Tag: cftc

LedgerX “Not Yet Approved” by CFTC to Launch Physical Bitcoin Futures

The United States Commodities and Futures Trading Commission (CFTC) confirmed that LedgerX has not yet been approved to offer physically-settled Bitcoin futures in contrary to previous announcements.

LedgerX has officially launched their product on July 31, as they revealed to CoinDesk that they had launched the first physically-settled Bitcoin futures contracts in the U.S, surpassing Intercontinental Exchange’s Bakkt and TD Ameritrade-backed ErisX. CEO of LedgerX, Paul Chou disclosed to the media that retail customers can now be able to trade the product using the company’s new platform.

CFTC Chief Communications Officer Michael Short said in an emailed statement on Aug 1, “LedgerX has not yet been approved by the commission.” The CFTC approved LedgerX as a designated contract market (DCM), which was one of the two approvals LedgerX needed to proceed with the launch.

However, the CFTC has not yet approved the amendment the derivatives clearing organization (DCO) license. The CFTC states that they have 180 days to approve or deny a DCO application, which led to the conclusion by the LedgerX team that this period has passed, and they have not received an objection from the CFTC as they submitted the amendment on Nov 8, 2018. Paul Cho added that since it has been more than 180 days, they do not understand why the amendment has not been approved. He also added that there is little difference between swaps and futures products, but officially, they still lack the approval to launch physical Bitcoin futures.

Exclusive: Gerard Dache, on the Two Contradictions of Facebook Libra

Exclusive interview with Gerard Dache: Part 2

In part 2 of the interview, Gerard walked us through some of the recommended bills to the government in fostering blockchain innovation, such as the “Blockchain Promotion Act”. He then shared his views on the nature of Bitcoin and two contradictions of Facebook’s Libra.

In Section 2 “Working group to recommend the definition of blockchain technology” of the Blockchain Promotion Act, as some academics have defined “blockchain technology” in their papers, is this bill trying to show that the working groups are more authoritative than the academic scholars? If the definition set is different from those in academics, will those academic papers and whitepapers lose their authority?

A great question! Firstly, we have 50 different working groups, and I am not involved in all of the output of all of them. We tend to think in terms of continuing to bring clarity, we are not in competition with the politicians or the academics and we are not a political organization. We want to bring the government and businesses together.

In my opinion, we are going to need a whole new asset class. These technologies are fundamentally different than securities or utilities or a lot of these things we seem to patent, they may have attributes of them.

We have never seen a technology like this before. We are going to need new regulatory tools to deal with it.

What’s your observation on the role of cryptocurrencies in the financial industry?

When cryptocurrencies first came out, the biggest enemy of cryptos was the financial services industry. Everybody in blockchain started moving to all these different use cases, such as supply chain, identity, healthcare, and others; blockchain will be helpful but it will be a slow path. In the area of financial services, there was the most animosity towards cryptocurrencies. The pace of blockchain development will be the quickest because the banks and financial institutions realize if they don’t leverage blockchain in their operations, they’re going to be left behind and will be out of existence.

The minute that banks start moving into this space, they will then drag the government. All the Facebook hearings, Libra hearings and other things are happening because the financial services industry is moving much faster than any other industry, and we see incremental innovations there. In the area of banking and financial services, that’s where the earthquakes will rock the foundations of our finances. That’s also where the laws must go first.

The US SEC claimed Bitcoin is not a security; the IRS said Bitcoin is considered property; the CFTC said Bitcoin is a commodity. How does the GBA or your personal view the nature of Bitcoin? Should Bitcoin be regulated?

There is no government agency that can come in and make an impact on Bitcoin. There isn’t any way for a government to regulate or to change the supply or to change the price of cryptocurrencies. The government can require its citizens to report it, but it is literally impossible for them to be regulated.

In your opinion, do you think Bitcoin is a security, commodity, property, or none of the above?

I believe it’s none of the above – Bitcoin has the property of the above mentioned and it bears similar characteristics as gold. However, for high dollar transactions, it can also be a payment system. GBA is not a lobbyist organization, so we’re not trying to push for legislation. In my opinion, we need a new asset class and new rules.

