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CFTC Commissioner Envisioning Oversight Framework for Virtual Currencies

In a recent speech to fintech thought leaders, CFTC Commissioner Brian Quintenz described the ongoing evolution of the CFTC’s philosophy on virtual currencies and future oversight possibilities.  He noted that the agency first began to take responsibility for virtual currencies in December 2014 under then-Chairman Timothy Massad, who first declared through Congressional testimony that the CFTC viewed virtual currencies as commodities. He described initial actions brought under the agency’s enforcement jurisdiction, which permits the CFTC to investigate potential fraud and manipulation in the underlying virtual currency spot markets, and how those actions are shaping current oversight. In 2017, the CFTC released proposed guidance about the meaning of actual delivery in the context of virtual currency transactions that Quintenz said will “greatly benefit the development of a clear standard for when financed virtual currencies are considered actually delivered to retail customers.” Quintenz also addressed broader concerns regarding the listing of Bitcoin futures contracts on exchanges. He noted that the CFTC has had “five years’ worth of price data, with multiple periods of stress, with which to back test initial margin sufficiency” and that the initial margin for Bitcoin futures contracts has performed as required to date. He described current initiatives at the CFTC to provide actionable advice regarding cryptocurrencies, distributed ledger technology, cybersecurity, and the modern trading environment. He also discussed possible consideration of a new, private independent organization that could perform an oversight function for U.S. cryptocurrency platforms.