After commending the Securities Exchange Commission’s statement on Initial Coin Offerings (ICO), CFTC Chairman J. Christopher Giancarlo released his own statement on Bitcoin and Virtual Currency today. ICOs and Cryptocurrency have posed a great challenges to regulation agencies after their exponential growth in 2017. The SEC announced it took regulatory actions against ICO scams last year and the CFTC has also gotten involved. Not only did the Commission released a primer for virtual currencies in October, but also launched its own webpage for Bitcoin and virtual currency resources. Before the year was over the CFTC had approved LedgerX to deal Bitcoin options and allowed three regulated US Exchanges, CME, CFE, and Cantor to self-certified new contract for Bitcoin futures and products. Chairman Giancarlo issued a statement today, January 4th, summarizing the Commission’s involvement with Bitcoin and cryptocurrency as well as defining its jurisdiction in the virtual currency spance, excerpt below:
“…Undoubtedly, virtual currency and virtual currency derivatives present both significant opportunities and challenges. As a Federal market regulator, the CFTC is cognizant of the considerable risks of virtual currencies like Bitcoin. In addition to the nascent stage of the technology itself, risks associated with virtual currencies include: operational risks of unregulated and unsupervised trading platforms; cybersecurity risks of hackable trading platforms and virtual currency wallets; speculative risks of extremely volatile price moves; and fraud and manipulation risks through traditional market abuses of pump and dump schemes, insider trading, false disclosure, Ponzi schemes and other forms of investor fraud and market manipulation.
In 2014, the CFTC declared virtual currencies to be a “commodity” subject to oversight under its authority under the CEA. Since then, the CFTC has taken action against unregistered Bitcoin futures exchanges, enforced the laws prohibiting wash trading and prearranged trades on a derivatives platform, issued proposed guidance on what is a derivative market and what is a spot market in the virtual currency context, issued warnings about valuations and volatility in spot virtual currency markets and addressed a virtual currency Ponzi scheme. The CFTC has also produced consumer information about virtual currencies, including a dedicated Bitcoin webpage, a virtual currency primer and several podcasts.
One thing is certain: ignoring virtual currency trading will not make it go away. Nor is it a responsible regulatory strategy. The CFTC has an important role to play. The CFTC seeks to promote responsible innovation and development that is consistent with its statutory mission to enhance derivative trading markets and to prohibit fraud and manipulation in connection with commodities in interstate commerce.
The responsible regulatory response to virtual currencies is 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. The CFTC has been following this course of action and will continue to do so.”
For the full statement, please click here.