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Federal Register / Vol. 85, No. 122 / Wednesday, June 24, 2020 / Rules and Regulations
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seller on a similar basis not retaining 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 Commission has thoroughly reviewed the comments received.
Further, the Commission has gained considerable experience and expertise with respect to digital asset markets generally, through additional public input and advisory committee meetings on the evolution of digital asset and cryptocurrency markets,37 regulatory oversight of exchanges offering derivatives products on certain digital assets,38 numerous LabCFTC initiatives and market interactions,39 and market surveillance in furtherance of its antifraud and anti-manipulation responsibilities. Applying this knowledge and expertise, as well as its experience in interpreting CEA section 2c2D particularly in light of recent judicial decisions, the Commission has determined to finalize the Proposed Interpretation with certain revisions discussed herein.
As noted, while the CEA addresses several different types of transactions, this final interpretive guidance specifically concerns the actual delivery exception in CEA section 2c2D as it applies to digital assets that serve as a medium of exchange.
Notably, CEA section 2c2D and its exceptions remain separate and distinct from application of the swap definition in CEA section 1a47.40
The Commission notes that this interpretive guidance is intended to provide an efficient and flexible way to communicate the agencys current views on how the actual delivery exception in Section 2c2D may apply in various 37 See, e.g., Request for Input, Request for Input on Crypto-Asset Mechanics and Markets, 83 FR
64563 Dec. 17, 2018; CFTC, Technology Advisory Committee, https www.cftc.gov/About/
CFTCCommittees/TechnologyAdvisory/tac_
meetings.html last visited Mar 14, 2020.
38 To date, four CFTC-registered futures exchanges have certified bitcoin-based futures contracts. A number of CFTC-registered swap execution facilities SEFs have offered bitcoinbased swaps, though some have since delisted these products or become dormant.
39 See CFTC, LabCFTC Events & News, https
www.cftc.gov/LabCFTC/News-Events/index.htm last visited Mar. 14, 2020.
40 7 U.S.C. 1a47. For example, certain retail transactions that may involve leverage, such as contracts for difference CFDs, are swaps. See Joint Final Rule, Further Definition of Swap, Security-Based Swap, and Security-Based Swap Agreement; Mixed Swaps; Security-Based Swap Agreement Recordkeeping, 77 FR 48208 at 48259
Aug. 13, 2012. Pursuant to CEA section 2e, U.S.
retail persons are prohibited from entering into such swaps unless they are offered on a designated contract market DCM.

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situations. Given the complex and dynamic nature of these markets, the Commission believes it is appropriate to take an adaptable approach while it continues to follow developments in this space and evaluate business activity on a case-by-case basis.
II. Comments Generally Among the many comments submitted, the Commission received 18
substantive comment letters and two substantive comment website entries.
These comments were submitted by entities and individuals representing a broad range of interests, including a self-regulatory organization,41 virtual currency exchanges or execution service providers,42 dealers or traders in virtual currency transactions,43 industry trade or advocacy groups,44 industry developers,45 trade associations comprised of energy producers and suppliers,46 and concerned individuals.47
Several commenters expressed their general support for the Proposed Interpretation as written, with only minor suggested clarifications.48 For example, NFA indicated that it fully supports the Commissions continued use of its jurisdiction to enhance the regulatory oversight of the nascent market for virtual currencies. 49 HBUS
believed that, once finalized, the Proposed Interpretation will facilitate the growth of a transparent and fair marketplace for virtual currency, where legitimate business can thrive. 50
Contrarily, certain commenters believed that the Commission should proceed with caution 51 or take a different approach.52 However, the majority of commenters primarily focused their responses on issues raised by varying 41 National
Futures Association NFA.
Inc. Coinbase; Gemini Trust Company, LLC Gemini; Decentralized Derivatives Association DDA; dYdX Trading, Inc. dYdX; HBUS Holdco Inc. HBUS.
43 3 Degrees Group, Inc. 3 Degrees; Cable Car Capital LLC Cable Car.
44 Chamber of Digital Commerce Chamber;
Coin Center Coin Center; Futures Industry Association FIA.
45 ConsenSys ConsenSys.
46 Commercial Energy Working Group CEWG;
International Energy Credit Association IECA.
47 Chris R. Barnard Barnard; Paul Booth Booth; Chris J. Dykzeul Dykzeul; The Consumer Advocacy and Financial Regulation Organization at the University of Michigan Law School CAFRO; Natalie Holland Holland;
Bruce A. Tupper Tupper.
48 3 Degrees Letter at 1; Barnard Letter at 12;
HBUS Letter at 12; NFA Letter at 1.
49 NFA Letter at 1.
50 HBUS Letter at 1.
51 FIA Letter at 1.
52 DDA Letter at 1.
42 Coinbase,
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questions posed in the Proposed Interpretation.
III. Specific Comments A. The Scope of the Interpretation Several commenters submitted suggestions for further modification of the virtual currency meaning provided in the Proposed Interpretation.53 In particular, Coin Center suggested that the term digital commodities would more accurately reflect all digital currencies since many tokens at issue contain utility beyond that as a medium of exchange.54
Separately, 3 Degrees encouraged the Commission to define virtual currency pursuant to a rulemaking process similar to the one used to further define the term swap. 55 In addition, the firm suggested virtual currency be further defined to focus on the extent to which a token is able to be used for its intended purpose at the time of evaluation to determine whether it is within scope.56 In this regard, 3 Degrees believed that a token that does not have a present use as a medium of exchange or is not otherwise mimicking the attributes of fiat currency should be excluded from virtual currency. 57
Similarly, ConsenSys urged the Commission to consider further distinguishing mainstream virtual currencies used as a medium of exchange generally from other types of virtual tokens. 58
HBUS supported the Proposed Interpretations definition of virtual currency and primarily endorsed the Commissions avoidance of a bright line definition. 59 IECA and CEWG
requested certain products or transactions be specifically excluded from the term and scope of the Proposed Interpretation, including transfers of digital assets between eligible contract 53 The Proposed Interpretation stated that the Commission interprets the term virtual currency broadly. In the context of this interpretation, virtual or digital currency: Encompasses any digital representation of value that functions as a medium of exchange, and any other digital unit of account that is used as a form of a currency i.e., transferred from one party to another as a medium of exchange; may be manifested through units, tokens, or coins, among other things; and may be distributed by way of digital smart contracts, among other structures. However, the Commission notes that it does not intend to create a bright line definition at this time given the evolving nature of the commodity and, in some instances, its underlying public distributed ledger technology.
Proposed Interpretation, 82 FR at 60338 footnotes omitted.
54 Coin Center Letter at 12.
55 3 Degrees Letter at 57.
56 Id.
57 Id.
58 ConsenSys Letter at 2, note 2.
59 HBUS Letter at 2.

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