[Federal Register Volume 85, Number 122 (Wednesday, June 24, 2020)]
[Rules and Regulations]
[Pages 37734-37744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11827]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1

RIN 3038-AE62


Retail Commodity Transactions Involving Certain Digital Assets

AGENCY: Commodity Futures Trading Commission.

ACTION: Final interpretive guidance.

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SUMMARY: The Commodity Futures Trading Commission (the ``Commission'' 
or ``CFTC'') is issuing this final interpretive guidance concerning the 
term ``actual delivery'' as set forth in the Commodity Exchange Act 
(``CEA'') pursuant to the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Dodd-Frank Act''). Specifically, this final 
interpretive guidance is being issued to inform the public of the 
Commission's views when determining whether actual delivery has 
occurred in the context of retail commodity transactions in certain 
types of digital assets that serve as a medium of exchange, 
colloquially known as ``virtual currencies.'' The Commission issues 
this interpretive guidance after a 90-day comment period and a 
significant amount of time and effort further observing the development 
of the digital asset and virtual currency marketplace.

DATES: This final guidance is effective on June 24, 2020.

FOR FURTHER INFORMATION CONTACT: Philip W. Raimondi, Special Counsel, 
(202) 418-5717, [email protected]; Office of the Chief Counsel, 
Division of Market Oversight, Commodity Futures Trading Commission, 
1155 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    With certain exceptions, the CFTC has been granted exclusive 
jurisdiction over commodity futures, options, and all other derivatives 
that fall within the definition of a swap.\1\ Further, the Commission 
has been granted general anti-fraud and anti-manipulation authority 
over any swap, or a contract of sale of any commodity in interstate 
commerce, or for future delivery on or subject to the rules of any 
registered entity.\2\ The Commission's mission is to promote the 
integrity, resilience, and vibrancy of the U.S. derivatives markets 
through sound regulation; it does so, in part, by protecting the 
American public from fraudulent schemes and abusive practices in those 
markets and products over which it has been granted jurisdiction.
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    \1\ 7 U.S.C. 2(a)(1)(A). The CFTC shares its swap jurisdiction 
in certain aspects with the Securities and Exchange Commission 
(``SEC''). See 7 U.S.C. 2(a)(1)(C).
    \2\ 7 U.S.C. 9(1).
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    The Commission has long held that certain speculative commodity 
transactions involving leverage or margin are futures contracts subject 
to Commission oversight.\3\ However, certain judicial decisions called 
that view into question with respect to certain leveraged retail 
transactions primarily in foreign currencies.\4\ In 2008, Congress 
addressed this judicial uncertainty by providing that certain 
enumerated provisions of the CEA apply to certain retail foreign 
currency transactions pursuant to CEA section 2(c)(2)(C)(iv).\5\ This 
new statutory provision is subject to an exception for retail foreign 
currency transactions that result in ``actual delivery'' within two 
days.\6\ Two years later, in the Dodd-Frank Act, Congress similarly 
extended certain provisions of the CEA to apply to all other ``retail 
commodity transactions'' pursuant to CEA section 2(c)(2)(D)(iii).\7\
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    \3\ See In re Stovall, CFTC Docket No. 75-7 [1977-1980 Transfer 
Binder] Comm. Fut. L. Rep. (CCH) paragraph 20,941, at 23,777 (CFTC 
Dec. 6, 1979) (applying traditional elements of a futures contract 
to a purported cash transaction).
    \4\ See, e.g., CFTC v. Zelener, 373 F.3d 861 (7th Cir. 2004); 
CFTC v. Erskine, 512 F.3d 309 (6th Cir. 2008).
    \5\ See Food, Conservation and Energy Act of 2008, Public Law 
110-246, 122 Stat. 1651 (2008).
    \6\ 7 U.S.C. 2(c)(2)(C)(i)(II)(bb)(AA).
    \7\ See Sec. 742 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010, Public Law 111-203, 124 Stat. 1376 
(2010); see also Hearing to Review Implications of the CFTC v. 
Zelener Case Before the Subcomm. on General Farm Commodities and 
Risk Management of the H. Comm. on Agriculture, 111th Cong. 52-664 
(2009) (statement of Rep. Marshall, Member, H. Comm. on Agriculture) 
(``If in substance it is a futures contract, it is going to be 
regulated. It doesn't matter how clever your draftsmanship is.''); 
156 Cong. Rec. S5, 924 (daily ed. July 15, 2010) (statement of Sen. 
Lincoln) (``Section 742 corrects [any regulatory uncertainty] by 
extending the Farm Bill's ``Zelener fraud fix'' to retail off-
exchange transactions in all commodities.'') (emphasis added).
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    Specifically, CEA section 2(c)(2)(D) applies to any agreement, 
contract, or transaction in any commodity that is (i) entered into 
with, or offered to (even if not entered into with), a person that is 
neither an eligible contract participant \8\ nor an eligible commercial 
entity \9\ (``retail''), (ii) on a leveraged or margined basis, or 
financed by the offeror, the counterparty, or a person acting in 
concert with the offeror or counterparty on a similar basis.\10\ CEA 
section 2(c)(2)(D) provides that such an agreement, contract, or 
transaction is subject to CEA sections 4(a),\11\ 4(b),\12\ and 4b \13\ 
``as if the agreement, contract,

[[Page 37735]]

