CFTC Commissioner Stump Explains CFTC’s Authority Over Digital Assets
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CFTC Commissioner Dawn D. Stump outlined 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 as to how such assets are regulated in the United States
and (ii) resulted in the “grossly inaccurate
oversimplification” that such assets are either SEC-regulated
securities or CFTC-regulated commodities.
Ms. Stump expressed the need for a broader understanding of the
scope of the CFTC’s authority over digital assets prior to
determining the need to redesign cryptocurrencies’ regulatory
oversight, and provided an infographic highlighting the following
- The CEA’s definition of “commodity” is very
extensive, and categorizing a digital asset as a commodity is
- The CFTC’s (i) regulatory authority under the CEA consists
of “registration requirements, day-to-day oversight, and
principles-based regulation,” and (ii) enforcement authority
consists of the CFTC’s power to bring civil enforcement action
against entities that violate the CEA and the CFTC’s
- The CFTC’s regulatory authority is inclusive of commodity
futures contracts and derivatives products, not cash commodities.
Therefore, while the CFTC regulates digital assets derivatives
(such as Bitcoin futures contracts) it does not regulate digital
- The CFTC does not regulate securities. Accordingly, even if a
digital asset is a security, the CFTC would not regulate it.
- Although the CFTC does not regulate securities, it may regulate
derivatives on securities, thus requiring further analysis as to
whether the CFTC has regulatory authority over a derivatives
product on a digital asset that is a security, as it would over a
futures contract on a security.
- Because the CFTC’s enforcement authority undoubtedly covers
the products it regulates, an unregistered trading platform
offering digital asset derivatives to U.S. persons or violating
other CFTC trading regulations is subject to CFTC enforcement
- Because a “well-functioning” futures contract is
based on a stable underlying cash market and might refer to cash
market indexes in its pricing, part of the CFTC’s enforcement
authority is its responsibility to prevent manipulation and fraud
with respect to cash commodities.
- Although the CFTC does not regulate cash market digital assets,
it has asserted its enforcement authority “for a number of
years” in order to prevent fraud and manipulation associated
with cash digital assets.
- To assess whether the CFTC has regulatory authority as it
pertains to a digital asset, consider whether the matter concerns a
futures contract or another type of derivatives product.
Commentary Steven Lofchie
Commissioner Stump’s outline is right on point.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
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