CFTC regtech implications for virtual currency trading

Laura Harper Powell and Bruce Tupper

Contents

Foreword

Preface

Preface

Introduction: Suptech/regtech defined: Payments, sandboxes and beyond

1.

The uncertain prudential treatment of cryptoassets

2.

US regulatory certainty versus uncertainty for crypto and blockchain

3.

Bermuda: Suptech and regtech supporting the risk-based approach

4.

Suptech: A new era of supervisory philosophy

5.

Cloud computing in the financial sector: A global perspective

6.

DeFi protocol risks: The paradox of cryptofinance

7.

IT transformation in the Prudential Authority of South Africa: A case study

8.

Making the vision a reality: Perspectives from the Monetary Authority of Singapore

9.

Lessons from Hong Kong through the lens of the HKMA

10.

Technological change: Is it different this time?

11.

The ECB’s suptech innovation house: Paving the way for digital transformation of banking supervision

12.

China’s financing opening up and regulatory convergence with the world

13.

Disclosures and market discipline: The promise of regtech

14.

Regtech and new derivatives developments

15.

Fintech and regtech: Leading the evolution and regulation of alternative investments

16.

The role of artificial intelligence and big data in investment management

17.

The promise and challenges of machine learning in finance

18.

Data privacy and alternative data

19.

Digital ID and financial inclusion

20.

Strategic technology: Regulation and innovation of CBDCs

21.

Regulatory sandboxes: Innovation and financial inclusion

22.

Technology and sandbox development innovation in a transitional market: A case study

23.

Developing the regulatory ecosystem: The evolution of stablecoin

24.

Central bank digital currency, regtech and suptech

25.

Digital dollar: Cryptocurrency for everyday commerce

26.

CFTC regtech implications for virtual currency trading

27.

Fintech, regtech, suptech and central bank decision making

This chapter will assess the regulatory impact of final interpretive guidance issued by the US Commodity Futures Trading Commission (CFTC) on June 24, 2020, on “Retail Commodity Transactions Involving Certain Digital Assets” (hereafter Final CFTC Guidance).11 Final CFTC Guidance: 85 Fed. Reg. 37734. In its Final CFTC Guidance, the CFTC clarified and formalised its view that actual delivery has occurred when the retail customer who purchased virtual currency on margin or leverage has achieved a meaningful degree of both possession and control over all of the virtual currency that is underlying the transaction no later than 28 days from the transaction date.22 Final CFTC Guidance: 85 Fed. Reg. at 37738. The discussion then moves onto the implications of the Final CFTC Guidance for virtual currency trading platforms that offer, or may wish to offer, the use of margin and leverage by retail customers. The chapter highlights the potential opportunity and need for regulatory technology (regtech) tools, such as a registered virtual currency repository, to facilitate market supervision and compliance with the CFTC’s 28-day actual delivery requirements.

CFTC definition of virtual

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