Recent Developments on Cryptocurrency

May 25 2018

On May 21, 2018, the U.S. Commodity Futures Trading Commission (CFTC) and Division of Clearing and Risk (DCR) issued guidance for exchanges and clearinghouses listing cryptocurrencies derivative products.

To this regard, last Thursday, May 17, 2018, we attended a conference about The Regulation of Cryptocurrencies organized by The Puerto Rico Academy of Jurisprudence and Legislation in which Mr. James McDonald, Director of the Enforcement Division of the CFTC, discussed his general remarks about the future of cryptocurrency guidance development.

Our general take was that the CFTC as part of its mission to “foster open, transparent, competitive, and financially sound markets” is evaluating the framework for the regulations to be drafted to cover cryptocurrency-related derivatives products. This type of cryptocurrencies as those treated as commodities and includes, for example: Bitcoin Futures currently exchanged in the Chicago Mercantile Exchange (CME). Our impression is that the CFTC supports innovation and thus, the regulation’s will not be harsh but aimed to preserve market integrity and protect those who participate in US markets from fraud and manipulation. 

The CFTC acknowledges that the regulatory framework to be issued for cryptocurrencies will be done in collaboration with other government agencies depending on the type of crypto transaction. According to this, the Security Exchange Commission (SEC) should be the agency in charge of providing guidance regarding initial coin offerings (ICOs) when the ICOs main purposes is to raise capital. Also, the Office of the Commissioner of Financial Institutions of Puerto Rico has issued guidance for entities that will operate in Puerto Rico as International Financial Entities that will engage in financial services involving cryptocurrencies under Act 273 of September 25, 2012, as amended, known as the “International Financial Center Regulatory Act.

We will continue to monitor the regulatory development on cryptocurrency.