What is CFTC and How is it Linked to Crypto?

What is CFTC and How is it Linked to Crypto?

In this short section, you will learn what is CFTC, and how it impacts the world of cryptocurrencies and their regulation. 

What is CFTC?

The Commodity Futures Trading Commission (CFTC) is an independent federal agency that regulates the commodity futures and options markets. 

It was created in 1974, when trading in futures contracts had rapidly expanded beyond physical and agricultural commodities.

Its goals include the promotion of competitive and efficient futures markets and the protection of investors against manipulation, abusive trade practices, and fraud.

How is the CFTC related to Bitcoin and other cryptocurrencies?

Since 2015, the CFTC has legally classified Bitcoin and other cryptocurrencies as commodities for the purposes of trading

As such, it is only natural that they fall under the regulation and jurisdiction of the CFTC. The commission follows the developments in the market closely and has charged cryptocurrency fraudsters multiple times. 

Some major examples include charges against the Bitcoin trading firm Control-Finance, a fraudulent trader from Chicago and CabbageTech Co, among others. 

An additional point of interest to the CFTC is the Bitcoin futures market. Bitcoin futures are cryptocurrency trading products (derivatives) that speculate on the price of Bitcoin without participants actually having to own Bitcoin. 

What products fall under the regulatory constraints of CFTC?

The CFTC oversees the functioning of:  

  • Designated contract markets (DCMs)
  • Exchanges
  • Swap markets
  • Derivatives clearing organizations
  • Futures commission merchants
  • Commodity pool operators

More precisely, it regulates the exchange of securities, commodities, foreign exchange (Forex), futures (including Bitcoin futures), and options contracts.

As previously mentioned, the CFTC considers Bitcoin and cryptocurrencies as commodities, so these fall under their regulation as well.