or transaction was a contract of sale of a commodity for future 
delivery'' (i.e., a futures contract).\14\ The statute, however, 
excepts certain transactions from its application. In particular, CEA 
section 2(c)(2)(D)(ii)(III)(aa) \15\ excepts a contract of sale that 
``results in actual delivery within 28 days or such other longer period 
as the Commission may determine by rule or regulation based upon the 
typical commercial practice in cash or spot markets for the commodity 
involved.'' \16\
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    \8\ 7 U.S.C. 1a(18).
    \9\ 7 U.S.C. 1a(17); see also 7 U.S.C. 2(c)(2)(D)(iv).
    \10\ 7 U.S.C. 2(c)(2)(D)(i).
    \11\ 7 U.S.C. 6(a) (prohibiting the off-exchange trading of 
futures transactions by U.S. persons unless the transaction is 
conducted on or subject to the rules of a designated contract 
market).
    \12\ 7 U.S.C. 6(b) (permitting foreign boards of trade 
registered with the Commission with the ability to provide direct 
access to U.S. persons).
    \13\ 7 U.S.C. 6b (prohibiting fraudulent conduct in connection 
with any contract of sale of any commodity in interstate commerce, 
among other things).
    \14\ 7 U.S.C. 2(c)(2)(D)(iii). In addition, retail commodity 
transactions fall within the definition of ``commodity interest,'' 
which also includes futures, options, and swaps. 17 CFR 1.3 
(defining ``commodity interest'').
    \15\ 7 U.S.C. 2(c)(2)(D)(ii)(III)(aa).
    \16\ The Commission has not adopted any regulations permitting a 
longer actual delivery period for any commodity pursuant to this 
statute. Accordingly, the 28-day actual delivery period remains 
applicable to all commodities, while retail foreign currency 
transactions remain subject to a 2-day actual delivery period 
pursuant to CEA section 2(c)(2)(C). In addition, certain commercial 
transactions and securities are excepted pursuant to CEA section 
2(c)(2)(D)(ii).
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    In connection with this statutory authority, the Commission 
previously issued a proposed interpretation of the term ``actual 
delivery'' in the context of CEA section 2(c)(2)(D), accompanied by a 
request for comment.\17\ In that interpretation, the Commission 
provided several examples of what may and may not constitute actual 
delivery. After reviewing public comments, the Commission issued a 
final interpretation in 2013 (the ``2013 Guidance'').\18\
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    \17\ Retail Commodity Transactions Under Commodity Exchange Act, 
76 FR 77670 (Dec. 14, 2011).
    \18\ Retail Commodity Transactions Under Commodity Exchange Act, 
78 FR 52426 (Aug. 23, 2013).
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    The 2013 Guidance explained that the Commission will consider 
evidence ``beyond the four corners of contract documents'' to assess 
whether actual delivery of the commodity occurred.\19\ The Commission 
further noted that it will ``employ a functional approach and examine 
how the agreement, contract, or transaction is marketed, managed, and 
performed, instead of relying solely on language used by the parties in 
the agreement, contract, or transaction.'' \20\ The 2013 Guidance also 
included a list of relevant factors the Commission will consider in 
determining whether a transaction has resulted in actual delivery \21\ 
and again provided examples \22\ of what may and may not constitute 
actual delivery. The 2013 Guidance provided that satisfactory examples 
of actual delivery involve transfer of title and possession of the 
commodity to the purchaser \23\ or a depository acting on the 
purchaser's behalf.\24\ Among other things, mere book entries and 
certain instances where a purchase is rolled, offset, or otherwise 
netted with another transaction do not constitute actual delivery.\25\
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    \19\ Id. at 52428.
    \20\ Id.
    \21\ Relevant factors in this determination include the 
following: Ownership, possession, title, and physical location of 
the commodity purchased or sold, both before and after execution of 
the agreement, contract, or transaction, including all related 
documentation; the nature of the relationship between the buyer, 
seller, and possessor of the commodity purchased or sold; and the 
manner in which the purchase or sale is recorded and completed. Id.
    \22\ In the 2013 Guidance, Examples 1 and 2 illustrate 
circumstances where actual delivery is made, while Examples 3, 4 and 
5 illustrate circumstances where actual delivery is not made. In 
setting forth the examples, the Commission made clear that they are 
non-exclusive and were intended to provide the public with guidance 
on how the Commission would apply the interpretation. Id. at 52427-
28.
    \23\ The Commission notes that ``purchaser'' and ``customer'' 
may be used interchangeably throughout this interpretation in 
reference to the non-eligible contract participant counterparty that 
has engaged in a ``retail commodity transaction'' as defined by CEA 
section 2(c)(2)(D). This clarification is made, in part, to 
recognize that a ``customer'' may be attempting to engage in a 
``retail commodity transaction'' as part of a short sale strategy.
    \24\ Id.
    \25\ Id.
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    Within a year after the 2013 Guidance was released, the Eleventh 
Circuit issued an opinion affirming a preliminary injunction obtained 
by the Commission in CFTC v. Hunter Wise Commodities, LLC.\26\ Hunter 
Wise was in line with the Commission's interpretation of actual 
delivery in the 2013 Guidance.\27\ Specifically, the Eleventh Circuit 
recognized that delivery ``denotes a transfer of possession and 
control.'' \28\ Indeed, the Eleventh Circuit explained, ``[i]f `actual 
delivery' means anything, it means something other than simply 
`delivery,' for we must attach meaning to Congress's use of the 
modifier `actual.' '' \29\ Accordingly, the Eleventh Circuit stated 
that actual delivery ``denotes `[t]he act of giving real and immediate 
possession to the buyer or the buyer's agent,' '' and constructive 
delivery does not suffice.\30\ Recently, the Ninth Circuit agreed, 
finding the exception requires ``some meaningful degree of possession 
or control by the customer.'' \31\
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    \26\ CFTC v. Hunter Wise Commodities, LLC, et al., 749 F.3d 967 
(11th Cir. 2014) (hereinafter, Hunter Wise).
    \27\ Id. at 980 (``While we need not defer to the agency's 
interpretation because the statutory text is unambiguous . . . we 
note also that the interpretation the court adopts today harmonizes 
with the Commission's own informal interpretation.'') (internal 
citations omitted).
    \28\ Id. at 978-79, (citing Black's Law Dictionary 494 (9th ed. 
2009)).
    \29\ Id. at 979.
    \30\ Id.
    \31\ CFTC v. Monex Credit Company, et al., 931 F.3d 966, 972-75 
(9th Cir. 2019).
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    Soon after the Hunter Wise decision, the Commission determined that 
virtual currency is a commodity as that term is defined by CEA section 
1a(9).\32\ Subsequently, the Commission brought its first enforcement 
action against a platform that offered virtual currency transactions to 
retail customers on a leveraged, margined, or financed basis without 
registering with the Commission.\33\ In the Bitfinex settlement order, 
the Commission found that the virtual currency platform violated CEA 
sections 4(a) and 4d because the unregistered entity ``did not actually 
deliver bitcoins purchased from them.'' \34\ Rather, the entity ``held 
the purchased bitcoins in bitcoin deposit wallets that it owned and 
controlled.'' \35\
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    \32\ In re Coinflip, Inc., d/b/a Derivabit, and Francisco 
Riordan, CFTC Docket No. 15-29, 2015 WL 5535736, [Current Transfer 
Binder] Comm. Fut. L. Rep. (CCH) paragraph 33,538 (CFTC Sept. 17, 
2015) (consent order); In re TeraExchange LLC, CFTC Docket No. 15-
33, 2015 WL 5658082, [Current Transfer Binder] Comm. Fut. L. Rep. 
(CCH) paragraph 33,546 (CFTC Sept. 24, 2015) (consent order).
    \33\ In re BFXNA INC. d/b/a BITFINEX, CFTC Docket No. 16-19 
(June 2, 2016) (consent order) (hereinafter, Bitfinex).
    \34\ Id.
    \35\ Id.
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    As a result of several requests for additional guidance regarding 
this subject, the Commission published a proposed interpretation (the 
``Proposed Interpretation'') regarding the ``actual delivery'' 
exception of CEA section 2(c)(2)(D) within the specific context of 
retail commodity transactions in virtual currency on December 20, 
2017.\36\ The Commission provided a 90-day comment period and received 
many public comments.
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    \36\ Retail Commodity Transactions Involving Virtual Currency, 
82 FR 60335 (Dec. 20, 2017).
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    The Proposed Interpretation set out two central tenets of the 
Commission's view on when actual delivery of virtual currency has 
occurred:
    (1) A customer having the ability to: (i) Take possession and 
control of the entire quantity of the commodity, whether it was 
purchased on margin, or using leverage, or any other financing 
arrangement, and (ii) Use it freely in commerce (both within and away 
from any particular platform) no later than 28 days from the date of 
the transaction; and
    (2) The offeror and counterparty seller (including any of their 
respective affiliates or other persons acting in concert with the 
offeror or counterparty

[[Page 37736]]

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 anti-fraud and anti-
manipulation responsibilities. Applying this knowledge and expertise, 
as well as its experience in interpreting CEA section 2(c)(2)(D) 
(particularly in light of recent judicial decisions), the Commission 
has determined to finalize the Proposed Interpretation with certain 
revisions discussed herein.
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    \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 
bitcoin-based 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).
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    As noted, while the CEA addresses several different types of 
transactions, this final interpretive guidance specifically concerns 
the ``actual delivery'' exception in CEA section 2(c)(2)(D) as it 
applies to digital assets that serve as a medium of exchange. Notably, 
CEA section 2(c)(2)(D) and its exceptions remain separate and distinct 
from application of the swap definition in CEA section 1a(47).\40\
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    \40\ 7 U.S.C. 1a(47). 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 2(e), 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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    The Commission notes that this interpretive guidance is intended to 
provide an efficient and flexible way to communicate the agency's 
current views on how the actual delivery exception in Section 
2(c)(2)(D) may apply in various 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\
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    \41\ National Futures Association (``NFA'').
    \42\ Coinbase, 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'').
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    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 
support[s] the Commission's 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 questions posed in the 
Proposed Interpretation.
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    \48\ 3 Degrees Letter at 1; Barnard Letter at 1-2; HBUS Letter 
at 1-2; NFA Letter at 1.
    \49\ NFA Letter at 1.
    \50\ HBUS Letter at 1.
    \51\ FIA Letter at 1.
    \52\ DDA Letter at 1.
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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\
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    \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 1-2.
    \55\ 3 Degrees Letter at 5-7.
    \56\ Id.
    \57\ Id.
    \58\ ConsenSys Letter at 2, note 2.
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    HBUS supported the Proposed Interpretation's definition of virtual 
currency and primarily endorsed the ``Commission's 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

[[Page 37737]]

participants (``ECPs'') and eligible commercial entities (``ECEs''), 
other physical commodity transactions effected through blockchain 
technology, and the trading of environmental commodities (e.g., 
renewable identification numbers and renewable energy 
certificates).\60\ Separately, dYdX requested that their specific type 
of virtual currency-based derivative transaction, which utilizes 
``smart contract technology,'' be included within the scope of the 
Proposed Interpretation and satisfy the actual delivery exception.\61\
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    \59\ HBUS Letter at 2.
    \60\ CEWG Letter at 2-3; IECA Letter at 2-4.
    \61\ dYdX Letter at 2-7.
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    After reviewing the comments, the Commission has decided to use the 
virtual currency definition stated in the Proposed Interpretation to 
delineate the scope of this final interpretation of the term ``actual 
delivery'' in CEA section 2(c)(2)(D). Primarily, the Proposed 
Interpretation intended to address a digital asset that is, or can be 
used as, a medium of exchange in commerce,\62\ including within a 
particular blockchain ecosystem.\63\ The Commission believes it is 
appropriate to retain this scope, as many facets of this interpretation 
focus on the customer's ability to use commodities in this class as a 
medium of exchange.\64\
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    \62\ Although the scope of this interpretive guidance is 
sufficiently broad to capture digital assets that can be, but are 
not yet, used as a medium of exchange, a transaction nonetheless 
must first satisfy the plain language of CEA section 2(c)(2)(D) 
before analyzing the application of the actual delivery exception.
    \63\ For example, in the context of a ``decentralized'' network 
or protocol, the Commission would apply this interpretation to any 
tokens on the protocol that are meant to serve as virtual currency 
as described herein. In such instances, the Commission could, 
depending on the facts and circumstances, view ``offerors'' as any 
persons presenting, soliciting, or otherwise facilitating ``retail 
commodity transactions,'' including by way of a participation 
interest in a foundation, consensus, or other collective that 
controls operational decisions on the protocol, or any other persons 
with an ability to assert control over the protocol that offers 
``retail commodity transactions,'' as set forth in CEA section 
2(c)(2)(D).
    \64\ Relatedly, the Proposed Interpretation asked whether the 
Commission should explore use of its exemptive authority in CEA 
section 4(c) to establish a distinct registration and compliance 
regime for retail commodity transactions in this class of 
commodities. 82 FR at 60341. Commenters responding to this question 
generally did not believe a separate exemption or related regulatory 
regime was necessary or appropriate at this time. After reviewing 
the comments overall, the Commission currently believes that the 
development of such a separate regulatory regime is not appropriate.
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    The importance of the ability to use these commodities as a medium 
of exchange is apparent given the industry's adoption of the terms 
``virtual currency'' and ``cryptocurrency.'' Therefore, while this 
interpretive guidance incorporates several elements of the 2013 
Guidance, the Commission views the examples provided herein as 
superseding the examples provided in the 2013 Guidance in the specific 
context of retail commodity transactions involving virtual currency. In 
regards to other digital assets that are commodities,\65\ but do not 
serve as a medium of exchange or otherwise fall within the scope of 
this interpretive guidance at the time of the transaction, the 
Commission would continue to refer to the 2013 Guidance to determine 
whether actual delivery has occurred.
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    \65\ The Commission may, from time to time, further interpret 
the meaning of ``actual delivery'' in CEA section 2(c)(2)(D) 
regarding other digital assets that are commodities.
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B. References to ``Title''

