The CFTC request for comments on a Proposed Interpretation of the term "actual delivery" for virtual currency retail transactions was published in the Federal Register. Comments are due by March 20, 2018.

The CFTC-Proposed Interpretation restated the CFTC position that a virtual currency is a commodity. As  previously covered, this means that leveraged, margined or financed transactions in virtual currencies with non-eligible contract participants ("non-ECPs") are "retail commodity transactions" subject to CFTC oversight under  Section 2(c)(2)(D) of the Commodity Exchange Act. The regulation of retail commodity transactions is subject to a statutory exemption for transactions in which the actual delivery of the commodity occurs within 28 days of the transaction.

In order to prove the "actual delivery" of virtual currency in connection with retail commodity transactions, the Proposed Interpretation would require a market participant to demonstrate:

  • that a customer has the ability to (i) take possession and control of the entire quantity of the commodity, whether it was purchased on margin, using leverage, or any other financing arrangement, and (ii) use it freely in commerce (both within and away from any particular platform) no later than 28 days from the date of the transaction; and
  • the offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) does not retain any interest in or control over any of the commodity purchased on margin, leverage or other financing arrangement at the expiration of 28 days from the date of the transaction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.