Let’s talk a bit about the future of Facebook’s Libra. David Marcus mentioned in the hearing that Facebook Libra is a payment instrument. What are the regulations required for Libra to stay compliant?

Facebook was hit with two completely conflicting issues; they said the reason that they are building this is that they want to help bank the unbanked. They also said at the same time that they will be fully AML and KYC compliant. The reason why so many people are unbanked is that they don’t have an identity. How are you going to give identity, do AML/KYC and at the same time bank the unbanked?

Facebook is going to run into so many regulatory challenges that I doubt they will ever launch, and if they do, it’s not going to be anytime soon.

Do you think Libra is not a cryptocurrency because of its centralized nature?

Yes. Facebook hasn’t figured out a lot of this stuff themselves yet, so the fact that they announced when they did, caused a lot of chaos but also woke up a lot of people. They are not ready for their prime time yet. In fact, many members of the association have many questions about what it would mean when trying to run a node and when they would be compliant, and the current regulators are not ready for this.

Recently, Walmart filed a patent on digital currency. What will be the future of Bitcoin when traditional giants start launching their own digital currency like Facebook?

For Facebook’s Libra and Walmart, when they launch their own token, I believe they will become another ‘Western Union’: another centralized payment channel.

I don’t think that they can actually take on the properties of a cryptocurrency. The concept of cryptocurrencies, as a decentralized mechanism, is so antithetical to what they’re trying to do.

My prediction is that I see Bitcoin going up to about half a million dollars. The reason is that if I go to Starbucks, or McDonald’s, I don’t need 51% of all the computers in the world to validate my transaction. However, if I’m going to buy a house or a car, or if the government is going to send a transfer payment to a state, a currency as secure as Bitcoin will be needed. I believe that we’ll see networks and technologies that are much lighter, much faster like the lightning network that will be secure enough for smaller transactions. Bitcoin will become more like the cornerstone gold, and more like the reserve currency that all of these technologies are tethered to.

I believe Bitcoin has something that very few other cryptocurrencies have – which is a fully decentralized nature gaining people’s trust. I think that’s where the value is, not in the everyday payment system, but as the foundation for a whole new economy.

Do you think the future of blockchain development will be driven by permissioned blockchains instead of public blockchains?

When the internet first came out, it was hard to imagine that we would be using the internet for our banking. Then we would use the internet to swipe right or left to decide who to date. We need transitional technologies and I believe that these enterprise permissioned blockchains are very important transitional technologies. If you try to tell someone we’re going to go from where we were ten years ago, to a fully decentralized economy, people will say you’re crazy. It is going to take time for that to happen. It may take decades, but these enterprise permissioned systems, I believe, are critical to the transition to the new economy.

CFTC’s New Chief Supports Blockchain Technology

The Commodity Futures and Trading Commission (CFTC) appointed a new chief who is also pro-crypto. Just as his predecessor J. Christopher Giancarlo, appears to have supported the established pro-crypto/pro-blockchain approach. In a recent interview, the newly appointed chief, Heath Tarbert gave a favorable opinion of blockchain technology.

He described the blockchain technology as a promising technology that ought not to be stifled. He also commented that the CFTC wants proper regulations and that he would hate to see China and other strategic competitors advance father than them due to the absence of these regulatory frameworks.

The CFTC defines digital assets such as bitcoin and others as commodities and regulates the trading of its futures. Tarbert acknowledged that his agency sees growth despite the low demand for cryptocurrencies as compared to other commodity classes.

“It’s definite that the demand is far below what we see for other commodity classes. So it’s still small at this point but I think we see it growing.”

On September 22, Bakkt launched physically-backed Bitcoin futures. Despite the modesty of the Bakkt platform, research has identified a fall in the demand for crypto across the board in recent weeks. The Pundits claimed that institutions were anticipating the regulators that would spur them to invest in cryptocurrency and crypto-token. This is however not forthcoming as many members of the Trump administration have spoken against cryptocurrency.

