What is the CFTC's Approach to Regulating Virtual Currencies?

06/12/2018 9:39 am EST


Dan Rutherford

Deputy Director, Office of Customer Education and Outreach, U.S. Commodity Futures Trading Commission


While its regulatory oversight authority over commodity cash markets is limited, the U.S. Commodity Futures Trading Commission (CFTC) maintains general anti-fraud and manipulation enforcement authority over virtual currency cash markets as a commodity in interstate commerce.

But is bitcoin a commodity? Yes, the definition of a commodity under the Commodity Exchange Act (CEA) is broad. A commodity can be a physical commodity – such as an agricultural product or other natural resource – or it can be a currency or interest rate. The CEA says commodities also include “all services, rights, and interests … in which contracts for future delivery are presently or in the future dealt in.”

In December 2017, both the Chicago Mercantile Exchange and Chicago Board Options Exchange began selling bitcoin futures contracts.

Beyond instances of fraud or manipulation, the CFTC generally does not oversee “spot” or cash market exchanges and transactions involving virtual currencies that do not utilize margin, leverage, or financing.

For more information, see A CFTC Primer on Virtual Currencies

CFTC’s Approach to Regulating Virtual Currencies

The CFTC seeks to promote responsible innovation and development that is consistent with its mission to foster open, transparent, competitive and financially sound derivative trading markets. The CFTC also seeks to prohibit fraud, manipulation and abusive practices in connection with derivatives and other products subject to the Commodity Exchange Act.

The CFTC believes that the responsible regulatory response to virtual currencies involves five components:

  1. Consumer Education. Amidst the wild assertions, bold headlines and shocking hyperbole, there is a need for greater public understanding.
  2. Asserting Legal Authority. Asserting legal authority over virtual currency derivatives in support of the CFTC’s anti-fraud and manipulation efforts, including in underlying spot markets, is a key component in the CFTC’s ability to effectively regulate these markets.
  3. Market Intelligence. Gaining the ability to monitor markets for virtual currency derivatives and underlying settlement reference rates through the gathering of trade and counterparty data will provide regulatory and enforcement insights into those markets.
  4. Robust Enforcement. In addition to its general regulatory and enforcement jurisdiction over the virtual currency derivatives markets, the CFTC has jurisdiction to police fraud and manipulation in cash or spot markets. The CFTC intends to continue to exercise this jurisdiction to enforce the law and prosecute fraud, abuse, manipulation or false solicitation in markets for virtual currency derivatives and underlying spot trading.
  5. Government-wide Coordination. The CFTC actively coordinates its approach to Bitcoin and other virtual currencies with other federal regulators, including the Securities and Exchange Commission (SEC), Federal Bureau of Investigation (FBI), Justice Department and Financial Stability Oversight Council (FSOC). The CFTC also coordinates with state entities, including state Attorneys General, in addition to working with the White House, Congress and other policy-makers.

For more information, read the CFTC Backgrounder on Oversight of and Approach to Virtual Currency Futures Markets.

Suspect Fraud?

If you believe you may have been the victim of fraud, or to report suspicious activity, contact us at 866-366-2382 or visit SmartCheck.gov/submitatip.

This article was prepared by the Commodity Futures Trading Commission’s Office of Customer Education and Outreach. The article is provided for general informational purposes only and does not provide legal or investment advice to any individual or entity. Please consult with your own legal adviser before taking any action based on this information.


Related Articles on CRYPTOCURRENCY

Keyword Image
The ABCs of Bitcoin
12/25/2020 5:00 am EST

Over the past two months, one of the most frequently asked questions I get is about investing in Bit...

Keyword Image
Is a Bitcoin Reversal Imminent?
01/14/2020 12:26 pm EST

Bitcoin has lost more than 50% since its June 2019 peak, but the technicals are turning, notes Matt ...