactions involving the purchase or sale of cryptocurrency, actual delivery is an important regulatory concept that provides a critical component of the basis for the CFTC to apply its rules. Under the [http://www.marketswiki.com/wiki/U.S._Commodity_Exchange_Act U.S. Commodity Exchange Act] (CEA), actual delivery of cryptocurrency in a retail cryptocurrency transaction is necessary for the transaction to be excepted from the CFTC's definition of and rules for futures contracts. The exception permits those transactions to occur away from regulated futures trading platforms known as designated contract markets pursuant to the CEA. According to the CFTC's Final Interpretive Guidance on Retail Commodity Transactions Involving Certain Digital Assets, “'actual delivery' has occurred within the context of virtual currency when,<ref>{{cite web|url=https://www.cftc.gov/PressRoom/PressReleases/8139-20|name=Final Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets|org=Commodity Futures Trading Commission|date=March 25}}</ref>   
 
  (1) A customer secures: (i) possession and control of the entire quantity of the commodity, whether it was purchased on margin, or using leverage, or any other financing arrangement, and (ii) the ability to use the entire quantity of the commodity freely in commerce (away from any particular execution venue) no later than 28 days from the date of the transaction and at all times thereafter; and  
 
  (1) A customer secures: (i) possession and control of the entire quantity of the commodity, whether it was purchased on margin, or using leverage, or any other financing arrangement, and (ii) the ability to use the entire quantity of the commodity freely in commerce (away from any particular execution venue) no later than 28 days from the date of the transaction and at all times thereafter; and  
  (2) The offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) do not retain any interest in, legal right, or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction.     
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  (2) The offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) do not retain any interest in, legal right, or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction."      
  
In its release of the "Voting Draft" of its final guidance, the CFTC provides two examples of what it considered actual delivery and three examples of what it considered not to be actual delivery.
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In its "Voting Draft" of its final guidance, the CFTC provides two examples of what it considered actual delivery and three examples of what it considered not to be actual delivery.
  
 
== Background ==
 
== Background ==
On August 23, 2020, the CFTC published a final interpretation of "actual delivery" under the Commodity Exchange Act and the CFTC's regulations. The interpretation included five examples of the CFTC's views of what constitutes actual delivery.<ref>{{cite web|url=https://www.govinfo.gov/content/pkg/FR-2013-08-23/pdf/2013-20617.pdf|name=Interpretation: Retail Commodity Transactions Under Commodity Exchange Act|org=Federal Register|date=March 25, 2020}}</ref>  
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On August 23, 2013, the CFTC published a final interpretation of "actual delivery" for any commodity under the CEA and the CFTC's regulations. The interpretation included five examples of the CFTC's views of what constitutes actual delivery for commodity transactions under its jurisdiction.<ref>{{cite web|url=https://www.govinfo.gov/content/pkg/FR-2013-08-23/pdf/2013-20617.pdf|name=Interpretation: Retail Commodity Transactions Under Commodity Exchange Act|org=Federal Register|date=March 25, 2020}}</ref>  
  
In response to the CFTC's settling charges against and fining Bitfinex for offering U.S. customers off exchange [[bitcoin]] futures contracts, the law firm Steptoe and Johnson petitioned the CFTC for rule making that would address chiefly the issue of when the CFTC considers actual delivery to have taken place.<ref>{{cite web|url=https://drive.google.com/file/d/0B6XchKCJQ5vMNkMycFlIbFZtWU0/view|name=Letter re: Petition for Rulemaking Concerning the Requirements of "Actual Delivery". . .|org=Steptoe and Johnson|date=March 25, 2020}}</ref>   
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In response to the CFTC's June 2, 2016 settlement and fine against Bitfinex for offering U.S. customers off-exchange [[bitcoin]] futures contracts, on July 1, 2016 the law firm Steptoe and Johnson petitioned the CFTC for rule making that would address chiefly the issue of when the CFTC considers actual delivery to have taken place.<ref>{{cite web|url=https://drive.google.com/file/d/0B6XchKCJQ5vMNkMycFlIbFZtWU0/view|name=Letter re: Petition for Rulemaking Concerning the Requirements of "Actual Delivery". . .|org=Steptoe and Johnson|date=March 25, 2020}}</ref>   
  
