CFTC Commissioner Stump explains CFTC’s authority over digital assets

United States: CFTC Commissioner Stump explains CFTC’s authority over digital assets

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CFTC Commissioner Dawn D. Stump described the CFTC’s regulatory and enforcement authority with respect to digital assets. Ms Stump explained that the proliferation of digital assets has (i) raised questions about how these assets are regulated in the United States and (ii) resulted in a “grossly inaccurate simplification” that these assets are either regulated securities by the SEC or the CFTC. -regulated products.

Ms Stump expressed the need for a broader understanding of the scope of the CFTC’s authority over digital assets before determining the need to redesign regulatory oversight of cryptocurrencies, and provided an infographic highlighting the following key points.

  • The CEA’s definition of “commodity” is very broad, and categorizing a digital asset as a commodity is “unremarkable”.
  • The regulatory authority of (i) the CFTC under the CEA consists of “registration requirements, day-to-day oversight and principled regulation”, and (ii) the enforcement authority consists of the power of the CFTC to bring civil action against entities that violate CEA and CFTC regulations.
  • The regulatory authority of the CFTC understands commodity futures and derivatives, not spot commodities. Therefore, while the CFTC regulates derivatives of digital assets (such as Bitcoin futures), it does not regulate digital assets.
  • The CFTC does not regulate securities. Therefore, even if a digital asset is a security, the CFTC would not regulate it.
  • Although the CFTC does not regulate securities, it can regulate securities derivatives, thus requiring further analysis to find out whether the CFTC has regulatory authority over a derivative over a digital asset that is a security, as it would on a futures contract on a security. .
  • Since the CFTC’s enforcement authority undoubtedly covers the products it regulates, an unregistered trading platform offering digital asset derivatives to US nationals or violating other trading regulations of the CFTC is subject to enforcement action by the CFTC.
  • Since a “well-performing” futures contract is based on a stable underlying spot market and may refer to spot market indices in its pricing, part of the CFTC’s enforcement authority is its responsibility to prevent manipulation and fraud in relation to cash products.
  • Although the CFTC does not regulate digital money market assets, it has asserted its enforcement authority “for a number of years” to prevent fraud and manipulation associated with digital cash assets.
  • To assess whether the CFTC has regulatory power with respect to a digital asset, determine whether it is a futures contract or some other type of derivative.

Comment Steven Lofchie

Commissioner Stump’s plan is correct.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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