Timothy Massad, chairman of the US Commodity Futures Trading Commission, a lesser-known agency whose responsibilities often overlap with the Securities and Exchange Commission, yesterday gave a very long testimonial update to the Senate Committee on Agriculture, Nutrition & Forestry which covered everything from “interaffiliate transactions” to virtual currency to local utility companies and their rights in energy swap markets.
In regard to cryptocurrencies, the Chairman noted that since such currencies are traded as commodities and in the same fashion as other futures, the 1936 Commodity Exchange Act grants the agency regulatory authority over them the same as it does any other commodity which is traded.
Virtual currencies may raise issues for a number of governmental agencies. The CFTC’s jurisdiction with respect to virtual currencies will depend on the facts and circumstances pertaining to any particular activity in question. While the CFTC does not have policies and procedures specific to virtual currencies like bitcoin, the agency’s authority extends to futures and swaps contracts in any commodity.
As mentioned before, the CFTC is not the primary regulatory agency when it comes to financial products, and often its duties overlap with the SEC. Thus it is only claiming authority when it comes to particular types of Bitcoin transactions. The primary agency that most US Bitcoin users will need to worry about still appears to be the Internal Revenue Service.
Derivative contracts based on a virtual currency represent one area within our responsibility. Recently, for example, a SEF registered with us made such a contract available.
SEF stands for Swap Execution Facility, and here the Chairman is referring to TeraExchange, which is the first regulated Bitcoin swaps exchange in the country. The CFTC as well as the SEC oversee parts of Tera’s operation, and it is answerable to either in the event of malfeasance.
Innovation is a vital part of our markets, and it is something that our regulatory framework is designed to encourage. At the same time, our regulatory framework is intended to prevent manipulation and fraud, and to make sure our markets operate with transparency and integrity.
The primary goal of any regulatory agency is ensuring that the general public is not harmed by the actions of those it is charged to oversee. While in the recent past we have seen the criminal justice system used against members of the crypto economy, regulatory agencies acknowledging and apparently intending to develop policy surrounding “virtual currencies” may or may not indicate a positive future.
After all, in Russia they’re looking to impose 1 million Ruble fines for using Bitcoin.
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