Brian Quintenz, CFTC Commissioner, at the Yahoo Finance all Market Summit, spoke about the supervision that the Commodity Futures Trading Commission [CFTC] does when delivery occurs with a digital asset and why this is more than an academic exercise for the CFTC. All Market Summit took place on the June 14th in San Francisco at the Nasdaq Entrepreneurial Center.
Quintenz said that they have a provision in the ‘Commodity Exchange Act’ that gives them the jurisdiction over retail transactions. This jurisdiction can be for any transaction involving the sale of a commodity to a retail participant that are margined, leveraged, or financed by the seller.
For any transaction that occurs, the CFTC views that as a look-alike futures transaction to a retail participant. It would require the seller of that transaction to register with them as a futures broker, who are referred to as futures commision merchant [FCM].
“Like anything else, there is an exception to it and the exception is that if actual delivery occurs within 28 days, then it is not a futures contract. It’s actally a sale, it’s actually a legitimate sale. so, the challenge then is, well, how do we define delivery of virtual currency, of a digital commodity.”
He further explained:
“Not all delivery is actually occurs with orange juice showing up on your door step, there are warehouse receipts that are issued in terms of assigning independent possession and control and that’s the standard that the agency is really used to test weather delivery has occurred.”
The main intention of the CFTC behind the process is to see if one can access what has been sold to them and if they can use it in the field of commerce in the way it was intended. The proposed guidance for this interprets what could constitute an actual delivery, an independent possession, and control of a digital currency.
The CFTC, as said by Quintenz are also accepting feedback on the proposed guidance.
“It is a very important concept for us to get right, so that we are protecting retail investors from look-alike futures contracts. And we’re making sure that when they buy something, they know they are going to get it.”
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