A CFTC enforcement action against San-Francisco based venue Coinflip establishes for the first time that virtual currencies and their derivatives must comply with the Commodity Exchange Act (CEA).
The Order finds that, from in or about March 2014 to at least August 2014, Coinflip and its CEO Francisco Riordan operated an online facility named Derivabit, offering to connect buyers and sellers of Bitcoin option contracts.
As a result, the CFTC has determined that Bitcoin and other virtual currencies are properly defined as commodities, and further specifically found that Coinflip's activities related to commodity option transactions were not conducted in compliance with a provision of the CEA, or a provision of the regulations otherwise applicable to swaps, and were not conducted pursuant to the Regulation 32.3 “trade option” exemption.
“While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets," said Aitan Goelman, the CFTC’s director of enforcement, in a statement.
CFTC Registration — as either a swap execution facility (SEF) or designated contract market (DCM), or both — has proven a crucial issue for several nascent Bitcoin derivatives trading venues, which Waters explored in depth earlier this year.
Jesse Lund talks about real uses for DLT in the capital markets, lessons learned while rolling out IBM's blockchain platform, and what’s ahead for 2018, and into 2019.Subscribe to Weekly Wrap emails