The US Commodity Futures Trading Commission is proposing to issue an 'interpretation' concerning its authority over retail commodity transactions involving virtual currencies such as Bitcoin.

The 'proposed interpretation,' as the regulator calls it, sets out its view of a so-called "actual delivery exception" that may apply to virtual currency transactions. The document is open to public comment for 90 days after its publication in the Federal Register.

Section 2(c)(2)(D) Commodity Exchange Act provides the CFTC with direct authority over “retail commodity transactions” – defined as agreements, contracts or transactions in any commodity that are entered into with, or offered to retail market participants on a leveraged or margined basis, or financed by the offeror, the counterparty or a person acting in concert with the offeror or counterparty on a similar basis. Such a transaction is subject to the Commodity Exchange Act 'as if' it were a commodity future. This statute contains an exception for contracts of sale that result in 'actual delivery' within 28 days from the date of the transaction.

The 'proposed interpretation' contains two primary factors necessary to demonstrate 'actual delivery' of retail commodity transactions in virtual currency.

(1) The customer must be able to: (i) take possession and control of the entire quantity of the commodity, whether it was purchased on margin, or using leverage, or any other financing arrangement, and (ii) use it freely in commerce (both within and away from any particular platform) no later than 28 days from the date of the transaction.

(2) The offeror and counterparty seller (including any affiliates) should not retain any interest in or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction.