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LabCFTC's First Primer Covers Bitcoin, Other Virtual Cureencies, Virtual Tokens and ICOs

The U.S. Commodity Futures Trading Commission’s (CFTC) New York-based LabCFTC has released a twenty-page primer (the “Primer”) about virtual currencies, virtual tokens and initial coin offerings (ICOs).  It’s the first in a series of educational primers that LabCFTC will issue in the coming months about innovations in the FinTech industry.

The Primer answers important questions about how CFTC regulations apply to virtual currencies, virtual tokens and ICOs.  Notably, the Primer reiterates that Bitcoin and other virtual currencies are appropriately categorized as commodities and also states that virtual tokens can in some instances be commodities or derivatives contracts even if they are also considered to be securities under the U.S. securities laws.  The Primer notes that, in applying U.S. commodity futures laws to virtual tokens, the CFTC will look beyond form and examine the “actual substance and purpose” of particular activities.

Unsurprisingly, the Primer notes that the CFTC has jurisdiction over futures, options, and derivatives contracts that reference virtual currencies or certain virtual tokens, including over fraud or manipulation related to virtual currencies or tokens that are traded in interstate commerce.  Finally, the Primer discusses risks posed to both investors and users of virtual currencies and tokens and reminds readers that the CFTC is prepared to police fraud or manipulation in virtual currencies and virtual tokens that are commodity interests.

The Primer appears to suggest the absence of a current conflict between the regulatory approaches of the CFTC and the U.S. Securities and Exchange Commission as they consider the regulatory response to the cryptocurrency explosion.

Copyright 2017 K & L Gates

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About this Author

Anthony R.G. Nolan, KL Gates, fixed income securities lawyer, structured finance attorney
Practice Area Leader

Anthony Nolan is a finance partner in the New York office and is a Practice Area Leader for the firm's global Finance practice. Mr. Nolan has a domestic and international practice that emphasizes lending transactions, fixed income securities, structured finance, structured products and derivatives. He often works at the intersection of finance and investment management, including trading and regulation of swaps and security-based swaps, loan trading, securities lending and repo as well as traditional borrowing and leverage transactions. 

Mr....

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Eric A. Love, KL Gates, Capital Markets Compliance Lawyer, Treasury Legislation Attorney
Law Clerk

Eric A. Love is a member of K&L Gates’ Public Policy and Law Practice and is based in the Washington, D.C. office. Mr. Love focuses on federal legislative and regulatory policy issues related to financial services and capital markets, with a particular emphasis on securities and corporate governance. 

Prior to joining K&L Gates, Mr. Love served as a special assistant in the Office of Legislative Affairs at the U.S. Department of the Treasury. In this capacity, he worked to help advance Treasury’s legislative agenda on a broad portfolio of international economic issues, including international financial services regulation, development, banking and securities, trade and investment, climate finance and monetary affairs. 

Immediately before joining Treasury, Mr. Love served for six years in a number of positions in the office of Congressman Melvin L. Watt of North Carolina, including as the senior legislative staff member responsible for advising the Congressman on all issues within the jurisdiction of the House Financial Services Committee.

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