    As per the Proposed Interpretation's question,\66\ several 
commenters discussed the meaning of ``title'' in the context of virtual 
currency and retail commodity transactions. Chamber advocated for a 
flexible approach, whereby title is only evidenced by the ability of 
the purchaser to use the virtual currency ``freely and without 
restriction by the seller or offeror at any time.'' \67\ CEWG 
recommended the Commission limit any further interpretation of 
``title'' and ``explicitly state that other concepts and indicia of 
title could apply . . . .'' \68\ Similarly, FIA urged the Commission to 
avoid developing a ``prescriptive regime concerning what constitutes 
good title . . .'' \69\ Cable Car suggested the Commission consider 
whether there are instances in which title can attach before a 
transaction is memorialized on the relevant public ledger or 
blockchain.\70\ In a similar manner, DDA asked the Commission to 
consider issues of internal transfers on ``side-chains'' that are 
separate from the general public ledger.\71\ In contrast, Mr. Tupper 
noted that it is unclear whether off-chain transactions could satisfy 
good title.\72\ ConsenSys argued that there is no acceptable equivalent 
to ``title'' that exists in the context of virtual currency.\73\
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    \66\ 82 FR at 60341 (Question 8).
    \67\ Chamber Letter at 6.
    \68\ CEWG Letter at 5.
    \69\ FIA Letter at 5.
    \70\ Cable Car at 4.
    \71\ DDA Letter at 6-7.
    \72\ Tupper Letter at 6.
    \73\ ConsenSys Letter at 4.
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    After reviewing the comments, the Commission believes the concept 
of ``title'' has not fully developed in the context of virtual 
currency, but the Commission will continue to follow the term's 
evolution. Indeed, the Commission agrees with the majority of 
commenters on this subject, and does not believe efforts to further 
define or utilize ``title'' in the examples of this interpretive 
guidance will provide appropriate clarity at this time. As recognized 
by existing judicial precedent,\74\ the Commission believes that 
evidence of possession and control is most significant, while title 
may, in fact, connote elements of each, along with undetermined 
additional elements, such as transfer of ownership. Therefore, the 
Commission is not including an example illustrating transfer of title 
in this final interpretation. The Commission notes that, depending on 
the evolution of the term, it remains open to considering a customer's 
ability to obtain title as part of the ``functional approach'' noted in 
this final interpretation, but the Commission does not seek to further 
define or interpret the concept at this time.
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    \74\ See, e.g., CFTC v. Monex Credit Company, et al., 931 F.3d 
966 (9th Cir. 2019); CFTC v. Hunter Wise Commodities, LLC, et al., 
749 F.3d 967 (11th Cir. 2014).
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C. The 28-Day Actual Delivery Period

    The Proposed Interpretation noted that, absent Congressional 
action, the Commission is unable to reduce the actual delivery 
exception period,\75\ and provided the public an opportunity to provide 
feedback regarding this requirement. A majority of the commenters 
addressing this subject were in support of any effort by the Commission 
to decrease the 28-day actual delivery period for retail commodity 
transactions in virtual currency.\76\ HBUS noted that ``it generally 
takes much fewer than 28 days for a virtual currency transfer to 
complete.'' \77\ Chamber stated that a shorter delivery period ``may be 
appropriate,'' as long as uncontrollable technological factors were 
considered.\78\ Ms. Holland and Mr. Booth each advocated for a 2-day 
delivery period as a more appropriate standard.\79\ Mr. Booth stressed 
that a shorter delivery period would ``provide a significantly larger 
impact on purchaser protection by decreasing the amount of time a 
virtual currency seller can hold currency paid for by the purchasing 
party.'' \80\ Gemini advocated for a 1-day delivery period, which 
``more accurately reflects the standard delivery time for spot 
transactions in virtual

[[Page 37738]]

currencies.'' \81\ Gemini noted that the delivery window is 
``unnecessarily long'' and ``may give rise to fraudulent activity.'' 
\82\
---------------------------------------------------------------------------

    \75\ 82 FR at 60339.
    \76\ HBUS Letter at 3; NFA Letter at 1.
    \77\ HBUS Letter at 3 (citation omitted).
    \78\ Chamber Letter at 4.
    \79\ Booth Comment at 2; Holland Letter at 2.
    \80\ Booth Comment at 2.
    \81\ Gemini Letter at 4.
    \82\ Id. at 3.
---------------------------------------------------------------------------

    Cable Car noted that ``establishing a uniform maximum settlement 
cycle'' for such retail transactions might be beneficial for future 
oversight.\83\ CEWG urged the Commission to clarify that the delivery 
window would not be shortened for any digital transactions that fall 
outside CEA section 2(c)(2)(D).\84\ FIA recommended that the Commission 
``allow the virtual currency markets to continue to develop'' before 
determining whether to decrease the actual delivery period.\85\
---------------------------------------------------------------------------

    \83\ Cable Car Letter at 2.
    \84\ CEWG Letter at 4-5.
    \85\ FIA Letter at 2.
---------------------------------------------------------------------------

    The Commission appreciates the comments received on this subject 
and agrees that the actual delivery period should correspond to the 
reality of a virtual currency ``spot'' transaction. The Commission 
continues to believe it is limited in its ability to shorten the 28-day 
delivery period specified in CEA section 2(c)(2)(D).\86\ However, the 
Commission will continue to engage all relevant stakeholders regarding 
a more appropriate actual delivery period for purposes of the exception 
to CEA section 2(c)(2)(D) in the context of virtual currency.
---------------------------------------------------------------------------

    \86\ 82 FR at 60340.
---------------------------------------------------------------------------

D. Demonstration of Possession and Control

    In Example 2 of the Proposed Interpretation, actual delivery could 
occur even if the retail customer utilizes a third-party depository as 
an agent to secure the purchased virtual currency.\87\ However, in 
order to constitute actual delivery under this example, the customer 
must obtain ``full control'' over the commodity within 28 days 
following the date of the transaction.\88\ The Proposed Interpretation 
asked for further examples of ways in which such control can be 
demonstrated,\89\ and several commenters replied.
---------------------------------------------------------------------------

    \87\ Id.
    \88\ Id.
    \89\ Id. at 60341.
---------------------------------------------------------------------------

    Gemini noted that ``possession of a private key, or in some 
instances multiple private keys or credentials, necessary for the 
transfer of the virtual commodity'' would be sufficient proof of ``full 
control.'' \90\ However, Gemini argued that book entries (which are 
inconsistent with actual delivery under Example 3 of the Proposed 
Interpretation) should be permitted to satisfy actual delivery where 
the purchaser's depository is appropriately licensed and regulated for 
such a custodial purpose.\91\
---------------------------------------------------------------------------

    \90\ Gemini Letter at 8.
    \91\ Id. at 8-9.
---------------------------------------------------------------------------

    Chamber suggested that ``full control'' can be demonstrated as long 
as the virtual currency is held at a depository ``outside the reach of 
the seller.'' \92\ Chamber noted that it did not believe requiring 
possession of private keys is necessary ``so long as the purchaser has 
access and the ability to move the virtual currency from the depository 
without restriction by the seller or offeror.'' \93\ Similarly, 
ConsenSys noted that purchaser control is the appropriate test, but one 
must look to the purchaser's ability to ``use'' the commodity and 
existing functionalities of the virtual currency at the time of the 
transaction.\94\ Coinbase believed that actual delivery can occur 
``once the customer is able to use the virtual currency to either trade 
on an exchange platform or transfer it off-platform to purchase goods 
or services.'' \95\ FIA argued that actual delivery should not require 
possession of a private key to demonstrate full control by the 
purchaser.\96\
---------------------------------------------------------------------------

    \92\ Chamber Letter at 5.
    \93\ Id.
    \94\ ConsenSys Letter at 4.
    \95\ Coinbase Letter at 7.
    \96\ FIA Letter at 4.
---------------------------------------------------------------------------

    The Commission appreciates all comments received on this subject 
and believes actual delivery has occurred when a customer achieves both 
possession and control of the virtual currency that is underlying the 
transaction. To avoid further confusion, the Commission clarifies that 
the customer's possession of a particular key or blockchain address 
will not be considered further in this interpretive guidance (except as 
described in Example 1), and has modified the final interpretation to 
focus on whether the customer has secured a meaningful degree of 
possession and control of the virtual currency, as discussed below.

