- The Chairman of the Commodity Futures Trading Commission stated at the All Markets Summit of Yahoo Finance that Ethereum is a commodity.
- Heath Tarbert continued to argue that “similar digital assets should be treated similarly” with regard to hard forks on cryptocurrencies.
After the regulatory authorities in the USA attracted attention last year due to restraint in the area of cryptocurrencies, more and more movement is now coming into the process. After the Securities and Exchange Commission (SEC) recently confirmed that Bitcoin is not a security, the Commodity Futures Trading Commission (CFTC) has apparently made a decision for the second largest cryptocurrency after market capitalization (ETH).
As the chairman of the CFTC, Heath Tarbert, explained on Thursday on stage at the All Markets Summit of Yahoo Finance in New York, Ethereum (ETH) in his opinion is a commodity and therefore falls under the jurisdiction of his authority:
We’ve been very clear on bitcoin: bitcoin is a commodity. We haven’t said anything about ether—until now. It is my view as chairman of the CFTC that ether is a commodity.
With this statement, Tarbert confirms an earlier finding by SEC Director of Corporate Finance William Hinman. He already said in June 2018 that in his opinion Ethereum should not be classified as a security because the ETH network is highly decentralized. The statement, however, was relativized shortly afterwards by SEC Chairman Jay Clayton. Clayton explained that Hinman’s statement was not a legally binding decision. A clear statement, neither from the SEC, nor from the CFTC on Ethereum, was missing afterwards.
Tarbert also said that the CFTC is working closely with the SEC to resolve the regulatory ambiguities in the market. Tarbert also clarified the situation by saying that “similar digital assets should be treated similarly”. With this statement, Tarbert referred to cryptocurrencies created by hard forks:
It stands to reason that similarly assets should be treated similarly. If the underlying asset, the original digital asset, hasn’t been determined to be a security and is therefore a commodity, most likely the forked asset will be the same.
Are all ICO tokens a security?
William Hinman also spoke at Yahoo Finance’s All Markets Summit. The SEC Director commented on Initial Coin Offerings (ICOs) and stated, according to Yahoo, that “newly created tokens are likely to be securities because they are marketed with the promise that the assets will be cultivated in such a way that they can increase in value and later be sold at a profit”.
Bitcoin and Ether are not securities in Hinman’s view because they are not controlled by a central interest group. Hinman also said, however, that cryptocurrencies can first be issued as securities and then become commodities. This follows on from the recent SEC ruling that Block.One had been condemned for selling unregistered securities under EOS’s ICO. At the same time, however, the SEC also noted that the EOS tokens had lost their status as securities with the launch of the Mainnet.
Why is the classification important?
For all cryptocurrencies, the question arises as to whether they can be classified as securities or investment goods. While regulations vary from country to country, the impact is likely to be similar in many countries. Classification as a security is the worse result, while declaration as an investment good is the preferred result.
This is because securities are more regulated globally. In the US, classification as a security would mean that the Securities and Exchange Commission would be responsible, while the CFTC for capital goods would be the controlling body. If a crypto currency is classified as a security, the cryptocurrency exchanges would have to register with the SEC.
To do this, they would have to comply with stricter guidelines and procedures, which would result in higher costs. Since the exchanges also want to escape the influence of the regulatory authorities, they would presumably simply remove the crypto currency concerned from the portfolio. For investors, the classification as a security would mean a lifting of the anonymity offered by some exchanges, such as Binance. On the other hand, the commodity spot market is much less regulated.