Commodity Futures Trading Commission (CFTC) chairman Heath Tarbert has cleared one of the most debated topics in the crypto-verse: Does Ethereum fall under the security category or is it a commodity like Bitcoin? CFTC after months of studying Ethereum has decided that the second-largest cryptocurrency is a commodity and thus it falls under their jurisdiction, reported Yahoo Finance.
Tarbert, during the Yahoo Finance’s All Market Summit noted that while everyone was clear regarding Bitcoin’s status, there were some doubts regarding the status of Ethereum even though SEC had earlier made it clear that neither Bitcoin nor Ethereum is considered as Security. He said,
“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.”
This is not the first time when CFTC has cleared their views on virtual currencies, back in 2015 during filing charges against a firm called CoinFlip, CFTC has mentioned in the filing that they consider “Bitcoin and other virtual currencies” as commodities. However, this is the first time the commission has issued guidelines for ether.
Forked cryptocurrencies should be treated similar to the parent chain by regulators
The announcement about Ethereum’s status was big news for the crypto-verse, however, the comments of the chairman regarding forked coins was even bigger news. He said forked cryptocurrencies like Bitcoin Cash, Bitcoin Gold and Ethereum Classic and like cryptocurrencies should be treated the same way by regulators as they treat the parent chain since they have been created from the same technology.
“It stands to reason that similar 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, unless the fork itself raises some securities law issues under that classic Howey Test.”
Newly created coins can start as Security but can turn into a commodity
Last year in June, SEC’s director of corporate finance Bill Hinman said that all new crypto tokens are Securities, because of their
“promise that the assets will be cultivated in a way that will cause them to grow in value, to be sold later at a profit,” and “typically are sold to a wide audience rather than to persons who are likely to use them on the network.”
However, Tarbert gave hope to the Altcoins by claiming that even those coins which are brought into the market via ICOs and thus categorized as Securities by the SEC can eventually become a commodity. He explained,
“You can have a situation where something in an initial coin offering is security initially, but over time, it gets more decentralized, and there’s a tangible value there, so you can have things that change back and forth.”
2019 has seen many governments and policymakers showing more interest in the crypto space than ever before. The adoption rate has gained significant momentum as several European countries have come out to regulate crypto trading positively while in many struggling States crypto has turned out to be a savior.
The former chairman of CFTC Christopher Giancarlo had quite similar views during a recent interview last week where he said,
“2019 is the year in which there’s a growing recognition that regulators and policymakers need to do more than just be aware of these, but may actually need to look at some policy responses. And I think the thing driving that in 2019 is a combination of Libra and the prospects for central bank digital currencies.”
This year not only mainstream cryptocurrency market has been in the headlines, but the urge of private players like Facebook planning to launch their own stablecoin in the form of Libra has pushed regulators and policymakers around the globe to study the cryptocurrencies more seriously than ever.