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Poloniex yesterday filed a request for “no-action” relief from the CFTC.

This is the latest episode in what must seem to non-policy-geeks like a tedious and esoteric regulatory saga that began with Bitfinex’s June settlement with the CFTC. It’s important, though.

Basically, if you’re an exchange offering margin trading (like Bitfinex and Poloniex), then you are subject to the Commodities Exchange Act (CEA) and regulation by the CFTC unless trades on your platform result in “actual delivery” of the commodity in question (in this case cryptocurrency). In the case of physical commodities like corn, physical delivery of the commodity is a good indicator of actual delivery. But in the case of non-physical commodities like cryptocurrency, the CFTC has never put forth a policy statement explaining what qualifies as actual delivery. Tedious, I know.

The question, therefore, is something like this: Does the cryptocurrency have to be delivered to a blockchain address to which only the buyer has the private keys? Or is it good enough to transfer the cryptocurrency to the buyer’s account on the exchange platform as long as they have full right to withdraw, sell, or do whatever else they want with the cryptocurrency?

It’s important to underscore that this is not a metaphysical question about the meaning of possession in digital bearer assets; it’s a question about what path best furthers the policy goals of the CEA and its exemptions. Answering this question, therefore, is something that the CFTC can only do in an open and transparent rulemaking with public input as the Administrative Procedures Act requires. We urge it to do so.