US CFTC takes step forward to provide guidance on digital assets

The U.S. Commodity and Futures Trading Commission (CFTC), which, unlike the Securities and Exchange Commission (SEC), has been more open to the advancement of blockchain and digital assets, is once again showing its support. The organization has taken another step forward in helping to better define, from a regulatory point of view, what constitutes delivery of digital assets, and issued its final authoritative guidance on the subject. It may not be an all-inclusive framework, but it is still an advance that will help continue to shape the Bitcoin ecosystem.

In the CFTC’s update, which was unanimously approved in a vote by commission members, CFTC Chairman Heath P. Tarbert explains, “Providing clarity to market participants is one of the CFTC’s core values. This interpretive guidance not only fulfills that commitment, but it reflects my belief that the U.S. must be a leader in the digital asset space. These efforts are also especially critical when the hard-earned income of everyday Americans is at stake. Under my leadership, the CFTC will continue to do its part to encourage responsible fintech innovation through sound regulation.”

To that end, it has established the criteria that determine what constitutes “actual delivery” of digital currency. There are two factors that are taken into consideration, per the new CFTC definition, including:

“(1) a customer securing: (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.”

This is an important step for the Bitcoin community, as it helps to establish better controls over transactions, which will protect consumers even more. In fact, the impetus for the clarification came after the CFTC targeted the Bitfinex exchange three years ago for delivering unauthorized digital assets. The exchange argued that it hadn’t delivered anything since it never physically handed over any coins, but the new regulations make it clear what is meant by delivery of digital currency. 

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