I agree with the Commission’s findings that the respondents in the Tether matter violated Section 6(c)(1)(A) of the Commodity Exchange Act (CEA) and CFTC Regulation 180.1(a)(2), and that the respondents in the Bitfinex matter violated Sections 4(a) and 4d of the CEA and Part VII. A of the Commission’s June 2, 2016 Order finding that BFXNA had violated the then-effective Sections 4(a) and 4d of the CEA.

The settlement with the Tether respondents finds that there were misrepresentations regarding the assets backing tether, specifically that the USDt tokens were backed 1-to-1 by US dollars.  The evidence establishes that this assurance provided to tether customers was not 100% true, 100% of the time.  When reviewing this record, it is clear to me that wrongdoing occurred, and that someone should be held accountable.  For all of these reasons, I concur in the Commission’s acceptance of the Tether respondents’ offers of settlement.

However, because this is the first time the CFTC has applied the CEA’s broad definition of “commodity” [1] to a stablecoin, I wish to reiterate my concern that enforcement actions such as this involving digital assets may cause confusion about the CFTC’s role in this area.  While the definition of a “commodity” is relied upon in applying the anti-fraud provisions in CEA Section 6(c), we should seek to ensure the public understands that we do not regulate stablecoins and we do not have daily insight into the businesses of those who issue such.  But in pursuing and settling this matter, do we provide users of stablecoins with a false sense of comfort that we are overseeing those who issue and sell these coins such that they are protected from wrongdoing?

In a recent speech, SEC Commissioner Hester Peirce asked an important question when it comes to the US regulators’ review of stablecoins: “Are we fighting for investors or are we fighting for jurisdiction?”[2]  This question is front-and-center in my mind as I consider these settlements.

Do the actions of the CFTC in entering into this settlement with the Tether respondents create a false sense of security for those investing in stablecoins?  Are we leading the general public to believe that stablecoins are safe from fraud and manipulation because of the CFTC is the full-time ‘cop on the beat’? Will our actions lead to greater protections, or have we taken an opportunity to push the limits of our enforcement authority in order to claim a piece of the jurisdictional pie?

I also concur in the findings that Bitfinex violated CEA Sections 4(a) and 4d by engaging in illegal, off-exchange retail commodity transactions and failing to register as a Futures Commission Merchant (FCM).  However, while I will not repeat the point in full here, I encourage you to read my concurring statement in the recent Kraken case.  As I stated there:

I believe that if the Commission is going to hold an exchange liable for operating as an unregistered FCM with respect to retail commodity transactions, it is incumbent upon the Commission to explain in a transparent manner the relevant legal requirements for such an entity that seeks to register as an FCM and how the Commission will apply them in enabling the entity to conduct business with U.S. customers.[3]