The Commodity Futures Trading Commission (CFTC) recently released a Digital Assets Primer that provides updated information to the public about emerging concepts in digital assets. The primer is part of a series issued by the CFTC’s innovation office, LabCFTC, and is the second to delve into issues surrounding digital assets.

The Digital Assets Primer is a helpful high level overview of the digital asset marketplace, and regulatory considerations under the U.S. Commodity Exchange Act and related CFTC regulations.

Here are a few observations that we believe are noteworthy:

• The Primer establishes Digital Assets as a broad term that may encompass physical or virtual assets, a value, or a use right/service, and can include smart contracts.
• While the CFTC has referred to Digital Assets before, such as in the Final Interpretive Guidance regarding Retail Commodity Transactions Involving Certain Digital Assets, this is the first time that a CFTC document specifically identifies Virtual Currencies, Digital Tokens, and Digital Assets.

• • The primer describes Virtual Currency as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value”, and places it as a subset of Digital Assets, alongside Digital Tokens.

• • A Digital Token is defined as a “digital asset that requires another blockchain network to operate and may serve a variety of functions beyond virtual currency, e.g., utility tokens.”
• The CFTC Primer specifies that : “Depending on its design, function, and use, a digital asset may be characterized differently, including as a commodity, swap or other derivative” depending upon its characteristics, and describes potential considerations in any evaluation of a Digital Asset to determine which regulatory frameworks may apply.
• The Primer also walks through its jurisdiction over Digital Assets and Digital Asset market oversight.

A full press release from the CFTC announcing the release of the Primer can be found here.

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