Petition Aims To Take The Mystery Out Of Blockchain Custody

The blockchain has another link, this time in the legal world.

CoinDesk reported on Wednesday (July 20) that law firm Steptoe & Johnson LLP filed a petition with the Commodity Futures Trading Commission (CFTC) seeking a bit more transparency and insight into what the definition of “delivery” across blockchain transactions might be.

Interestingly enough, the petition has been signed by one former CFTC commissioner, Michael Dunn, who is also the senior policy adviser at the firm, along with partner Micah Green. The petition has, as its gestation, actions that involved both the CTFC and Hong Kong bitcoin exchange Bitfinex in June of this year. As has been reported, the exchange paid $75,000 to settle allegations that funds were not fully paid out to some traders. The issue, according to Steptoe, is that the fines and attendant settlement did not disclose what other changes had been mandated by the agency to ensure that the bitcoin platform would come into compliance — clarity that would ostensibly help the broader market.

As the site noted in reference to the Green/Dunn petition, the authors wrote: “Absent a definitive commission statement identifying the essential elements, participants must attempt to discern what is lawful and what is problematic through assessments of enforcement orders, which are focused on a single entity at a time and may or may not be instructive.”

Custody remains a key issue, and the contention exists that Bitfinex maintained access to the private keys tied to bitcoin loaned to traders. Holding onto those keys would imply that the currency was not actually delivered. The law firm noted that “engaging the public through a notice-and-comment rulemaking process would help to inform the commission about the relevant considerations in developing the elements of ‘actual delivery’ and the potential unintended consequences in rendering such an articulation.”