E. Depository Independence

    In order to satisfy Example 2 of the Proposed Interpretation, an 
acceptable third-party depository (acting as agent for the customer) 
cannot be affiliated with the counterparty seller.\97\ The Proposed 
Interpretation did not explicitly extend this statement to the offeror 
or offeror's execution venue unless acting as a counterparty to the 
transaction.\98\ However, under Example 3 in the Proposed 
Interpretation, mere book entries would not constitute actual 
delivery.\99\ Therefore, the Proposed Interpretation sought feedback 
surrounding depository independence,\100\ including whether the offeror 
or its affiliate may maintain some level of association with the 
depository in demonstration of actual delivery.
---------------------------------------------------------------------------

    \97\ 82 FR at 60340.
    \98\ Similar to the Proposed Interpretation, actual delivery 
does not occur in Example 2 of this final interpretation if the 
offeror, an affiliate thereof, or someone acting in concert with 
such persons is also a counterparty to the retail commodity 
transaction at issue.
    \99\ 82 FR at 60340.
    \100\ Id. at 60341.
---------------------------------------------------------------------------

    Several commenters expressed the view that independence of a third-
party depository is an important factor in determining whether actual 
delivery has occurred. Ms. Holland stated that actual delivery ``cannot 
and should not be satisfied where the offering party, counterparty 
seller, or any of their agents retain any interest or control over the 
token at the conclusion of 28 days.'' \101\ Similarly, Mr. Tupper 
stated that a virtual currency depository ``should operate in an 
independent manner from execution platforms and market participants.'' 
\102\ NFA expressed concern with virtual currency execution venues that 
purchase relevant commodities for their own account and merely allocate 
purchases through internal bookkeeping.\103\ NFA believes that such 
internal book entries are not subject to the same level of regulatory 
scrutiny that exists for traditional depositories authorized to hold 
customer funds.\104\
---------------------------------------------------------------------------

    \101\ Holland Letter at 2.
    \102\ Tupper Letter at 8.
    \103\ NFA Letter at 2.
    \104\ Id.
---------------------------------------------------------------------------

    On the other hand, certain commenters believed that independence of 
a third-party depository is not necessary as long as the depository is 
appropriately regulated. Gemini noted that acceptable depositories 
should be limited to those covered by the CEA's definition of 
``financial institutions,'' \105\ which may include affiliates of the 
offeror or counterparty seller.\106\ Chamber supported the idea of a 
federal licensing regime for virtual currency depositories.\107\ 
Chamber argued that affiliation between offeror and depository should 
not be prohibited as long as appropriate controls and firewalls are in 
place to address potential conflicts of interest.\108\ Coinbase noted 
that Commission guidance should ``encourage digital

[[Page 37739]]

assets to be held at regulated entities.'' \109\
---------------------------------------------------------------------------

    \105\ 7 U.S.C. 1a(21).
    \106\ Gemini Letter at 7-8.
    \107\ Chamber Letter at 5.
    \108\ Id.
    \109\ Coinbase Letter at 5.
---------------------------------------------------------------------------

    ConsenSys and FIA believed that depository affiliation with the 
offeror or counterparty seller can be consistent with actual 
delivery.\110\ ConsenSys argued that treating depository affiliation as 
disqualifying may inadvertently expose the purchased virtual currency 
to higher cybersecurity risks by encouraging an external transfer away 
from the offeror and increase transaction costs since such transactions 
must be verified and recorded on the relevant public ledger.\111\ 
ConsenSys and Coinbase also referenced the 2013 Guidance to argue that 
the Commission has said that actual delivery can occur even when 
affiliates of the offeror or seller hold the physical commodity in 
limited circumstances.\112\ However, Coinbase further acknowledged that 
such affiliation was found to be consistent with actual delivery only 
by way of the Commission's reference to the regulated nature of the 
limited entities that would take delivery.\113\
---------------------------------------------------------------------------

    \110\ ConsenSys Letter at 6; FIA Letter at 4.
    \111\ ConsenSys Letter at 6-7.
    \112\ ConsenSys Letter at 6-7; Coinbase Letter at 5, 7.
    \113\ Coinbase Letter at 5.
---------------------------------------------------------------------------

    After reviewing the variety of comments received and further 
considering the retail customer concerns at issue, the Commission is 
deciding to strike a balance. Primarily, the Commission generally 
believes the two central tenets of actual delivery are demonstrated 
when there is (i) a transfer of the virtual currency (that is the 
subject of the transaction) away from the counterparty seller, offeror, 
and any offeror execution venue ledger or digital account system and 
(ii) receipt by a separate blockchain address or depository that is 
chosen by the customer and allows the customer to use the virtual 
currency freely in commerce, where accepted, as soon as technologically 
practicable. Actual delivery may be found to have occurred even if 
there is some level of offeror affiliation with a depository that is a 
separate, independent legal entity, so long as there are certain 
safeguards to ensure that the customer receives actual possession and 
control over the purchased commodity within the 28-day actual delivery 
period, as described below.
    The Commission believes that, in the context of virtual currency, 
such a transfer of the commodity to a separate entity from the offeror 
and the offeror's execution venue, when applicable, establishes that a 
customer achieves meaningful possession and control, including the 
ability to use the virtual currency as a medium of exchange at any 
time. The Commission is not alone in treating such a demonstration as 
critical when such a transaction, bearing hallmarks of a derivative, 
would otherwise be conducted in an unregulated capacity.\114\
---------------------------------------------------------------------------

    \114\ See Canadian Securities Administrators, CSA Staff Notice 
21-327, Guidance on the Application of Securities Legislation to 
Entities Facilitating the Trading of Crypto Assets (Jan. 16, 2020), 
https://www.osc.gov.on.ca/documents/en/Securities-Category2/csa_20200116_21-327_trading-crypto-assets.pdf (finding that crypto 
assets traded on a platform would be subject to applicable Canadian 
securities legislation unless the transaction results in an 
``obligation to make immediate delivery of the crypto asset'' and 
``is settled by the immediate delivery of the crypto asset'' to the 
platform's customer; and stating that ``immediate delivery'' 
involves transfer of ``ownership, possession and control'' of the 
crypto asset to the customer with no further involvement by the 
platform, including through any security interest or exposure to 
certain additional risks).
---------------------------------------------------------------------------

    This final interpretive guidance includes a new Example 3 and 
revises Example 2 to describe an appropriate transfer of possession and 
control to the customer, notwithstanding that an offeror may maintain 
an affiliation with a depository, so long as the depository is 
completely separated from any execution venue services and additional 
safeguards are satisfied. Accordingly, in order for offeror-depository 
affiliation not to disqualify a transaction from constituting ``actual 
delivery'' in Example 2, the Commission believes that an affiliated 
depository should be: (i) A ``financial institution'' as defined by CEA 
section 1a(21); (ii) a separate line of business from the offeror not 
subject to the offeror's control; \115\ (iii) a separate legal entity 
from the offeror and any offeror execution venue; (iv) predominantly 
operated for the purpose of providing custodial services, including for 
virtual currency and other digital assets; \116\ (v) appropriately 
licensed \117\ to conduct such custodial activity in the jurisdiction 
of the customer; (vi) offering the ability for the customer to utilize 
and engage in cold storage of the virtual currency; and (vii) 
contractually authorized \118\ by the customer to act as its agent.
---------------------------------------------------------------------------

