It was in 2015 that the US Commodity Futures Trading Commission (CFTC) first started its take down on unregistered bitcoin trading platforms which stirred up debate in the crypto community on the legal nature of bitcoin and other digital currencies, along with the jurisdictional scope of CFTC in the crypto realm.
Its mission is to foster transparent, competitive and financially sound trading markets which prevent abusive prices and exploitation. It has full authority to engage in anti-fraud and anti-manipulation enforcement actions on commodities markets where virtual currencies are traded.
Virtual currencies as commodities
According to CFTC’s interpretation, the term “virtual currency” incorporates digital representation of value, any digital representation of value that functions as a medium of exchange.
The commission, however, emphasizes that this definition should not be taken as definitive nor arbitrary. As of September 2015, the CTFC maintains that:
Bitcoin and other virtual currencies are encompassed in the definition and properly defined as commodities, and are therefore subject as a commodity to applicable provisions of the Act [CEA] and Regulations.
CTFC’s jurisdiction over cryptocurrency exchanges
Generally, markets or platforms that conduct transactions in virtual currencies, as well as participants in these currencies are out of the CTFC’s regulatory oversight. That, however, does not mean that the CTFC has it’s hands tied. The Commission has enforcement jurisdiction to investigate fraud and market manipulation through subpoenas and other investigative powers.
In December 2017, these powers were seen in action as the CTFC issued subpoenas to Bitfinex and Tether (although the subject of investigation was not revealed) and to Bitstamp, Coinbase, itBit and Kraken as part of market manipulation regulation.
A landmark ruling took place on March 6 of this year, in which the New York Federal District Court affirmed CTFC’s regulatory authority to spot fraud and manipulation on virtual currency markets.
The ruling added that until the Congress clarifies matters, the CTFC has concurrent authority, along with other state and federal administrative agencies, and civil and criminal courts over dealings in virtual currency. It also emphasized that the jurisdictional authority of CTFC does not prevent other agencies from exercising their regulatory power, when appropriate.
CTFC’s general attitude towards cryptocurrencies
There is a positive feeling about CTFC’s general attitude towards cryptocurrencies and about Digital Ledger Technology (DLT) in general. The positive vibe about CTFC has also served as encouragement for the crypto community, as there is a general expectation that if ever cryptocurrencies become legalized and adopted wholly, CTFC’s jurisdictional powers would help in legislation and ‘getting things done’ so to make the process swift and effective.
Several commissioners have expressed their great admiration for blockchain technology and they believe that the Ledger Technology has the power to revolutionize the financial world.
Recapitulating, CTFC’s actions towards crypto exchanges and other enforcement interventions on the on the market are adding much needed security to the crypto industry. With recently broadened power awarded under the Dodd-Frank act, the CTFC will only cement its role as one of the key regulators of virtual currencies in the US.