The preceding chief of the CFTC, J. Christopher Giancarlo was the initiator of the pro bitcoin approach of the organization. After his five year term where he handed over to Tarbert, he joined the chamber of Digital Commerce’s Board of Advisors. Thus, it is anticipated that the CFTC maintains this approach.

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Heads of SEC, CFTC and FinCEN Jointly Warn Crypto Industry to Follow Regulations

The heads of the three major US financial regulators have issued a joint statement warning the cryptocurrency industry to adhere to banking regulations in the development of digital assets. 

The joint statement was signed by Commodity Futures Trading Commission (CFTC) Chairman Heath Tarbert, Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco and Securities and Exchange Commission (SEC) Chairman Jay Clayton. The statement reiterates that digital assets must comply with the various banking and financial services laws already in place in the US, regardless of what they call their cryptocurrencies or tokens—citing the Bank Secrecy Act (BSA) which outlines how financial services must be registered in compliance with regulators.

The details of the statement spoke to the nature of digital asset-related activities, explaining that the “activities a person engages in are a key factor in determining whether and how that person must register with the CFTC, FinCEN, or the SEC.” 

The statement further highlights that an ‘exchange’ in a digital assets market may or may not qualify or be categorized as an ‘exchange’ in the federal securities market. Quoted from the joint statement, “Regardless of the label or terminology that market participants may use, or the level or type of technology employed, it is the facts and circumstances underlying an asset, activity or service, including its economic reality and use (whether intended or organically developed or repurposed), that determines the general categorization of an asset, the specific regulatory treatment of the activity involving the asset, and whether the persons involved are ‘financial institutions’ for purposes of the BSA.”

Comments from the SEC

In additional comments, Chairman Jay Clayton, Securities and Exchange Commission (SEC) spoke on the responsibilities of his department stating that “The statutory mission of the SEC is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. In general, the SEC has jurisdiction over securities and securities-related conduct. Persons engaged in activities involving digital assets that are securities have registration or other statutory or regulatory obligations under the federal securities laws.” Clayton concluded, “Broker-dealers and mutual funds are required to implement reasonably-designed AML Programs and report suspicious activity  These rules are not limited in their application to activities involving digital assets that are “securities” under the federal securities laws.”

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US Congress Plans New Provisions for Cryptocurrency Derivatives Markets

The US Congress aims to pass a new bill deciding on data collection for digital commodities contracts and swaps. 

The Commodity Futures Trading Commission’s (CFTC) clarified how all information can be accessed, helping efforts to fight manipulation and fraud in crypto markets. If the new bill is passed, it would be the first to place crypto set requirements onto the CFTC, which means that they must follow a higher set of guidelines. 

The bill aims to have the CFTC comply with new rules detailing trade and trader data, including other information that the board of trade must be able to access. Congress sees this as the time to create smarter guidelines and regulations across all crypto-related trading and traders. In the US derivatives markets, there are more than 4 trillion USD of activity each day. If this were to become jeopardized, it would lead to an extreme problem for the economy and US citizens. 

Regulation to ensure safety on all markets, including emerging crypto markets, is underpinning new approaches from congress in an attempt to close the gap in regulation between old and new financial markets.

The crypto markets are still small in comparison to traditional markets, however, without planning and new bills to support their growth, it seems unlikely the US government will allow citizens to become involved. 

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US CFTC Commissioner Says Crypto Derivative Contracts Had an Enormous Positive Impact on the US Economy

United States Commissioner of the Commodities and Futures Trading Commission (CFTC), Brian Quintenz, spoke about the current and future regulation in Fintech at the Singapore Fintech Festival held last week.  

Quintenz started by saying that one of the main values that the Commission stands by is to “first do no harm, then be technology-neutral.”  

LabCFTC working with technologists, innovators, and the public 

As stated by Quintenz, CFTC has been engaging with innovators and technologists, “to understand what they were doing, to help them understand if what they were doing implicated our rules, and to help the CFTC understand if there is any technology we can take advantage of as an agency to enhance our own processes.”

