Actual delivery

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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 statutory basis for the U.S. Commodity Futures Trading Commission's (CFTC) application of its rules to the 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,[1]

“actual delivery” has occurred within the context of virtual currency when: 
(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 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.

Background

On August 23, 2013, 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 for commoditiy transactions under its jurisdiction.[2]

In response to the CFTC's settling charges against and fining 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 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