Regulation for Blockchain Commodities Trading

by | May 12, 2020 | Blockchain | 0 comments

As commodity and global markets begin this week with a rally, regulators turn to commodity markets to ensure global financial stability as shutdowns stretch into the distant horizon. Responding to the recent global commodity price crash and its related risks to global financial instability, cryptocurrencies, coins, tokens, and other digital currencies are increasingly becoming part of conversations as regulated investments are being made to bolster safeguards containing investor losses in commodities. Recent legislation passed in the U.S. might have some details to provide insight into what is to come.

Earlier this year in an interview Bloomberg Markets, Chairman of the Commodity Futures Trading Commission (CFTC) talked about the agency’s proposal to limit the size of speculative trades that can be made on derivatives in the commodity market; ensuring the protection of the futures market from excessive speculation causing unreasonable or unwarranted price fluctuations. In the same interview, Chairman Tarbert, expressed the CFTC’s position on increasing the role of cryptocurrencies, mentioning a favor of encouraging innovation and settling the U.S. as a leader in the space. ETH and BTC currently fall under CFTC regulations potentially introducing more crypto-exchanges as the commodities and assets markets are further integrated with crypto-markets.

Enter Regulation

Introduced in March, H.B. 1865 — the Further Consolidated Appropriations Act was passed into law introducing agency roles to regulating the use of cryptocurrencies in illegal activity, preventing unfair and deceptive practices, and furthermore calling for the Secretary of State and the Secretary of the Treasury to consult with the Securities and Exchange Commission and the Commodity Futures Trading Commission to access the impact of cryptocurrencies on the U.S. Sanctions. Later in April, The Blockchain Association announced the formation of a new Security Token Working Group helping “coordinate the crypto industry’s work with regulators and policy market to modernize securities regulations.” Although this was the only bill passed into law, it was one of five recently introduced to US Congress over the last legislative cycle.

As the role of cryptocurrencies and blockchain trading continues to increase, there will likely be further regulations on trading platforms, increase of protection of customer assets, governance standards, conflicts of interest, prevention of fraud, and disclosure to platform users to ensure support widespread adoption of the blockchain in commodities and asset trading. Proving to be a well-performing method of hedging risk in the wake of the coronavirus, blockchain commodities trading will become more popular increasing additional potential regulations to support institutional adoption of platforms and daily trading.

Creating a Roadmap for Regulatory Adoption

With the potential asset-backed tokens playing a role in evolving the development of commodities markets, industry contributors and partners must formulate self-regulatory standards, including providing transparent and compliment services according to the location regulation of projects, in an effort to create a roadmap for regulatory adoption.

As asset-backed tokens and other blockchain tools continue altering commodities and future tradings, traders have an opportunity to join in creating the roadmap set to bring new value in the future of trading commodities and assets deemed too risky in the wake of a global depression. Contact us today for investing, fundraising, and trading in asset-backed tokens.


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