    \115\ The Commission understands that an offeror and an 
affiliated depository may be under common control. The Commission 
believes that ``control'' would include the possession, direct or 
indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership 
of voting securities, by contract, or otherwise. See, e.g., Joint 
Final Rule, Further Definition of ``Swap Dealer,'' ``Security-Based 
Swap Dealer,'' ``Major Swap Participant,'' ``Major Security-Based 
Swap Participant'' and ``Eligible Contract Participant,'' 77 FR 
30596 at 30631 n.437 (May 23, 2012); 17 CFR 49.2(a)(4).
    \116\ The Commission recognizes that other custodial services 
may be provided as well.
    \117\ The Commission appreciates that the regulation of digital 
asset custodial services is still evolving. However, the Commission 
will only consider those regulatory regimes that are implemented by 
state or federal authorities, or a self-regulatory organization that 
has been formally authorized by such state or federal authorities to 
carry out such purposes on their behalf.
    \118\ The customer should be free to revoke such a contractual 
agency relationship at any time.
---------------------------------------------------------------------------

    The Commission believes this balance will ensure that a retail 
customer receives meaningful possession and control over purchased 
virtual currency, while permitting the offeror to associate with 
additional services in relation to the transaction. Further, the 
Commission believes the factors set forth above for an offeror-
affiliated depository would ensure an adequate transfer of possession 
and control is made to the customer's chosen depository so that the 
customer can use the commodity freely in commerce, as a medium of 
exchange.
    As mentioned, the Commission believes these factors will 
demonstrate that the depository's business is focused on providing the 
customer with control over purchased digital assets, as opposed to 
control that may be asserted by an affiliated offeror. Specifically, 
the Commission agrees with certain commenters that a ``financial 
institution,'' as defined by CEA section 1a(21), is one useful element 
to apply to an affiliated depository, as such institutions are already 
subject to supervision and are familiar with providing custodial 
services to customers.\119\ In furtherance of ensuring that the 
customer obtains possession and control free and clear from an 
offeror's execution venue service, the Commission believes that the 
depository's status as a separate line of business and a separate legal 
entity is highly critical to the determination of whether actual 
delivery has occurred. These barriers should forestall attempts by an 
offeror to assert control over digital assets transferred to an 
affiliated depository. Further, the Commission believes that requiring 
such depository services to be operated predominantly for custodial 
services would further ensure a focus on the customer's control over 
the purchased asset. While regulatory registrations around digital 
asset custody are still developing, the Commission believes such 
regulations should apply to an offeror-affiliated depository to the 
extent such regulations exist, as they will ensure additional customer 
protection. Similarly, proper segregation of customer assets pursuant 
to regulatory requirements for entities offering custodial services 
further demonstrates

[[Page 37740]]

customer control and protection from the risks of commingling assets 
(which may frustrate usability).
---------------------------------------------------------------------------

    \119\ See 7 U.S.C. 1a(18).
---------------------------------------------------------------------------

    Given the noted cybersecurity concerns raised regarding risks 
associated with external transfers and usage of hot storage, it is also 
important to consider the availability of cold storage options for the 
customer. While some external transfer risk may still exist, the option 
of cold storage will help mitigate the long term risk associated with 
the transfer. Lastly, the Commission will generally consider whether a 
customer has control over the contractual relationship regarding 
custodial services, similar to the custodial services available for 
other customer assets that are primarily used as a medium of exchange. 
Taken together, the Commission believes these safeguards would ensure 
that a customer receives meaningful possession and control in instances 
where a customer's chosen depository is affiliated with an offeror or 
an offeror's execution venue services.

F. Bucket Shops and Conflicts of Interest

    The Commission specifically sought comment regarding potential 
``bucket shop'' arrangements, whereby an offeror \120\ may act as 
principal to a trade and take the opposite side of a retail commodity 
transaction, especially within a self-contained environment.\121\ The 
Commission believes these types of transactions have, in the past, 
often served as a vehicle for unscrupulous actors to take advantage of 
customers. Keeping this concern in mind, the Commission sought comment 
to further consider whether ``actual delivery'' occurs in instances 
where an offeror is also a counterparty and the virtual currency 
remains within the offeror's blockchain address, execution venue, or 
affiliated depository, when applicable.
---------------------------------------------------------------------------

    \120\ The Proposed Interpretation acknowledges that an offeror 
may also be acting as counterparty seller. 82 FR at 60339, n. 66.
    \121\ 82 FR at 60338; 60340; see also Vitalik Buterin, Bitfinex: 
Bitcoinica Rises From The Grave, Bitcoin Magazine (Nov. 22, 2012), 
http://bitcoinmagazine.com/articles/bitfinex-bitcoinica-rises-from-the-grave-1353644122 (describing a bucket shop arrangement whereby 
an execution venue ``steps in and acts as the counterparty to some 
of its users,'' creating ``perverse incentives'').
---------------------------------------------------------------------------

    Several commenters expressed similar concerns, advocating that 
offerors should not take the opposite side of a customer transaction. 
Chamber noted that if an offeror acts as principal, it should not be 
permitted to rely on the actual delivery exception.\122\ Cable Car 
believed that no unregulated entity should be able to act as principal, 
especially regarding the potential for a bilateral market consisting of 
a bucket shop acting as counterparty to its customers.\123\ Gemini also 
agreed that an offeror should not be permitted to take the opposite 
side of a retail commodity transaction.\124\ Further, Gemini noted that 
``[a]llowing an exchange operator to take the opposite side of 
participant transactions may create incentives to influence prices and/
or trading volumes as offerors would operate with an informational 
advantage with respect to its participants.'' \125\ No commenters 
directly advocated for the ability of an offeror to act as principal in 
retail commodity transactions.
---------------------------------------------------------------------------

    \122\ Chamber Letter at 4.
    \123\ Cable Car Letter at 3.
    \124\ Gemini Letter at 4.
    \125\ Id.
---------------------------------------------------------------------------

    The Commission appreciates the comments received on this subject 
and agrees that, in the context of virtual currency, the offeror's 
ability to take the opposite side of a retail commodity transaction may 
create situations in which actual delivery fails to occur. Since the 
plain language of CEA section 2(c)(2)(D) does not specifically address 
whether the offeror has taken the opposite side of the transaction, the 
Commission will, within the ``functional approach'' described in this 
interpretation, consider such activity as a factor weighing against 
demonstration of actual delivery.\126\ Therefore, as originally stated 
in the Proposed Interpretation,\127\ the Commission will not consider 
the scenario in Example 2 to constitute actual delivery if an offeror 
is also the counterparty to the particular transaction.
---------------------------------------------------------------------------

    \126\ This is most notable in Example 2, whereby the Commission 
will only consider the occurrence of actual delivery in instances 
where the counterparty seller is not associated with, or acting as, 
the depository.
    \127\ 82 FR at 60340.
---------------------------------------------------------------------------

G. Liens, Third-Party Leverage, and Forced Sales

    One of the central tenets of the Proposed Interpretation is that to 
achieve actual delivery in the context of digital assets serving as a 
medium of exchange, the offeror and counterparty seller (including any 
affiliates) cannot retain interest or control over any of the virtual 
currency in question at the expiration of 28 days from the date of the 
transaction.\128\ This principle supports the other central tenet of 
actual delivery--a customer securing ``possession and control'' over 
the virtual currency and the ability to use it freely in commerce 
within 28 days from the date of the transaction for its primary purpose 
as a medium of exchange.\129\ Essentially, if a customer cannot 
practically use the virtual currency freely in commerce as a medium of 
exchange (and the offeror or seller can essentially take it back), it 
is difficult to argue the customer truly received or secured control 
over it in the first instance.\130\
---------------------------------------------------------------------------

    \128\ Id. at 60339.
    \129\ Id.
    \130\ As a practical matter, an ongoing lien on purchased 
virtual currency generally results in a customer's inability to 
freely use such virtual currency for its full purpose as a medium of 
exchange. If a customer cannot freely use a purchased virtual 
currency as a medium of exchange, then the Commission would 
generally view such a customer as lacking ``possession and control'' 
of the virtual currency. While the focus of this interpretive 
guidance is solely on virtual currency as described herein, this 
conclusion is distinguishable from other types of loan arrangements, 
such as those involving a car or house. In those other 
circumstances, a debtor may actually obtain meaningful possession 
and the ability to use those items for their primary purposes, even 
while encumbered and in an environment outside of the offeror or 
counterparty. A lien on a car allows the customer to use the vehicle 
as a means of transportation. A lien on a house allows the customer 
to use the house for shelter. By contrast, as noted above, a lien on 
virtual currency as a practical matter does not allow the customer 
to fully use the virtual currency for its purpose as a medium of 
exchange both within and away from a relevant execution venue 
service.
---------------------------------------------------------------------------

    The Proposed Interpretation noted that, in order to effect actual 
delivery, any liens on purchased virtual currency generally cannot 
extend beyond 28 days from the date of the transaction, and invited 
public comment on the forced sale scenarios that may result.\131\ In 
the context of this final interpretative guidance, the Commission views 
forced sale scenarios as any event in which the offeror or counterparty 
seller, or anyone acting in concert with such persons, retains a 
security interest or some other contractual ability to forcibly 
liquidate, sell off, claw back, or reacquire any portion of the virtual 
currency subject to the transaction in satisfaction of a lien, debt 
obligation, or other security interest related to the transaction, with 
or without the prior consent of the customer.
---------------------------------------------------------------------------

