The CFTC has published guidance on the” actual delivery ” of crypto assets

The CFTC has published final guidance on the” actual delivery ” of digital assets, determining exactly when a crypto asset is considered to be transferred from one party to another.

The us commodity futures trading Commission (CFTC) published a document stating that the “actual delivery” of a crypto asset occurs when the customer fully controls the asset, and the Offeror no longer controls it at the end of 28 days after the transaction.

The definition of” actual delivery ” of digital assets has long been an open question. In 2016, the law firm Steptoe & Johnson LLP filed a petition with the CFTC after the Agency settled claims over allegations of violating the rules for trading the cryptocurrency exchange Bitfinex.

The charges were related to the CFTC’s claims that Bitfinex retained control of private keys after delivering funds related to margin trading, and therefore the funds were not actually considered delivered. The charges were settled and Bitfinex paid a $75,000 fine.

Soon after, Steptoe filed a petition claiming that the settlement does not provide any clarity as to what the “actual delivery”looks like. The petition claimed that the definition of custodial activity is unclear, and this could be harmful to the cryptocurrency industry. The new CFTC guidance sheds light on this issue:

“The Commission notes that it does not intend to create a clear definition, given the changing nature of the product and, in some cases, the underlying distributed Ledger technology.”

CFTC Chairman Heath Tarbert said the Agency will not take enforcement action for the next 90 days over potential supply rule violations to “prevent any potential market disruptions” while firms are familiarizing themselves with the new guidance. According to the document, the CFTC believes that the” actual delivery ” of digital assets occurs when:

“(1) the Client provides: (i) possession and control of the entire quantity of the product, regardless of whether it was purchased with margin, using leverage or any other financing mechanism, and (ii) the ability to use the entire quantity of the product in free trade (without reference to any specific place of execution of the transaction), no later than 28 days from the date of the transaction and at any time thereafter.

(2) the Offeror and the seller of the counterparty (including any of their respective affiliates or other persons acting in conjunction with the Offeror or seller of the counterparty on a similar basis) do not retain any interest, legal right or control over any purchased product, margin, leverage or other financial agreement after 28 days from the date of the transaction.”

Recall that last fall, CFTC Chairman Heath Tarbert said that ether is a commodity, not a security. The CFTC holds a similar position with respect to bitcoin.