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CFTC Blockchain and Cryptocurrency Compliance Lawyers

Blockchain attorney Dr. Nick Oberheiden

Attorney Nick Oberheiden
CFTC Blockchain and Cryptocurrency Compliance Team Lead
Blockchain attorney Alina Veneziano

Attorney Alina Veneziano
CFTC Blockchain and Cryptocurrency Compliance Team Lead

Team of Experienced CFTC Compliance Experts

If you require CFTC compliance because you deal in cryptocurrencies or blockchain technology, seek advice from experienced CFTC compliance experts. Commodities Futures Trading Commission (CFTC) jurisdiction is a serious issue for blockchain companies and entities engaging in crypto activities.

While blockchain technology and cryptocurrencies are transforming how the world transacts business, the technology has an impact on CFTC compliance. CFTC-regulated markets and businesses must think of compliance issues as federal agencies intensify investigations and enforcement actions on blockchain companies and those dealing with cryptocurrencies.

Fraud investigations have increased. Federal agencies are also monitoring for manipulative behavior. The CFTC’s jurisdiction has expanded, exposing blockchain companies and entities handing crypto to intense federal scrutiny.

We can offer comprehensive evaluations on CFTC issues to be concerned about when doing business. Our CFTC compliance consultants and attorneys can do detailed reviews and highlight important steps for improving and enhancing compliance.

Don’t wait for federal investigations. New technology is now part of financial markets. However, CFTC compliance issues are likely to come along if you aren’t proactive. Let us provide the protection and assurance you need. Blockchain Lawyer can solve CFTC compliance issues in the cryptocurrency and blockchain space.

CFTC Regulatory Scope

The CFTC’s goal is fostering transparency and competitive trading markets. The agency seeks to create derivative trading markets free from manipulation, fraud, and abuse as per the CEA (Commodity Exchange Act).

While the CEA tends to focus on commodities, the definition of commodity is broad and goes beyond agricultural products. It can cover cryptocurrencies as well as interest in contracts with future delivery.

Generally, the CFTC is responsible for ensuring integrity in trading, safeguarding customer assets from misuse, fostering fair competition, and promoting innovative trading practices. The agency is the main oversight authority in options, futures, and derivative contracts.

The CFTC’s Take on Cryptocurrencies

Since 2014, the CFTC has been treating virtual currencies as commodities subject to oversight as per the CEA. In fact, in early 2015, the agency defined Bitcoin as a commodity as opposed to a security. In the enforcement case, the agency held that persons who established the Bitcoin trading platform were running a swaps trading facility without the required registration/designation as a contract market or swap execution facility.

Several years later, the agency’s chairman determined another cryptocurrency to be a commodity (Ether) falling under its regulatory landscape. Generally, virtual currencies qualify as commodities as per the CEA in cases where the SEC lacks regulatory oversight and where a virtual currency doesn’t qualify as a security as per federal securities laws.

Virtual currencies like Bitcoin and Ether have notable differences from traditional (fiat) currencies. For instance, they aren’t issued by a centralized authority. What’s more, transactions aren’t dependent on centralized authorities. Instead, respective blockchains issue new coins and authorize new transactions.

As a result, when virtual currencies are used in derivative contracts or when cryptocurrency fraud is in question, the CFTC has enforcement authority over such cases within interstate commerce.

CFTC’s Action on Cryptocurrencies

The agency actively monitors companies’ business operations to uncover behavior that implicates its jurisdiction or CEA mandate. The CFTC’s focus is on investigations and virtual currency transactions in derivative markets. The agency is also involved in fraud allegations in spot or cash markets.

The CFTC published a report in 2018 detailing its approach towards cryptocurrency futures markets where it stated its oversight responsibilities, stance, and possible parties that are bound to be impacted in regards to virtual currency contracts.

In the report, the agency states the importance of a responsible regulatory approach to regulating cryptocurrencies which includes consumer education, market intelligence, legal authority, government-wide coordination, and robust enforcement.

Besides engaging in investigations, the agency also coordinates investigative efforts and resources with agencies like the SEC, DOJ, and FBI. The CFTC has also worked with policymakers in many instances.

Entities concerned about impending compliance guidelines or rules capable of impacting business/trading practices involving cryptocurrency can. Contact us today.

Recent Enforcement Actions

The CFTC tends to come second to the SEC on blockchain/crypto regulatory matters. However, the agency has still taken enforcement actions in the crypto/blockchain space recently. The agency is known for stringent enforcement actions against cryptocurrency trading platforms and entities.

In September 2021, for instance, the CFTC filed 14 complaints against many cryptocurrency trading platforms for registration issues and making false statements on CFTC registration. The platforms in question were guilty of overlooking futures commission merchant registration and falsely reporting on the NFA membership. The entities offered the public binary options trading opportunities based on commodity value (such as cryptocurrencies) and encouraged public participation in transferring assets to the platforms.

Around the same period (August-September 2021), the CFTC was also involved in high-stakes investigations and settlements involving cryptocurrency exchange platforms BitMEX and Kraken. BitMEX agreed on a fine with the FinCEN and CFTC and settled civil charges for $100 million to US customers whom it offered unlicensed and leveraged cryptocurrency products. Kraken agreed on a $1.25 million payment to the CFTC to settle charges on digital assets that were illegally margined without being registered appropriately.

The CFTC’s core mandate may be on cryptocurrency derivatives. However, the agency has an aggressive stance on cryptocurrencies and blockchain. According to Acting Enforcement Director – McGonagle, cryptocurrency trading platforms have a mandate to register and implement KYC/AML provisions to be deemed to operate legally within the digital assets market.

Get CFTC Compliance Advice on Blockchain and Cryptocurrency

If you have concerns about CFTC investigations or enforcement actions on your blockchain company or cryptocurrency business transactions, seek CFTC compliance expertise. The CFTC has the power to initiate an investigation if it suspects any wrongdoing in cryptocurrency derivatives dealings. This normally applies when there are CEA violations.

Even in cases where settlements are reached, or the amounts in question are insignificant, CFTC investigations can damage your reputation and cause a significant loss in business. You shouldn’t allow this to happen. Attorneys can take some actions to reduce negative consequences of CFTC investigations.

At Blockchain Lawyer, we have a team of consultants and attorneys specialized in CFTC regulations in regard to blockchain and crypto industries. Our team has former DOJ officials, among other former government officials/experts, with the experience to deal with CFTC compliance matters and more.

Most importantly, we can fight CFTC charges by crafting comprehensive CFTC defense strategies. Get your free CFTC compliance consultation now.