Don Deberry Stump, Commissioner of the Commodity Futures Trading Commission (CFTC), called for a widespread “misunderstanding of U.S. regulations” that suggested the agency was responsible for directly regulating cryptocurrencies.
“[Crypto currencies] or organized by the Securities and Exchange Commission or the Commodity Futures Trading Commission Commodity securities organized by a crude simplification, which is false is often recommended. The prevalence of this misunderstanding compared to the regulatory limitation in the US has risen to the point where I think it requires a correction,”he wrote.
According to a presentation published on Monday, the definition of “commodity” prescribed by the Commodity Exchanges Act (CEA) is quite broad, so the classification of a particular cryptocurrency as it is today would be “imperceptible.” However, even if the digital asset is officially considered a commodity, this does not mean that it is still responsible for the CFTC’s regulation.
That’s because the agency only oversees commodity-based futures, swaps and other derivatives.
For example, the CFTC will not regulate goods such as livestock or natural gas when they are traded directly on the cash markets. However, the regulatory body will have to intervene when it comes to derivatives based on these goods.
“The CFTC has actively used broader law enforcement to prevent manipulation and fraud of monetary digital assets for several years, even though the CFTC does not regulate it,” Stump said. “This distinction may not have been adequately understood (to the detriment of the investing public), as it is not found in numerous CFTC press releases relating to enforcement.”
What are derivative instruments?
Derivative financial instruments are a type of financial contract whose value is based on an underlying asset, including commodities, or a benchmark. Perhaps the most famous example of a derivative instrument is a futures contract.
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