    \131\ 82 FR at 60339-41.
---------------------------------------------------------------------------

    Cable Car advocated that the Commission not permit forced sale 
scenarios in finding actual delivery.\132\ They noted that it would be 
an ``extremely grave error'' if the Commission permitted a technical 
lien termination event on a margined trading platform to qualify for an 
exception from CEA section 2(c)(2)(D) jurisdiction.\133\ Cable Car 
urged that ``[t]he Commission should be on guard against proposed `lien 
scenarios' that lack economic purpose or serve only to

[[Page 37741]]

circumvent registration requirements.'' \134\ Chamber stated that, if 
there is a possibility of a forced sale event, such an event should not 
qualify for actual delivery.\135\ In addition, Chamber argued that 
permitting forced sales would circumvent the purpose and intent of the 
Proposed Interpretation.\136\ Further, Chamber noted that allowing such 
scenarios would be ``tantamount to allowing rolling, netting, 
offsetting and/or cash settlement''--practices prohibited by Example 4 
of the Proposed Interpretation.\137\
---------------------------------------------------------------------------

    \132\ Cable Car Letter at 4.
    \133\ Id.
    \134\ Id.
    \135\ Chamber Letter at 5-6.
    \136\ Id.
    \137\ Id.
---------------------------------------------------------------------------

    Coinbase recognized that many digital asset spot exchanges offering 
margin trading operate like futures markets. Specifically, Coinbase 
noted its observation of exchanges offering margined or leveraged 
transactions, matching those orders and allowing netting or offsetting 
settlements--all while forcibly liquidating margin positions if the 
market moved against the margined position.\138\ As Coinbase stated, 
``[a]ll of these are hallmarks of futures contracts and transactions 
with these qualities should be traded on regulated contract markets . . 
. .'' \139\
---------------------------------------------------------------------------

    \138\ Coinbase Letter at 8.
    \139\ Id.
---------------------------------------------------------------------------

    The Commission agrees with the majority of comments that a forced 
sale scenario, as described herein, appears inconsistent with actual 
delivery in CEA section 2(c)(2)(D). As noted above, while the 
Commission will consider all relevant facts and circumstances, the 
presence of a lien, debt obligation, or other security interest on a 
virtual currency generally makes it impractical for the customer to use 
the virtual currency freely in commerce as a medium of exchange, thus 
frustrating actual delivery. Forced sale scenarios would equally 
prevent a customer from freely utilizing the full amount of the 
relevant virtual currency in commerce. Again, if a retail customer 
cannot practically use the virtual currency underlying the transaction 
freely in commerce as a medium of exchange (and the offeror or seller 
can essentially take it back), it is difficult to argue the customer 
truly received or secured control over it in the first instance.\140\ 
The Commission has further revised Example 2 \141\ and created Example 
3 \142\ in this final interpretive guidance to reflect this view. The 
Commission notes that it does not intend to frustrate commercial 
transactions conducted in the normal course of business of the buyer 
and seller, which may be separately excepted by CEA section 
2(c)(2)(D)(ii)(III)(bb).\143\
---------------------------------------------------------------------------

    \140\ The Commission recognizes that a customer should have the 
ability to cover an outstanding debt obligation (unrelated to the 
initial retail commodity transaction) with their purchased virtual 
currency, but such a situation must be initiated freely by the 
customer only after the occurrence of actual delivery as described 
in this interpretive guidance. Before actual delivery (and 
associated transfer of possession and control) has occurred, such 
transactions would otherwise bear hallmarks of off-exchange 
derivatives as described herein. The difference is the freedom of 
the customer to decide how to use the digital asset once they have 
secured control over it.
    \141\ Example 2 is revised in this interpretive guidance to 
address scenarios in which the offeror maintains an affiliated 
relationship with the depository or custodial services provider of 
the virtual currency subject to the retail commodity transaction.
    \142\ Example 3 in this interpretive guidance is meant to 
express the view that actual delivery occurs when the virtual 
currency subject to the transaction is transferred away from the 
offeror and any offeror execution venue service ledger or digital 
account and received by a depository or blockchain address that 
allows the customer to use the commodity freely in commerce for its 
primary purpose as a medium of exchange.
    \143\ CEA section 2(c)(2)(D)(ii)(III)(bb) creates an exception 
from section 2(c)(2)(D) for any ``contract of sale'' that creates an 
enforceable obligation to deliver between a seller and a buyer that 
have the ability to deliver and accept delivery, respectively, in 
connection with the line of business of the seller and buyer. 
Further, CEA section 2(c)(2)(D)(i)(II) applies to transactions that 
are leveraged, margined, or financed by the offeror or counterparty 
seller. However, as noted within, this section would not apply to 
transactions financed by independent third parties.
---------------------------------------------------------------------------

IV. Commission Interpretation of Actual Delivery for Virtual Currency

A. Virtual Currency as a Commodity

    As noted in the Proposed Interpretation, the Commission considers 
virtual currency to be a commodity as defined under Section 1a(9) of 
the Act,\144\ like many other intangible commodities that the 
Commission has previously recognized (e.g., renewable energy credits 
and emission allowances, certain indices, and certain debt instruments, 
among others).\145\ Indeed, virtual currency structures, at times, have 
been compared to other long-standing classes of commodities.\146\ In 
addition, multiple federal courts have held that virtual currencies 
fall within the CEA's commodity definition.\147\ As a commodity, 
virtual currency is subject to applicable provisions of the CEA and 
Commission regulations, including CEA section 2(c)(2)(D).
---------------------------------------------------------------------------

    \144\ 82 FR at 60337-38; In re Coinflip, Inc., d/b/a Derivabit, 
and Francisco Riordan, CFTC Docket No. 15-29, 2015 WL 5535736, 
[Current Transfer Binder] Comm. Fut. L. Rep. (CCH) paragraph 33,538 
(CFTC Sept. 17, 2015) (consent order); In re TeraExchange LLC, CFTC 
Docket No. 15-33, 2015 WL 5658082, [Current Transfer Binder] Comm. 
Fut. L. Rep. (CCH) paragraph 33,546 (CFTC Sept. 24, 2015) (consent 
order); see also In re BFXNA Inc., CFTC No. 16-19, 2016 WL 3137612, 
at *5 (June 2, 2016) (consent order).
    \145\ See generally 77 FR 48208 at 48233 (discussing application 
of the swap forward exclusion to intangible commodities).
    \146\ Nick Szabo, Bit gold, Unenumerated (Dec. 27, 2008), http://unenumerated.blogspot.com/2005/12/bit-gold.html.
    \147\ See CFTC v. McDonnell, 287 F. Supp. 3d 213, 217 (E.D.N.Y. 
2018) (``Virtual currencies can be regulated by CFTC as a commodity. 
. . . They fall well-within the common definition of `commodity' as 
well as the [Act's] definition of `commodities' as `all other goods 
and articles . . . in which contracts for future delivery are 
presently or in the future dealt in.' ''); McDonnell, 332 F. Supp. 
3d at 650-51 (entering judgment against defendant following bench 
trial); CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492, 495-98 
(D. Mass. 2018) (denying motion to dismiss; applying a categorical 
approach to interpreting ``commodity'' under the Act and determining 
that a non-bitcoin virtual currency is a ``commodity'' under the 
Act).
---------------------------------------------------------------------------

    The Commission continues to interpret the term ``virtual currency'' 
broadly. In the context of this interpretation, virtual currency:\148\ 
Is a digital asset that encompasses any digital representation of value 
or unit of account that is or can be used as a form of 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 given the evolving nature of the 
commodity and, in some instances, its underlying public distributed 
ledger technology (``DLT'' or ``blockchain'').
---------------------------------------------------------------------------

    \148\ As noted in the Proposed Interpretation, the term 
``virtual currency'' for purposes of this interpretive guidance is 
meant to be viewed as synonymous with ``digital currency'' and 
``cryptocurrency'' as well as any other digital asset or digital 
commodity that satisfies the scope of ``virtual currency'' described 
herein.
---------------------------------------------------------------------------

B. The Commission's Interest in Virtual Currency

    The Commission continues to recognize that certain virtual 
currencies and their underlying blockchain technologies have the 
potential to yield notable advancements in applications of financial 
technology (``FinTech''). As noted in the Proposed Interpretation, the 
Commission launched the LabCFTC initiative \149\ with this potential in 
mind. LabCFTC continues to engage the FinTech community and promote 
market-enhancing innovation in furtherance of improving the quality, 
resiliency, and competitiveness of the markets overseen by the 
Commission. As such, the Commission is closely following the 
development and

[[Page 37742]]

continuing evolution of blockchain technologies and virtual currencies.
---------------------------------------------------------------------------