In October 2017, CFTC Commissioner Brian Quintenz told an audience that the Commission was considering what constitutes actual delivery and was "working very hard to provide a suitable response to that question."<ref>{{cite web|url=https://www.coindesk.com/cftc-still-doesnt-know-constitutes-cryptocurrency-delivery|name=The CFTC Is Still Considering a Cryptocurrency ‘Delivery’ Definition|org=CoinDesk|date=March 25, 2020}}</ref> Shortly thereafter, on December 30, the CFTC published a proposed interpretation of actual delivery and invited public comment.<ref>{{cite web|url=https://www.govinfo.gov/content/pkg/FR-2017-12-20/pdf/2017-27421.pdf|name=Proposed interpretation; request for comment: Retail Commodity Transactions Involving Certain Digital Assets|org=Federal Register|date=March 25, 20220}}</ref>  The March 2020 final guidance was the CFTC's first public response on its invitation for public comment.<ref>{{cite web|url=https://www.cftc.gov/PressRoom/PressReleases/8139-20|name=Final Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets|org=Commodity Futures Trading Commission|date=March 25}}</ref>     
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In October 2017, CFTC Commissioner Brian Quintenz told an audience that the Commission was considering what constitutes actual delivery of cryptocurrency and was "working very hard to provide a suitable response to that question."<ref>{{cite web|url=https://www.coindesk.com/cftc-still-doesnt-know-constitutes-cryptocurrency-delivery|name=The CFTC Is Still Considering a Cryptocurrency ‘Delivery’ Definition|org=CoinDesk|date=March 25, 2020}}</ref> Shortly thereafter, on December 30, the CFTC published a proposed interpretation of actual delivery and invited public comment.<ref>{{cite web|url=https://www.govinfo.gov/content/pkg/FR-2017-12-20/pdf/2017-27421.pdf|name=Proposed interpretation; request for comment: Retail Commodity Transactions Involving Certain Digital Assets|org=Federal Register|date=March 25, 20220}}</ref>  The March 2020 final guidance was the CFTC's first public response on its invitation for public comment.<ref>{{cite web|url=https://www.cftc.gov/PressRoom/PressReleases/8139-20|name=Final Interpretive Guidance: Retail Commodity Transactions Involving Certain Digital Assets|org=Commodity Futures Trading Commission|date=March 25}}</ref>     
 
   
 
   
 
== References ==
 
== References ==

Latest revision as of 20:42, 25 March 2020

CFTC
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The U.S. Commodity Futures Trading Commission's (CFTC) published final guidance on what constitutes "actual delivery" of cryptocurrency under its rules on March 24, 2020.

With regard to transactions involving the purchase or sale of cryptocurrency, actual delivery is an important regulatory concept that provides a critical component of the basis for the CFTC to apply its rules. Under the U.S. Commodity Exchange Act (CEA), actual delivery of cryptocurrency in a retail cryptocurrency transaction is necessary for the transaction to be excepted from the CFTC's definition of and rules for futures contracts. The exception permits those transactions to occur away from regulated futures trading platforms known as designated contract markets pursuant to the CEA. According to the CFTC's Final Interpretive Guidance on Retail Commodity Transactions Involving Certain Digital Assets, “'actual delivery' has occurred within the context of virtual currency when,[1]

(1) A customer secures: (i) possession and control of the entire quantity of the commodity, whether it was purchased on margin, or using leverage, or any other financing arrangement, and (ii) the ability to use the entire quantity of the commodity freely in commerce (away from any particular execution venue) no later than 28 days from the date of the transaction and at all times thereafter; and 
(2) The offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) do not retain any interest in, legal right, or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction."     

In its "Voting Draft" of its final guidance, the CFTC provides two examples of what it considered actual delivery and three examples of what it considered not to be actual delivery.

Background

On August 23, 2013, the CFTC published a final interpretation of "actual delivery" for any commodity under the CEA and the CFTC's regulations. The interpretation included five examples of the CFTC's views of what constitutes actual delivery for commodity transactions under its jurisdiction.[2]

In response to the CFTC's June 2, 2016 settlement and fine against Bitfinex for offering U.S. customers off-exchange bitcoin futures contracts, on July 1, 2016 the law firm Steptoe and Johnson petitioned the CFTC for rule making that would address chiefly the issue of when the CFTC considers actual delivery to have taken place.[3]

In October 2017, CFTC Commissioner Brian Quintenz told an audience that the Commission was considering what constitutes actual delivery of cryptocurrency and was "working very hard to provide a suitable response to that question."[4] Shortly thereafter, on December 30, the CFTC published a proposed interpretation of actual delivery and invited public comment.[5] The March 2020 final guidance was the CFTC's first public response on its invitation for public comment.[6]

References