CFTC Chairman Confirms Bitcoin, Ether Are CommoditiesAdam Gardiner
One of the biggest uncertainties facing cryptocurrencies is their legal status and the prospect of future financial regulation. With the Internal Revenue Service (IRS) providing minimal tax guidance, cryptocurrency users and investors have been largely operating in a gray area for the past several years. One of the biggest questions to face cryptocurrency investors was whether cryptocurrencies are considered securities or commodities. The answer to that question has profound ramifications for users, businesses, and investors. And now we may have a little more clarity.
The Chairman of the Commodity Futures Trading Commission (CFTC) made it clear in a recent talk that neither Bitcoin nor Ether are securities, but rather commodities. The CFTC has always been of the opinion that Bitcoin wasn’t a security, but Ether was another story altogether due to the nature of its creation and dispersal. Chairman Heath Tarbert also tackled the issue of hard forks, that each hard fork that resulted in a new crypto-coin would retain the commodity nature of its underlying parent cryptocurrency unless some other issue crept up.
According to Tarbert, the CFTC is working with the Securities and Exchange Commission (SEC) to flesh out details surrounding regulation of Bitcoin and Ether. The CFTC is also looking at Facebook’s planned Libra cryptocurrency, attempting to determine whether it too is a security or a commodity.
While many cryptocurrency users and investors may feel that the distinction isn’t an important one, the difference between commodities and securities affects who can offer them for sale, how they are purchased, what types of derivative and futures contracts can be offered and where, etc. It’s a distinction with very important differences.
Any cryptocurrency that ends up being classified as a security is going to have a very tough time making headway against commodity cryptocurrencies such as Bitcoin and Ether. Thankfully Bitcoin’s status as a commodity is assured, which means that those who invest in Bitcoin don’t have much to worry about.