Commissioner says CFTC has wide enforcement authority on Crypto derivatives

In a statement issued this week, Dawn Stump clarified the CFTC's authority with regards to digital assets.

Commissioner says CFTC has wide enforcement authority on Crypto derivatives

In a statement issued this week, Dawn Stump clarified the CFTC's authority with regards to digital assets. She is one of four commissioners currently serving at the Commodity Futures Trading Commission, or CFTC.

Commodity regulation and enforcement are the CFTC's responsibilities, Stump said in a Monday statement. While she did not say specifically that digital assets are viewed as commodities by the CFTC, she did claim that “even if they are commodities, they are not regulated by the agency."

Nonetheless, the commissioner stated that the agency is within its rights to regulate derivatives on digital assets, "including bitcoin futures contracts and ether futures contracts that trade on CFTC-regulated exchanges."

CFTC, Securities and Exchange Commission (SEC), and the Financial Crimes Enforcement Network (FinCEN) are among the most important federal agencies charged with regulating and enforcing digital assets in the country.

Companies trying to operate within the law are often confused by the fact that each jurisdiction has its own laws regarding crypto.

A CFTC commissioner believes the agency should estimate where its regulatory authority would lie for a derivatives product linked to a digital asset that is already considered security - and thus falls under the SEC's jurisdiction.

The CFTC, however, clarified that it had authority on enforcement over financial products under its current regulation.

The CFTC has the authority to enforce its trading rules against trading platforms that offer derivatives on digital assets to U.S. persons without registering, or in violation of the commission's rules. "That's what the CFTC has been doing since its 2015 enforcement action against BitMEX." Stump said.

Accordingly, as a rule, you should determine whether the asset is a futures contract or a derivatives product rather than a commodity or a security, she added.

CFTC and FinCEN settled BitMEX's case for $100 million, which means the crypto derivatives exchange will pay both financial authorities.

Additionally, the regulatory agency is reportedly investigating Binance Holdings Limited based in the United States for possible derivatives trades it is making, and earlier accused Laino Group of soliciting investors for futures trading on Bitcoin, Ethereum, and Litecoin.

However, Stump appears to be one of four voices on the panel regulating commodities, which usually has six. Brian Quintenz, the commissioner of the CFTC who appears to be a pro-crypto advocate, is rumored to be planning to resign at the end of August.