LabCFTC, the CFTC’s financial technology research wing, has been very active with over 350 different private meetings held with innovators in the last two years, as Quintenz mentioned. LabCFTC has published three primers to the marketplace based on their understanding of smart contracts, artificial intelligence, and crypto assets. They have also looked into how these three categories are evolving outside of, or challenging the current regulatory dynamic.  

Two requests for information, the first on crypto assets and the different proofing constructs that back consensus mechanisms such as proof of stake, proof of work, and zero-knowledge proofs were asked from the public. The CFTC was curious to understand the proliferation of derivatives contracts on different assets with different underlying proofing constructs.  

Structuring innovation competition and its hurdles with the regulatory sandbox 

The second included the request for information on innovation competitions. This helps the CFTC to understand where the lines draw in terms of sandboxes. The regulator is prohibited by law from having a regulatory sandbox due to the legal structure of the US, viewing that there should be free use of technology, which would be an “unauthorized gift” under the US ethics laws, as explained by Quintenz. 

“I think it was kind of an unintended consequence of how those rules are written,” commented Quintenz. “There is a discussion right now in Congress to change that, but in the meantime, we’re thinking about how to structure innovation competition because that focuses on our rule set, our processes and if we can bring technologists in-house to compete and solve some of those issues, and to get a better sense as to what the solutions are and how that innovation is evolving.” 

Self-certification for a positive impact on the US economy 

Quintenz stated: “The provision of derivatives contracts into different parts of the economy has and an enormous positive impact on the US economy to be able to manage that risk and provide stable prices for goods and services, building apps and government involvement and to the private sector.” 

The CFTC has led an effort to help exchanges and clearinghouses through the creation of the self-certification process. Exchanges that are looking to list a new contract would not have to go to the CFTC and request approval. Instead, they can list the contract and “self-certify” that meets all the necessary requirements from the CFTC. 

The results of implementing self-certification have been quite significant; in the last 15 to 20 years, since self-certification existed, exchanges have listed 8000 new contracts, compared to the 800 contracts listed between 1920 to 2000 prior to self-certification.

US CFTC Rounded Up Over $1.3B in Regulatory Penalties in 2019, 40% More Than the Previous Year

The US Commodity Futures Trading Commission (CFTC), the derivatives regulator in the US, has collected over $1.3 billion in regulatory and administrative penalties in the fiscal year of 2019, including funds collected from cryptocurrency businesses, which ended on Sept. 30.  

In the annual report released by the CFTC Division of Enforcement, the regulator stated that 69 actions were brought during the fiscal year of 2019, noting a slight increase over the average of 67.5 in the previous five fiscal years.  

The result in regulatory penalties has also increased by 40% compared to the fiscal year of 2018, of around $947 million.  

James McDonald, the Director of Enforcement at the CFTC, said: “The breadth and significance of the enforcement activity in FY 2019 is reflected in the fact that the filed cases involved some of the most significant commodities fraud, manipulation and spoofing cases in the history of the agency.” 

McDonald also added that the CFTC will continue to work against fraudsters and will “operate in parallel with our criminal law enforcement colleagues.” 

Several charges were pointed out, including the $147 million crypto scheme Control-Finance Ltd, Jon Barry Thompson, who was accused of a $7 million Bitcoin-related fraud, and Joseph Kim, who was charged with defrauding investors. However, the CFTC did not specify the exact amount of regulatory penalties obtained from these companies.  

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The Digital Dollar Continues to be Pushed by Former CFTC Chair

The former US Commodity and Futures Trading Commission (CFTC) Chairman continues to fight for the US Dollar to become a digital global force. 

Chris Giancarlo, known in the crypto community as “Crypto Dad” was one of the few in the office to issue cryptocurrency services into the American Markets. Bitcoin and other crypto futures markets have been approved under his administration and continue to see growth, with companies like the Intercontinental Exchange (ICE; Bakkt) and The Chicago Mercantile Exchange (CME) all pushing for bitcoin settlements into USD. 