    \149\ See Press Release, Commodity Futures Trading Commission, 
CFTC Launches LabCFTC as Major FinTech Initiative (May 17, 2017), 
http://www.cftc.gov/PressRoom/PressReleases/pr7558-17.
---------------------------------------------------------------------------

    Moreover, since virtual currency may serve as an underlying 
component of derivatives transactions, the Commission maintains a close 
interest in the development of the virtual currency marketplace 
generally. Since publication of the Proposed Interpretation, several 
listed derivatives contracts based on virtual currency have been self-
certified to be listed on CFTC registered entities \150\ in accordance 
with the CEA and Commission regulations.
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    \150\ 7 U.S.C. 1a(40).
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    In addition, the Commission continues to closely follow the 
evolution of the cash or ``spot'' market for virtual currencies, 
including related execution venues, especially since such markets may 
inform and affect the listed derivatives markets. Many cash market 
execution venues offer services to retail customers that wish to 
speculate on the price movements of a virtual currency against other 
currencies. For example, a speculator may purchase virtual currency 
using borrowed money in the hopes of covering any outstanding balance 
owed through profits from favorable price movements in the future. 
Among other scenarios,\151\ this interpretation is meant to address the 
Commission's concern with such ``retail commodity transactions,'' 
whereby an entity, platform or execution venue: (i) Offers margin 
trading or otherwise facilitates \152\ the use of margin, leverage, or 
financing arrangements for their retail market participants; (ii) 
typically to enable such participants to speculate or capitalize on 
price movements of the commodity--two hallmarks of a regulated futures 
marketplace.\153\
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    \151\ For example, bilateral transactions could also fall within 
``retail commodity transactions'' in CEA section 2(c)(2)(D).
    \152\ As noted earlier, CEA section 2(c)(2)(D)(i) captures any 
such retail transaction entered into, or offered on a leveraged or 
margined basis, or financed by the offeror, the counterparty, or a 
person acting in concert with the offeror or counterparty on a 
similar basis. The Commission views any financing arrangements 
facilitated, arranged, or otherwise endorsed by the offeror or 
counterparty to satisfy this statutory definition for purposes of 
this interpretive guidance.
    \153\ See, e.g., CFTC v. Int'l Foreign Currency, Inc., 334 F. 
Supp. 2d 305, 310 (E.D.N.Y. 2004) (listing elements typically found 
in a futures contract); In re Stovall, CFTC Docket No. 75-7 [1977-
1980 Transfer Binder] Comm. Fut. L. Rep. (CCH) paragraph 20,941, at 
23,777 (CFTC Dec. 6, 1979) (describing how futures contracts, being 
traded on margin, ``are entered into primarily for the purpose of 
assuming or shifting the risk of change in value of commodities, 
rather than for transferring ownership of the actual 
commodities.''); David J. Gilberg, Regulation of New Financial 
Instruments Under the Federal Securities and Commodities Laws, 39 
Vand. L. Rev. 1599, 1603-04, n.14 (1986) (typically, futures 
``traders are interested only in obtaining cash payments of price 
differentials, not actual commodities'').
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    Despite this concern, the Commission has sought to take a 
deliberative and measured approach in this area as supported by one 
commenter,\154\ as the Commission does not wish to stifle nascent 
technological innovation. Accordingly, the Commission has carefully 
continued to monitor these markets and even sought additional comment 
on these markets more generally.\155\ While these efforts have informed 
the Commission of the many potential uses of digital assets and related 
technology, they have also reinforced the Commission's concern 
regarding potential risk to participants in retail commodity 
transactions involving virtual currency. The Commission highlighted a 
host of concerns in the Proposed Interpretation \156\ regarding these 
nascent and speculative \157\ markets. In setting forth this final 
interpretation, the Commission believes that many of the concerns 
raised remain justified \158\ and the ``actual delivery'' exception 
from CEA section 2(c)(2)(D) cannot be interpreted in a way that would 
frustrate the protection for retail customers afforded by Congress.
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    \154\ FIA Letter at 1-2.
    \155\ Request for Input on Crypto-Asset Mechanics and Markets, 
83 FR 64563 (Dec. 17, 2018).
    \156\ See, e.g., 82 FR at 60338; Matt Levine, How A Bank Should 
Be?, Bloomberg View (Mar. 11, 2015), https://www.bloomberg.com/view/articles/2015-03-11/how-should-a-bank-be- (``Just because you mumble 
the word `blockchain' doesn't make otherwise illegal things 
legal'').
    \157\ Paul Vigna, BitBeat: Bitcoin Price Drops on Block-Size 
Debate, `Flash Crash,' The Wall Street Journal (Aug. 20, 2015), 
http://blogs.wsj.com/moneybeat/2015/08/20/bitbeat-bitcoin-price-drops-on-block-size-debate-flash-crash/ (``[B]itcoin's speculative 
traders love this kind of stuff [margin trading]; these guys could 
easily give Wall Street's casino hotshots a run for their money'').
    \158\ See, e.g., Paul Vigna and Eun-Young Jeong, Cryptocurrency 
Scams Took In $4 Billion in 2019, The Wall Street Journal, Feb. 10, 
2020, at B4 (``[T]here are plenty of inexperienced investors who 
have heard stories of bitcoin riches and think they can get rich, 
too.''); Shane Shifflett and Coulter Jones, Hundreds of 
Cryptocurrencies Show Hallmarks of Fraud, The Wall Street Journal, 
May 18, 2018, at A1; Andy Greenberg, A `Blockchain Bandit' Is 
Guessing Private Keys and Scoring Millions, Wired.com (Apr. 23, 
2019), https://www.wired.com/story/blockchain-bandit-ethereum-weak-private-keys/.
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C. Actual Delivery Interpretation

    In consideration of the foregoing, the Commission issues the 
following final interpretive guidance to inform the public of the 
Commission's views as to the meaning of the term ``actual delivery'' in 
the context of CEA section 2(c)(2)(D) transactions in virtual currency. 
The Commission, in interpreting the term ``actual delivery'' for the 
purposes of CEA section 2(c)(2)(D)(ii)(III)(aa), will continue to 
follow the 2013 Guidance and ``employ a functional approach and examine 
how the agreement, contract, or transaction is marketed, managed, and 
performed, instead of relying solely on language used by the parties in 
the agreement, contract, or transaction.'' \159\
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    \159\ 78 FR at 52428.
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    Further, the Commission will continue to assess all relevant 
factors \160\ that inform an actual delivery determination.\161\ More 
specifically, in the Commission's view, ``actual delivery'' has 
occurred within the context of virtual currency when:\162\
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    \160\ This list includes, but is not limited to ``[o]wnership, 
possession, title, and physical location of the commodity purchased 
or sold, both before and after execution of the agreement, contract, 
or transaction, including all related documentation; the nature of 
the relationship between the buyer, seller, and possessor of the 
commodity purchased or sold; and the manner in which the purchase or 
sale is recorded and completed.'' Id.
    \161\ As noted above, 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.
    \162\ The Commission has slightly modified this sentence of the 
interpretive guidance, as compared to the Proposed Interpretation. 
This modification clarifies that this is a statement of when, in the 
Commission's view, actual delivery has occurred.
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    (1) A customer secures: \163\ (i) Possession and control of the 
entire quantity of the commodity, whether it was purchased on margin, 
or using leverage, or any other financing arrangement, and (ii) the 
ability to use the entire quantity of the commodity freely in commerce 
(away from any particular execution venue) no later than 28 days from 
the date of the transaction and at all times thereafter; and
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    \163\ While this interpretation speaks to the customer, the 
burden of proof would always rest on the party that relies on this 
exception from the Commission's jurisdiction in CEA section 
2(c)(2)(D). See CFTC v. Monex Credit Company, et al., 931 F.3d 966, 
973 (9th Cir. 2019).
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    (2) The offeror \164\ and counterparty seller (including any of 
their respective affiliates or other persons acting in concert with the 
offeror or counterparty

