Timothy Massad Says CFTC Has Legal Supervision on Bitcoin

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Timothy Massad Says CFTC Has Legal Supervision on Bitcoin

In testimony before the US Senate Committee on Agriculture, Nutrition and Forestry, the chairman of the US derivatives regulator has said that digital currency derivatives fall within his agency’s remit. The testimony from Timothy Massad, who chairs the Commodity Futures Trading Commission (CFTC), may not please many Bitcoin stakeholders.

He said that while his agency does not have specific rules governing digital currencies, it would oversee futures and swaps in any commodity and this includes digital currencies. According to him, the agency’s authority extends to futures and swaps contracts in any commodity, derivative contracts based on a virtual currency represent one area within the responsibility.

Interestingly, Bitcoin is a digital currency which does not fall under any jurisdiction and cannot be controlled by any government agency for that matter; this is its special feature. However, with the attempts on the part of various government agencies in the US in the last one or so years sound a desperate attempt to regulate it.

According to Mr. Massad, the CFTC defines commodities “very broadly” and the term is not limited to agricultural commodities like metals and energy, but also includes derivatives linked to stock market indices, currencies and electricity. Thus, in his view, digital currency derivatives are a form of innovation that his agency wants to encourage.

The Agency Aims to Stop Manipulation and Fraudulent Activities in Bitcoin Ecosystem

However, he is of the firm opinion that his agency is also tasked with enforcing consumer protection and preventing manipulation and fraud, and that is where the role comes in. The CFTC chair referred to TeraExchange’s Bitcoin swap as an example of a digital currency derivative that fell within his agency’s oversight.

Similarly, New Jersey-based TeraExchange received approval for its swap from the CFTC in September. According to Mr. Massad, innovation is a vital part of the markets, and it is something that the regulatory framework is designed to encourage. At the same time, regulatory framework is intended to prevent manipulation and fraud.

Thus, according to him to make sure that markets operate with transparency and integrity, the jurisdiction must be expanded. Though some market participants welcomed Massad’s comments, some others think that his statement was too broad to be interpreted clearly.

According to them, more specific comments from the regulator would be required before market participants could be sure about the impact of possible regulation.

To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com