West Palm Beach Securities Attorney Laura Anthony Provides Insights into Emerging Questions about Bitcoin and Cryptocurrencies

As the cryptocurrency market continues to expand and evolve, so do some very common questions surrounding it.

Do Bitcoins or cryptocurrencies qualify as commodities? If they’re used for investment purposes, do they generate dividends or interest? Can they be converted to more traditional currencies, and if so, what are the regulator and reporting consequences?

Those questions and other issues are addressed in the February 20 Securities Law Blog by West Palm Beach Securities Attorney Laura Anthony, founder of Legal and Compliance, LLC.

She specifically focuses on recent actions and guidance provided by the Commodities Futures Trading Commission (CFTC), which defined cryptocurrencies as commodities in 2015 and has regulatory authority over virtual currency transactions and fraud.

Ms. Anthony describes the finer points of the CFTC’s October 17 publication, “Primer on Virtual Currencies,” noting that the CFTC’s position is in line with the U.S. Securities and Exchange Commission’s finding that “most cryptocurrencies and initial cryptocurrency offerings today are securities requiring compliance with the federal securities laws.”

The SEC, she points out, regulates securities and securities markets (although no SEC-licensed securities exchanges accept virtual currencies), while the CFTC regulates commodities and commodity markets, including several commodities exchanges that trade virtual currency-product swaps and options (e.g., the TeraExchange, North American Derivatives Exchange, and LedgerX).

The CFTC joins other regulators in warning investors about the “significant speculation and volatility risk” of virtual currencies like Bitcoin, Ms. Anthony points out as she continues to urges investors to explore the cryptocurrency with an open mind and a healthy dose of caution and scrutiny.

“Although many virtual currencies, including Bitcoin, market themselves as a payment method, the ability to utilize Bitcoin and other virtual currencies for everyday goods and services has not yet come to fruition,” she writes.

“In fact, the trend toward Bitcoin as a regularly accepted payment has seemed to have gone the other way, with payment processor Stripe, tech giant Microsoft, and gaming platform Steam discontinuing Bitcoin support due to lengthy transaction times and increased transaction failure rates.”