Breaking: CFTC Views Leveraged Bitcoin Contracts as Swaps
In an unprecedented decision, the CFTC maintains that bitcoin as well as other virtual currencies are deemed as a commodity under the Commodity Exchange Act.
The CFTC or, the U.S. Commodity Futures Trading Commission just today submitted an Order filing, as well as settlement of charges against Coinflip, Inc., doing business as Derivabit, based in San Francisco, CA- as well as its Chief Executive Officer, Francisco Riordan.
The Order is a result of Riordan conducting activity pertaining to commodity options transactions without properly complying with the mandates related to the Commodity Exchange Act, as well as CFTC Regulations i.e., without registering as a Swap Execution Facility.
To be more specific, Derivabit was operating for the purpose of trading or processing commodity options without first complying with the Regulations set forth by both the CEA and CFTC. This action is aligned with the applicability of swaps, in addition to activity in accordance to the CFTC’s listed exemptions for trade options.
“This Order provides a new perspective of how the CFTC views leveraged bitcoin contracts. It is likely that the CFTC will set up its efforts in prosecuting market participants for offering leveraged bitcoin contracts without the appropriate registration with the CFTC and NFA,” said Felix Shipkevich, of Shipkevich PLLC, a derivatives and bitcoin regulatory attorney in New York.
This decision from the CFTC is substantial due to the level of regulatory uncertainty behind bitcoin, as well as other virtual currencies. It is a rude reminder of the fact that despite the hype surrounding these innovative financial developments, they too, are subject to the regulations and standards set forth by the CFTC as well as the CEA.