According to Mr. Giancarlo, in his new role in New York-Based Law firm Willkie Farr & Gallagher, blockchain technology is the next necessary step to keep the USD relevant amidst China and cryptocurrency developments. In America, many states including The Republic Of Texas, use Silver and Gold-based commodities to both earn as salary and spend among themselves, showing that there is a demand for something better than what the current U.S.A Dollar provides. 

Newly appointment CFTC chair, Health Tarbert believes that time and steady progress should be the key, stating that innovation is important, but understanding the best and worst before going all in, is where America can really benefit. Evaluating law and regulation is an area that must be carefully considered. 

The rise of educated people in law and government continues to allow for blockchain to grow, but is it something that fits the needs of the average citizen? Or just the next trend that will never attain mass adoption?

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LedgerX Co-Founders Put on Leave Following US CFTC Scrutiny

Ledger Holdings, Inc., the parent company of LedgerX, feels pressure from the United States Commodity Futures Trading Commission (CFTC) after it has been reported that LedgerX physically settled Bitcoin futures products have not been approved. 

The CFTC continues to push for regulation and full approval before any crypto company wishes to offer commodities trading to US Citizens sparking what many believe could be seen as major problems for Ledger Holdings, Inc..

In July Ledger began to offer the trading services on its platform which has led to many in the CFTC commenting that this is not certified and should be. 

Ledger X Co-Founders Paul and Juthica Chou have been placed on administrative leave effective immediately. Larry Thompson is appointed as the interim CEO and lead director of Ledger Holdings who has over 30 years of wall street experience.  The reason for the personnel change remains unclear. 

With board changes and regulatory scrutiny from the CFTC, it is expected that Thompson needs to step up and negotiate the best next steps for Ledger.

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XRP Status Classified as Unclear, Meanwhile Analysts Say XRP Price Could Jump to $0.30

The US Commodities and Futures Trading Commission (CFTC) Chairman Heath Tarbert indicated in an interview that the status of XRP had been classified as unclear. He said, “It’s unclear. Stay tuned I’d say. Part of the issue is that our jurisdiction we share with the SEC (Securities and Exchange Commission). If it’s a security, it falls under their jurisdiction. If it’s a commodity, it falls under ours.” 

Tarbert also added that the CFTC and SEC would be working together to classify the status of various cryptocurrencies. According to Tarbert, Bitcoin and Ethereum are classified as commodities. XRP, however, does not fall into this classification, as the token is used on RippleNet by Ripple to enable fund transfers globally, and has been used as a store of value.  

Is XRP ready to push above its resistance? 

XRP has been staying in the mid $0.20 region, proven to be a strong support level prior to its drop to $0.18 in Q4 2019. The bullish trend in the crypto market has been positive for major altcoins such as XRP to push against a key resistance. If the resistance is broken in the next few days, it could lead to a significant spike reaching new multi-month highs.  

Crypto Rand, a crypto analyst said that he believes that XRP could push upwards past $0.30. 

Popular crypto analyst stated in a tweet, “XRP – 6 month RSI technical level broke yesterday, here is where the 6 month descending trend line rejected yesterday but very likely breaks up today.” 

MoneyGram’s expansion into India, a win for Ripple’s adoption 

MoneyGram, a multinational payment remittance platform previously partnered with Ripple, for its on-demand liquidity for cross-border transactions. Using XRP is the bridge between two fiats for transactions, this ensures a faster and more efficient transfer. This resulted in MoneyGram’s improved speed of the settlement of transactions, as XRP adoption also increased.  

MoneyGram recently partnered with EbixCash, to expand the former’s presence in India. According to a press release, it states that Ebixcash is owned by a software application product supplier, who is responsible for MoneyGram’s expansion into the Indian market. As MoneyGram will get access to more consumers in India, the company will also get access to hit the rural areas in the country.  

Alex Holmes, MoneyGram’s CEO believes that Ripple’s on-demand liquidity could be a game-changer, although it is currently in its early days. Ripple has already put together a list of partners who are using or planning to use on-demand liquidity. 

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