The US is gearing up to introduce stronger rules for the regulation of virtual currencies, including Bitcoin, amidst concerns about how risky these currencies are.
On 17 October 2017, the US Commodity Futures Trading Commission (CFTC) issued a report in which it confirmed that Bitcoins are commodities which fall under its regulatory remit.
The report, titled ‘A CFTC primer on virtual currencies’, confirmed that, “[t]he CFTC’s jurisdiction is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.”
The CFTC report makes it clear that the US is moving towards stricter regulation of Bitcoins, and justifies this move by reference to a number of risks associated with virtual currencies. The report identifies four categories of risks with virtual currencies, namely operational risks, cyber security risks, speculative risks and fraud and manipulation risks.
There are particular concerns that virtual currencies are unproven and may not perform as expected, leading to financial loss, and that virtual currency marketplaces operate across various unsupervised platforms, which lack system safeguards and customer protection features. The cyber security systems supporting some of these platforms may be poor and customers run the risk of losing their assets in the event of a cyber attack.
The price of Bitcoins reportedly fell by around 9% in response to the CFTC report.
The CFTC report follows on from reports in August 2017 that the US Congress is drafting a ‘Bitcoin Bill’. The details of this Bill are unknown, though it reportedly seems to be aiming to avoid the use of Bitcoins for illegal activities. In May 2017, the US Government sought to introduce a provision into law which would give money laundering enforcement agencies more powers to supervise the use of Bitcoins.