The regulatory response to the initial coin offerings of 2017–18 proceeded slowly and varied considerably between one jurisdiction and another. This was in part because there was no agreed classification of cryptoassets. Depending on how they were used by the issuer they could be construed as a means of exchange, a store of value, or investment tokens, supposedly providing ownership rights, or dividends. And utility tokens provide access to a specific product or service. The situation is even more confusing because some cryptoassets fall into more than one category.

Similarly developments in the cryptocurrency world also led to further changes in the approach to regulation. The differences in approach meant that companies in the virtual asset or currency business could select the jurisdiction which best suited their purposes. The fact that cryptocurrencies have become multibillion-dollar industries has, of course, attracted investors in every part of the world.

THE UNITED STATES

The United States regulatory structure enabled the regulatory authorities to accommodate cryptoassets with ease. On 1 December 2017, the CFTC first approved trading in Bitcoin futures and then later virtual currencies. This might seem odd at first, but the Commodity Exchange Act gives such a broad definition of “commodity” that it can cover “all services, rights and interests … in which contracts for future delivery are presently or in the future dealt with”.1 The CFTC's focus is on the risk transfer markets and derivatives, which are largely traded by big institutions, not on the retail market, which is the SEC's concern. The then chairman of the CFTC, Chris Giancarlo was a well-known advocate of virtual currencies. The CFTC has jurisdiction when a virtual currency is used in a derivatives contract or if there is fraud or manipulation involving a virtual currency traded in interstate commerce. The CFTC issued a statement supporting interpretive guidance on actual delivery of virtual assets in March 2020. The CFTC concluded that an actual delivery has occurred when the customer has the ability to take possession and control of the “entire quantity of the commodity” however it was purchased (e.g. using leverage) and is able to use “freely in commerce” no later than 28 days from the date of the transaction.