October 18, 2016
Our Request for No-Action Relief
Petition Filed with the CFTC.
Earlier today, we filed a request for no-action relief with the Commodity Futures Trading Commission ("CFTC") seeking clarity with respect to satisfying the "actual delivery" exemption under the Commodity Exchange Act. We did this because we believe that our industry cannot grow unless all market participants understand their compliance obligations. The meaning of the term "actual delivery" could have broad implications touching on virtual currency transactions of all types.
We are all pioneers.
You, as you read this, and us, as we write this - we care about something that most of the world knows little about. We are fortunate to participate in the evolution of an industry so significant that the potential cannot be boxed in by anyone, not yet, perhaps not even in our lifetime. But this privilege isn't without its challenges, because we are operating in an emerging space against a backdrop of regulations honed and crafted for yesterday's technology - the bygone era of analogue trading. As stakeholders, stewards, and charter members of a nascent technology, it is our collective responsibility to respectfully request for laws that make sense for this new technology.
We want to be good actors.
We trust that our competitors want the same. All of us have no choice right now but to operate under good faith that the existing laws that govern hard commodities, like gold or wheat, can also be reasonably applied to our industry, because on September 17, 2015, the CFTC declared digital currency to be a commodity within the meaning of the Commodity Exchange Act (CEA) and subject to the CFTC’s regulatory jurisdiction.
We could all benefit from regulatory clarity.
For hard commodities like gold or wheat, "actual delivery" is achieved when the commodity is physically delivered by the seller to the buyer. When we apply this to digital currency and more specifically, to loaned funds, "actual delivery" should occur when the borrower acquires possession, ownership, and control over the digital currency that is being borrowed. We have been informed by the CFTC that certain transactions may not constitute actual delivery, but the CFTC will not tell us why, or what would constitute actual delivery. They won’t even tell us what license might apply to a virtual currency exchange. So, if it is the case that delivering the loaned digital currency to a borrower's account the moment we debit the lender's account does not satisfy the statutory definition of "actual delivery" as well as the CFTC's "functional" interpretation of "actual delivery," we believe the time has come for clearer guidance and formal rulemaking with the current and potential needs of our industry squarely in mind.
We've been at this a while.
Back in early July, we worked with our legal team to make a formal request for "Petition for Rulemaking Concerning the Requirements of 'Actual Delivery' and the Transfer of Ownership under the Commodity Exchange Act in the Context of Cryptocurrency Markets Utilizing Blockchain for Executing Transactions" not only for the benefit of our company, but for the industry at large. Regulations are a reality for all of us, and we should welcome them for consistent business practices as well as for consumer protection. But regulations without clarity, fairness, accountability, or applicability to our industry create an environment of legal uncertainty that benefits no one and stifles our collective ability to innovate and compete in the global marketplace.
We can do better.
We should be spending our time innovating, improving our products and services, building on and beyond what's already out there. We seek clear laws that make sense for our industry so that we can confidently follow them and be free to flourish. We welcome you to join us in our quest for clarity and contact the CFTC to show your support.