CFTC Creates Subcommittees On Distributed Ledger Technology And Virtual Currencies

Love is in the air. On Valentine’s Day 2018, the Commodity Futures Trading Commission showed some affection for blockchain and virtual currency.

  • On February 14, 2018, at a meeting of the CFTC’s Technology Advisory Committee (TAC), the agency passed motions to create subcommittees dedicated to distributed ledger technology (DLT) and virtual currencies. Director of LabCFTC and Chief Innovation Officer, Daniel Gorfine, held the votes, and both motions passed unanimously. At present, the only subcommittee listed on the CFTC’s TAC website is a group focused on automated and high frequency trading.

    Selected Remarks From Morning Segment:

    CFTC Commissioner Brian Quintenz’s Opening Statement

    On the utility of Distributed Ledger Technology:

    • “DLT has the potential to transform how firms handle the execution, processing, reporting, and recordkeeping of derivatives transactions. Market participants may find that using DLT to satisfy their regulatory obligations results in greater accuracy, greater efficiency, and less cost.”

    On the regulatory definition of tokens and the risks posed by virtual currencies:

    • “Definitional questions about whether a particular virtual currency or token is a security or a commodity continue to be debated. In addition to these foundational legal questions, the growing demand to trade virtual currencies also elevates the risks to consumers posed by potential fraud and manipulation on spot platforms.”

    On the potential of self-regulation:

    • “It is worth exploring whether an SRO [self-regulatory organization] model could assist cryptocurrency exchanges establish and enforce standards that protect investors and deter fraud.”

    CFTC Chairman J. Christopher Giancarlo’s Opening Statement

    On the changes arising from global FinTech development:

    • “The landscape is changing for trading, markets and the entire financial structure, domestic and global, with far ranging implications for capital formation and risk transfer.”

    On the need for further institutional education regarding said developments:

    • “Good public policy and regulation can only be built on a foundation of thorough understanding of the subject matter.”

    CFTC Commissioner Rostin Behnam’s Opening Statement

    On the rapidly evolving landscape of the crypto and blockchain ecosystems:

    •  “Given the events of the last several months, which included the historic listing of the first bitcoin futures contracts, the price of bitcoin skyrocketing to over $19,000, the filing of multiple CFTC enforcement actions related to bitcoin fraud, and my personal education in bitcoin, DLT, digital wallets, Ether, Ripple, proof of stake, and something called a CryptoKitty—which I understand is a blockchain collectible – it is no surprise that the TAC will be exploring these important regulatory developments.”

    Last week, CFTC chairman J. Christopher Giancarlo testified before the Senate Banking Committee alongside SEC chairman Jay Clayton. Since allowing bitcoin derivatives to come to market, the CFTC has considered the self-certification process that was used by exchanges for listing. In recent weeks, the agency has undertaken enforcement actions against My Big Coin, Coin Drop Markets, and The Entrepreneurs Headquarters among others. And, earlier this month, the CFTC also issued an advisory regarding cryptocurrency-linked IRAs.

    ETHNews will continue to provide coverage of today’s events.

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