In recent days, Bitcoin prices have surged past $11,000 before dropping back to around $10,000. This represents a more than 1000% growth since the start of 2017. In the last month alone, the price has more than doubled. This surge follows the announcement by the CME Group, the world’s leading derivatives marketplace, to launch Bitcoin futures on December 18. CBOE Global Markets Inc. also intends to launch a Bitcoin futures soon. Both received a green light from the CFTC today, December 1, through the process of self-certification – a pledge that the products do not run afoul of the law. There are also rumors that NASDAQ will launch a futures contract based on Bitcoin in 2018.

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange using cryptography to secure the transaction and verify the transfer of assets with no need for a bank or other middleman. It is one of many new virtual currencies. Many startups have attempted “Initial Coin Offerings” or ICOs to raise funds in an attempt to create a new virtual currency. Other startups have attempted to launch various platforms as exchanges or ways to utilize Bitcoin and similar virtual currencies.

The SEC, CFTC, and other regulators in the United States and around the world are taking an active role in regulating Bitcoin and other cryptocurrencies and bringing enforcement actions when necessary.

As early as 2013, the SEC’s office of Investor Education and Advocacy issued an investor alert on Ponzi schemes using virtual currencies. In July of this year, the SEC Division of Enforcement issued an investigative report “cautioning market participants that offers and sales of digital assets by ‘virtual’ organizations are subject to the requirements of the federal securities laws.” In March of 2017, the SEC rejected a bitcoin ETF on the basis that “significant markets for bitcoin are unregulated.” So far, no ETFs have been approved. In August, the SEC temporarily suspended the trading activity of three public companies that indicated they were likely to engage in an “initial coin offering” for a new digital currency. Earlier this month, the SEC Division of Enforcement issued a statement warning that celebrity endorsements of initial coin offerings and similar investments may be unlawful if they “do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”

Since 2015, the CFTC has taken the position that it views Bitcoin and other virtual currencies as commodities under the Commodity Exchange Act. Coinflip operated a trading platform with put and call options for Bitcoins in 2014 but did not follow regulations under the Commodity Exchange Act. Coinflip agreed to a settlement with the CFTC. It was not subject to a fine but was required to cease and desist from violating the act as well as subject to additional undertakings. As part of its order, the CFTC for the first time found that Bitcoin and other virtual currencies are properly defined as commodities. Aitan Goelman, the CFTC’s Director of Enforcement, commented: “While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets.” On October 4, 2017, the CFTC issued a “Primer on Virtual Currencies.” The primer warns of the extensive risk of fraud with virtual currencies and reaffirms the CFTC’s enforcement authority.

Bitcoin’s future is still uncertain. Goldman Sachs CEO Lloyd Blankfein tweeted in October that “Still thinking about #Bitcoin. No conclusion – not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.” Others have made up their mind. At a Barclay’s conference in September, J.P. Morgan’s Jaime Dimon called Bitcoin “a fraud worse than tulip bulbs.” A common critique of Bitcoin is that it is mostly used by tax evaders, money launders, and others wanting to avoid government scrutiny. Such secrecy may not last. The IRS recently won a court victory over Coindesk, one of the top Bitcoin exchanges, in a demand for a list of all Bitcoin users making transactions worth more than $20,000. The case is U.S. v. Coinbase, 17-01431, U.S. District Court, Northern District of California (San Francisco).

Companies utilizing virtual currencies may be using the money of the future, but they will face the regulators of today.