|Key People||J. Christopher Giancarlo, Chairman; Brian D. Quintenz, Commissioner; Rostin Benham, Commissioner|
The U.S. Commodity Futures Trading Commission (CFTC) is a federal regulatory agency that oversees the commodity marketplaces in the U.S. It has been one of the leading regulators of bitcoin and other cryptocurrency transactions in the world.
The CFTC has exclusive jurisdiction over commodity futures markets, which trade futures, swaps and futures options on numerous commodities and financial instruments. It also regulates the customer solicitation practices, financial intermediaries, and clearinghouses in the industry. The U.S. Congress has also granted the CFTC authority to move against fraud and manipulation in cash commodity markets, although the exact nature of that authority is disputed.
Bitcoin As a Commodity
In September 2014 the CFTC permitted TeraExchange, a swap execution facility, to certify to the commission that its bitcoin swap complied with the requirements of the Commodity Exchange Act, a statement which implied that bitcoin is a commodity under the CFTC's authority. That December, Chairman Tim Massad stated his view during Congressional testimony that bitcoin was a commodity and acknowledged that the CFTC defined the term "commodity" broadly. In 2015 the CFTC settled a complaint against a company called Coinflip for providing, during 2014, a marketplace called Derivbit, which listed bitcoin options without being registered as a swap execution facility - the only permissible venue for commodity options trading. The CFTC settled its case against Bitfinex, wherein the CFTC accused Bitfinex of trading off-exchange Bitcoin futures and failing to register as a futures commission merchant, in June 2016. The view that bitcoin can be regulated as a commodity received support on March 6, 2018 when U.S. District Judge Jack Weinstein ordered that the CFTC could sue Patrick McDonnell and his company, CabbageTech, for fraud under the Commodity Exchange Act. CabbageTech solicited funds from investors for providing cryptocurrency advisory services, which the CFTC alleged were never forthcoming. 
Request for public comments on Ether regulation
In December, the CFTC released an official Request for Information (RFI) to the public. The RFI stated that its purpose was to "seek public comment and feedback in order to better inform the commission's understanding of the technology, mechanics, and markets for virtual currencies beyond bitcoin, namely Ether and its use in the Ethereum Network." The RFI specified that information gathered through the RFI would be considered in future efforts to provide oversight and regulation to the digital asset markets. It also gave three methods members of the public could use to deliver their comments to the commission, including a mailing address and a link to its public comments website. Comments will be collected until February 15, 2019.
Although treating bitcoin as a commodity for the purpose of trade regulation has been helpful to the CFTC, other factors not strictly related to cryptocurrency have hampered its efforts. In Commodity Futures Trading Commission v. Monex Credit Co. , C.D. Cal., No. 8:17-cv-01868-JVS-DFM, a case involving accusations against precious metals dealer Monex for off-exchange fraud, the CFTC suffered a significant blow to its authority. In that case, Judge James Selna held that the Dodd-Frank Act amendments to the Commodity Exchange Act required the presence of both fraud and manipulation for a case to be brought by the CFTC. In the Monex Credit case, there were no allegations of manipulation. Several of the cases brought by the CFTC regarding cryptocurrencies included no apparent element of market manipulation by the defendants.
Bitcoin Related Registrations
TeraExchange, who applied to the CFTC for registration as a swap execution facility, was permitted to certify its bitcoin swap contract and list if for trading. TeraExchange was registered permanently on May 26, 2016. North American Derivatives Exchange (or NADEX), a registered designated contract market, certified bitcoin swaps for trading on its platform in November of 2014. In August 2015, the CFTC accepted applications from LedgerX to be registered as both a swap execution facility in order to trade bitcoin options and a derivatives clearing organization in order to clear bitcoin options. LedgerX was registered for both trading and clearing physically delivered bitcoin swaps in July 2017.
On December 1, 2017, both the Cboe Futures Exchange and CME Group began offering certified cash-settled futures contracts. The launching of these futures contracts was controversial with the futures commission merchant community, which complained publicly in a December 2017 letter from the Futures Industry Association. The CFTC's staff responded in June 2018 with a notice to exchanges and clearinghouses seeking to certify new cryptocurrency products that they need to be aware of concerns about market surveillance and financial integrity when they certify contracts.
The CFTC has undertaken efforts to educate market participants and potential market participants about the specific risks associated with dealing in cryptocurrencies in general and bitcoin specifically. The CFTC provides a website that lists resources that the CFTC has made available to the public. The web page provides brief descriptions of and hyperlinks to a variety of materials including podcasts, customer advisories, primers/backgrounders and brochures.
In July 2018, the CFTC issued a customer advisory to those considering buying digital currency. The document cited the high rate of failure and fraud among new ICOs and the volatility of digital currency prices. It also urged potential consumers to take responsibility for knowing the laws, function, and promises made by those selling them.
In September 2018, a federal judge ruled that all virtual currencies fall under the legal definitions for "commodities," and thus fall within the jurisdiction of the CFTC. The CFTC used this ruling to begin pursuing legal action against Crater and My Big Coin Pay Inc., two cryptocurrency companies accused of fraud.
- J. Christopher Giancarlo - Chairman
- Brian D. Quintenz - Commissioner
- Rostin Benham - Commissioner
- Dawn DeBerry Stump - Commissioner
- Dan M. Berkovitz - Commissioner
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- CFTC Appeals Monex Opinion Curbing Enforcement, Crypto Authority. Bloomberg.
- ORDER OF REGISTRATION. CFTC.
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- ORDER OF REGISTRATION. CFTC.
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- CFTC Staff Advisory No. 18-14. CFTC.
- U.S. judge sides with CFTC on virtual currency oversight. Reuters.
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