The U.S. Commodity Futures Trading Commission (CFTC) has released interpretive guidance about what exactly does ‘delivery’ of digital assets constitute. The announcement followed a unanimous vote in approving the interpretive guidance. The CFTC stated:
“Specifically, the guidance clarifies the CFTC’s views regarding the ‘actual delivery’ exception to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA) in the context of digital assets that serve as a medium of exchange, colloquially known as ‘virtual currencies.’”
The new move comes amid a year-long procedure which can be traced back to a settlement involving Bitfinex and CFTC. This particular settlement revolved around the accusation that the exchange failed to actually ‘deliver’ funds to different leveraged trading services clients.
It is on this basis that Steptoe & Johnson LLP, a law firm, pushed for elaborate guidance from CFTC regarding delivery.
The new announcement from CFTC now clarifies that physical delivery will involve 28 days which means that the buyer can utilize their bought virtual assets after the expiry of this period.
The fresh guidance comprises an individual that is holding or controlling such a commodity, purchased through leverage trading as well as other techniques. Such a person will have the capacity to utilize all the volume of the commodity for commerce purposes not later than 28 days after the transaction date and can use the coins at any other time thereafter.
In addition, CFTC also clarified that the selling party, as well as the facilitating agency, does not have any powers or privileges to retain ownership.
The clarity by CFTC is an indication that digital assets trading has gained prevalence within the mainstream financial and commodities markets, hence the need for the continued update of clarifications and guidance. In addition, the Chicago Mercantile Exchange (CME) introduced Bitcoin options trading. This was in response to the high demand for Bitcoin trading following the launching of Bitcoin futures back in 2017. With the recent guidance and clarity, it is expected that settlement disputes will drastically go down.
You can read the full 35 page release below: