CFTC approves final interpretative guidance on “actual delivery” in virtual currency transactions

Agency Rule-Making & Guidance Federal Issues CFTC Virtual Currency Fintech Securities

On March 24, the CFTC approved final interpretive guidance concerning the term “actual delivery” in the context of retail virtual currency transactions. As previously covered by InfoBytes, the CFTC reaffirmed its belief that virtual currencies are commodities, and thus certain transactions involving these types of currencies are subject to CFTC oversight. In order to demonstrate the “actual delivery” of virtual currency in connection with retail commodity transactions, the final interpretive guidance sets forth two primary factors that market participants must demonstrate:

• A customer has (i) the ability to secure “possession and control of the entire quantity of the commodity, whether it was purchased on margin, by using leverage, or any other financing arrangement”; and (ii) “the ability to use the entire quantity of the commodity freely in commerce (away from any particular execution venue) no later than 28 days from the date of the transaction and at all times thereafter”; and
• “The offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) do not retain any interest in, legal right, or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction.”

CFTC Chairman Heath P. Tarbert stated that he anticipates a 90-day period before the CFTC begins initiating enforcement actions related to the final interpretive guidance that may not have been plainly evident in prior guidance, enforcement actions, and case law.