News  •  Regulation

Commissioner Claims CFTC Can Intervene in Bitcoin Markets

| Published on November 18, 2014 at 17:25 BST

A commissioner at the Commodity Futures Trading Commission (CFTC) has asserted the agency has the authority to take enforcement actions against price manipulation in bitcoin markets.

Commissioner Mark Wetjen made the remarks at a bitcoin conference held at Bloomberg in New York on Monday.

When asked if the CFTC has the authority to become intervene in such an event, he said:

“It has not been tested, but I do believe we have the authority because bitcoin, by I think a very rational reading of our statute, classifies as a commodity and the definition of a commodity under the Commodity Exchange Act."

He added that this gives the regulating body the authority to bring enforcement on any type of manipulative activity, thereby broadening the reach of how a commodity can be defined.

Wetjen also recently spoke out in favour of flexible bitcoin regulation, saying digital currency has become important to the CFTC because bitcoin-accepting merchants have expressed the need to hedge exposures to fluctuations in its value.

Interpreting its policies

The CFTC does not have a “special focus” on bitcoin and it is currently looking at the rule set and understanding bitcoin-related regulatory obligations, as it does with all asset classes.

Bitcoin has created a number of interesting challenges for the CFTC, he said, chief among them being the way it monitors exchanges or swap exchange facilities required to abide by certain surveillance obligations.

“It hasn’t really up until now required us to rethink the policies themselves," he said. "It’s more an issue around interpretation and understanding.”

The agency notably approved the first regulated financial instrument tied to bitcoin in the US, when it gave the greenlight to swap execution facility TeraExchange to launch USD/BTC swaps on its platform in September.

Approaching regulation

The Bloomberg panel on which he spoke discussed a range of issues, including New York's BitLicense proposal, reputational risk associated with bitcoin, negative publicity and overall lack of understanding of cryptocurrencies.

Jennifer Shasky Calvery, director of the US Treasury Department’s Financial Crimes Enforcement Network, welcomed regulatory efforts launched by the New York State Department of Financial Services (NYDFS), saying the whole process has been “open and iterative” and that it would be good to have sensible but strong regulation at the state level.

“I am heartened by the fact that we have a state like New York, and other states, that are issuing licenses and trying to think through some of the issues,” she said.

Tanaya Macheel contributed reporting.

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