Regulatory Series on Cryptocurrencies: US-SEC, CFTC, and FinCEN Heads Issue Joint Statements on Digital Assets For AML/CFT Obligations

While the US-SEC maintains the conservative approach on cryptocurrencies by constantly declining bitcoin ETF proposals and by stating ‘Bitcoin and Ethereum Are Not Securities’, whereas the new Chair of the CFTC (Commodity Futures Trading Commission) has said that Ether (ETH) is a commodity – hinting the room for a plethora of newly regulated derivatives products on platforms like the CBOE.

Recently, the CFTC Chairman Heath Tarbert, at Yahoo Finance’s All Markets Summit in New York, said “it is my view as chairman of the CFTC that ether is a commodity.” 

Although the CFTC had previously declared that “Bitcoin and other virtual currencies” should be treated as commodities in 2015, Tarbert’s remarks are the first time A CFTC official has ever publicly commented on Ether.

For now, the heads of the U.S. Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, and the U.S. Securities and Exchange Commission (the “Agencies”) have now issued the following joint statement to remind those who engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA). 

AML/CFT obligations apply to entities that the BSA defines as “financial institutions,” such as futures commission merchants and introducing brokers obligated to register with the CFTC, money services businesses (MSBs) as defined by FinCEN, and broker-dealers and mutual funds obligated to register with the SEC.  Among those AML/CFT obligations are the requirement to establish and implement an effective anti-money laundering program (AML Program) and recordkeeping and reporting requirements, including suspicious activity reporting (SAR) requirements.

For the purpose of this joint statement, “digital assets” include instruments that may qualify under applicable U.S. laws as securities, commodities, and security-or commodity-based instruments such as futures or swaps. 

We are aware that market participants refer to digital assets using many different labels. The label or terminology used to describe a digital asset or a person engaging in or providing financial activities or services involving a digital asset, however, may not necessarily align with how that asset, activity or service is defined under the BSA, or under the laws and rules administered by the CFTC and the SEC.