Popular Bitcoin and altcoin exchange Poloniex has submitted a request for no action relief to the Commodities and Futures Trading Commission (CFTC) around potential allegations that required timing of the “actual delivery” of cryptocurrency, regulated by a 28 day period in the Commodity Exchange Act (CEA), has been violated.
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The digital nature of cryptocurrency, however, does not mend well to the wording of existing laws, thereby hurting attempts to determine the full, or “actual” delivery of the commodity. Poloniex, in turn, has responded by saying that their business practices of providing cryptocurrency exchange and margin trading do not fall under this stipulation.
Poloniex Makes a Case for Constructive Bitcoin Regulation
Due to the unique, abstract nature of cryptocurrency, determining when an “actual delivery” occurred is grey in relation to the black and white delivery of traditional commodities such as wheat or oil.
The CEA, enacted initially in 1936, states, “physical… delivery [of] the entire quantity of the commodity purchased by the buyer, including any portion of the purchase made using leverage, margin, or financing.”
While the blockchain is time-stamped, delivery of cryptocurrency itself to customers is the main question in play here. Poloniex, however, argues that the cryptocurrency at hand is delivered to the recipient immediately after the completion of an order. Whether these transactions are traditional or for lending or margin trading, the recipient takes possession, ownership, and legal control of the cryptocurrency as soon as an order is completed.
While it seems that this would free such services from this particular regulatory obligation, such questions will have to be answered in court.
Speaking to the difficulty faced by many organizations navigating the murky regulatory waters in the space and the subsequent need for further clarification, Poloniex’s press release states:
“This privilege isn’t without its challenges, because we are operating in an emerging space against a backdrop of regulations honed and crafted for yesterday’s technology — the bygone era of analogue trading. As stakeholders, stewards, and charter members of a nascent technology, it is our collective responsibility to respectfully request for laws that make sense for this new technology.”
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Images courtesy of Hedge Think, Poloniex.