CFTC Asserts Jurisdiction over Bitcoin Derivatives

On September 17, 2015, the Commodity Futures Trading Commission (“CFTC”) issued an order (“Coinip Order”) settling charges brought against Coinip, Inc., the operator of an online trading platform that facilitated the trading of derivatives on Bitcoin and other digital currencies, also referred to by the CFTC and other regulators as “virtual currencies” (“Bitcoin Derivatives”), including U.S. dollar cash-settled options. The CFTC found that Coinip, Inc. had violated the Commodity Exchange Act (“CEA”) and CFTC rules by failing to register as a swap execution facility (“SEF”) or designated contract market (“DCM”). The direct impact of the Coinip Order is minimal, as the platform itself had already shut down due to lack of volume. However, the Coinip Order represents a watershed in the development of virtual currencies, as it is the first time that the CFTC has affirmatively asserted that Bitcoin and other virtual currencies are “properly defined as commodities” and that the CFTC has jurisdiction over Bitcoin Derivatives.