[[Page 37743]]

seller on a similar basis) \165\ do not retain any interest in, legal 
right, 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.\166\
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    \164\ The Commission views the term ``offeror'' broadly in this 
interpretation to encompass any persons that present, solicit, or 
otherwise facilitate a retail commodity transaction under the Act. 
As noted, an offeror may include those with operational control of a 
particular blockchain protocol. Separately, CEA section 2(c)(2)(D) 
captures any transaction that is financed by the offeror, among 
other things. Transactions financed solely by non-affiliated third 
parties, such as a non-affiliated credit card network, are not 
traditionally considered within CEA section 2(c)(2)(D). However, the 
Commission may continue to view financing through a credit card that 
is endorsed, sponsored, or specifically affiliated with an offeror 
as a transaction that falls within CEA section 2(c)(2)(D).
    \165\ The Commission recognizes that the offeror of the 
transaction and the ultimate counterparty may be two separate 
entities or may be the same. For example, the Commission would 
consider as the offeror of the transaction a virtual currency 
execution venue that makes the transaction available to the retail 
customer or otherwise facilitates the transaction. That virtual 
currency execution venue could also be considered a counterparty to 
the transaction if, for example, the platform itself took the 
opposite side of the transaction or the purchaser of the virtual 
currency enjoyed privity of contract solely with the platform rather 
than the seller. Additionally, the Commission recognizes that some 
virtual currency execution venues may provide a purchaser with the 
ability to source financing or leverage from other users or third 
parties. The Commission would consider such third parties or other 
users to be acting in concert with the offeror or counterparty 
seller on a similar basis.
    \166\ Among other things, the Commission may look at whether the 
offeror or seller retain any ability to access or withdraw any 
quantity of the commodity purchased from the purchaser's account or 
wallet.
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    Consistent with the 2013 Guidance and the Proposed Interpretation, 
a sham delivery is not consistent with the Commission's interpretation 
of the term ``actual delivery.'' As noted above, the Commission 
believes that actual delivery occurs when the offeror and counterparty 
seller, including their agents, cease to retain any interest, legal 
right, or control whatsoever \167\ in the virtual currency acquired by 
the purchaser at the expiration of 28 days from the date of entering 
into the transaction or at any time prior to expiration of the 28-day 
period once ``actual delivery'' occurs. Indeed, in its simplest form, 
actual delivery of virtual currency connotes the ability of a purchaser 
to utilize the virtual currency purchased ``on the spot'' as a medium 
of exchange in commerce or within the entirety of its relevant 
blockchain ecosystem.
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    \167\ The Commission would continue to take this view even if 
the offeror maintains some level of affiliation with an independent, 
third-party depository, as described in Example 2.
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    The Commission believes that, in the context of an ``actual 
delivery'' determination in virtual currency, physical settlement 
involving the entire amount of purchased commodity must occur. A cash 
settlement or offset mechanism, as described in Example 5 below, is not 
consistent with the Commission's interpretation. The distinction 
between physical settlement and cash settlement in this context is akin 
to settlement of a spot foreign currency transaction at a commercial 
bank or hotel in a foreign nation--the customer receives physical 
foreign currency, not U.S. dollars. As mentioned, actual delivery 
occurs if such physical settlement occurs within 28 days from the date 
on which the ``agreement, contract, or transaction is entered into.'' 
\168\
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    \168\ 78 FR at 52427.
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    Consistent with the interpretation above, the Commission provides 
the following non-exclusive examples to further clarify the meaning of 
actual delivery in the virtual currency context:
    Example 1: Actual delivery of virtual currency will have occurred 
if, within 28 days after entering into an agreement, contract, or 
transaction, there is a record on the relevant public distributed 
ledger or blockchain address of the transfer of virtual currency, 
whereby the entire quantity of the purchased virtual currency, 
including any portion of the purchase made using leverage, margin, or 
other financing, is transferred from the counterparty seller's 
blockchain address \169\ to the purchaser's blockchain address, over 
which the purchaser maintains sole possession and control. When an 
execution venue or other third party offeror acts as an intermediary, 
the virtual currency's public distributed ledger should reflect the 
purchased virtual currency transferring from the counterparty seller's 
blockchain address to the third party offeror's blockchain address and, 
separately, from the third party offeror's blockchain address to the 
purchaser's blockchain address, over which the purchaser maintains sole 
possession and control.
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    \169\ The source of the virtual currency is provided for 
purposes of this example. However, the focus of this analysis 
remains on the actions that would constitute actual delivery of the 
virtual currency to the purchaser.
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    Example 2: Actual delivery will have occurred if, within 28 days 
after entering into a transaction:
    (1) The counterparty seller or offeror has delivered the entire 
quantity of the virtual currency purchased, including any portion of 
the purchase made using leverage, margin, or financing, into the 
possession of a depository \170\ (i.e., wallet or other relevant 
storage system) other than one owned, controlled, operated by, or 
affiliated with, the counterparty seller (including any parent 
companies, subsidiaries, partners, agents, affiliates, and others 
acting in concert with the counterparty seller) \171\ that has entered 
into an agreement with the purchaser to hold virtual currency as agent 
for the purchaser without regard to any asserted interest of the 
offeror, the counterparty seller, or persons acting in concert with the 
offeror or counterparty seller on a similar basis;
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    \170\ As noted above, the offeror may associate with an 
affiliated depository in Example 2 that the customer chooses to 
utilize, but such an affiliated depository should be: (i) A 
``financial institution'' as defined by CEA section 1a(21); (ii) a 
separate line of business from the offeror not subject to the 
offeror's control; (iii) a separate legal entity from the offeror 
and any offeror execution venue; (iv) predominantly operated for the 
purpose of providing custodial services for virtual currency and 
other digital assets; (v) appropriately licensed to conduct such 
custodial activity in the jurisdiction of the customer; (vi) 
offering the ability for the customer to utilize and engage in cold 
storage of the virtual currency; and (vii) contractually authorized 
by the customer to act as its agent.
    \171\ The Commission recognizes that an offeror could act in 
concert with both the purchaser and the counterparty seller in the 
ordinary course of business if it intermediates a transaction. This 
level of association would not preclude the offeror from maintaining 
an affiliation with a depository in a transaction that otherwise 
results in actual delivery pursuant to this example. However, 
pursuant to this example, actual delivery does not occur if the 
offeror, the offeror's execution venue, or any of its subsidiaries 
or affiliates, is also the counterparty to the retail commodity 
transaction at issue.
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    (2) The purchaser has secured full control over the virtual 
currency (e.g., the ability to remove as soon as technologically 
practicable and use freely up to the full amount of purchased commodity 
from the depository at any time, including by transferring to another 
depository of the customer's choosing); and
    (3) With respect to the commodity being delivered, no liens (or 
other interests or legal rights of the offeror, counterparty seller, or 
persons acting in concert with the offeror or counterparty seller on a 
similar basis) resulting or relating to the use of margin, leverage, or 
financing used to obtain the entire quantity of the commodity delivered 
will continue after the 28-day period has elapsed.\172\ This scenario 
assumes that no portion of the purchased commodity could be subjected 
to a forced sale or otherwise removed from the customer's control as a 
method of satisfying this example.
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    \172\ Although it will consider all relevant factors and 
circumstances, the Commission believes that actual delivery would 
not occur if a lien or similar interest is retained upon the 
specific virtual currency purchased beyond the 28-day actual 
delivery period, as such a lien is likely to preclude the customer 
from using the virtual currency freely as a medium of exchange in 
commerce. However, the Commission understands that actual delivery 
may still occur when liens exist on other collateral, including 
virtual currency or digital assets other than the specific virtual 
currency that is the subject of the retail commodity transaction.
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    Example 3: Actual delivery will not have occurred if, within 28 
days of entering into a transaction, the full amount of the purchased 
commodity is not transferred away from a digital account or ledger 
system owned or

[[Page 37744]]

operated by, or affiliated with, the offeror or counterparty seller (or 
their respective execution venues) and received by a separate, 
independent, appropriately licensed, depository or blockchain address 
in which the customer maintains possession and control in accordance 
with Example 2.
    Example 4: Actual delivery will not have occurred if, within 28 
days of entering into a transaction, a book entry is made by the 
offeror or counterparty seller purporting to show that delivery of the 
virtual currency has been made to the customer, but the counterparty 
seller or offeror has not, in accordance with the methods described in 
Example 1 or Example 2, actually delivered the entire quantity of the 
virtual currency purchased, including any portion of the purchase made 
using leverage, margin, or financing, regardless of whether the 
agreement, contract, or transaction between the purchaser and offeror 
or counterparty seller purports to create an enforceable obligation 
\173\ to deliver the commodity to the customer.
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    \173\ As discussed earlier, this ``enforceable obligation'' 
language relates to an element of a separate exception to CEA 
section 2(c)(2)(D) that is limited by its terms to a commercial 
transaction involving two commercial entities with a pre-existing 
line of business in the commodity at issue that is separate and 
distinct from the business of engaging in a retail commodity 
transaction. See 7 U.S.C. 2(c)(2)(D)(ii)(III)(bb).
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    Example 5: Actual delivery will not have occurred if, within 28 
days of entering into a transaction, the agreement, contract, or 
transaction for the purchase or sale of virtual currency is rolled, 
offset against, netted out, or settled in cash or virtual currency 
(other than the purchased virtual currency) between the customer and 
the offeror or counterparty seller (or persons acting in concert with 
the offeror or counterparty seller).

    Issued in Washington, DC, on May 27, 2020, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix to Retail Commodity Transactions Involving Certain Digital 
Assets--Commission Voting Summary

    On this matter, Chairman Tarbert and Commissioners Quintenz, 
Behnam, Stump, and Berkovitz voted in the affirmative. No 
Commissioner voted in the negative.

[FR Doc. 2020-11827 Filed 6-23-20; 8:45 am]
BILLING CODE 6351-01-P