Chair Giancarlo Outlines CFTC Approach to Virtual Currency Regulation

CFTC Chair J. Christopher Giancarlo asserted the CFTC’s commitment to regulating virtual currency trading effectively. In a public statement, he highlighted the agency’s scrutiny of new launches of virtual currency futures markets in light of recent launches of bitcoin futures under “self-certification procedures.” He announced a meeting of the CFTC’s market risk advisory committee to consider the efficacy of the self-certification process. He reiterated the CFTC view that virtual currency is a “commodity” as that term is defined in the CEA, and thus is subject to CFTC regulation. Chair Giancarlo contended that the CFTC is delivering a regulatory response centered on “consumer education, asserting CFTC authority, surveilling trading in derivative and spot markets, prosecuting fraud, abuse, manipulation and false solicitation and active coordination with fellow regulators.”

Chair Giancarlo also highlighted an upcoming meeting of the CFTC Technology Advisory Committee to consider challenges, opportunities, and market developments of virtual currencies. He said that virtual currency and virtual currency derivatives offer potential benefits, but market participants must be vigilant, as they also present certain heightened risks.

The CFTC also published a document providing information on CFTC oversight of and approach to virtual currency futures markets. The document includes an explanation of the self-certification process as applied to virtual currency futures products.

Lofchie Comment: The SEC also recently issued a statement asserting jurisdiction over certain transactions involving blockchain products. (See SEC Chair Jay Clayton Urges Caution regarding ICOs and Cryptocurrencies.) This raises the possibility of a regulatory dispute over jurisdiction. Each agency is perfectly correct in interpreting the relevant statutes to the effect that at least some transactions involving virtual currency or other blockchain products will fall within the ambit of that agency, and perhaps within the ambit of both. What is significant in the regulatory pronouncements is not the possibility for regulatory disagreement, but rather that both regulators are seeking to exercise their consumer protection functions.