US Federal Courts declare cryptocurrencies are commodities


Pronouncing judgment in a case of a cryptocurrency-related fraud, U.S District Judge Jack Weinstein ruled that Bitcoin-like cryptocurrencies can be regulated by the U.S Commodity Futures Trading Commission (CFTC). This is in line with CFTC’s contention that cryptocurrencies are commodities subject to its regulatory powers. The ruling could have widespread legal ramifications should other courts accept this position and classify Bitcoin-like cryptocurrencies as commodities.

Meanwhile, recent statements by the chairman of the U.S Securities and Exchange Commission (SEC) Jay Clayton suggest that the SEC might be viewing some cryptocurrencies, especially Initial Coin Offerings (ICOs), as securities coming under its purview.

Part of the confusion has to do with the fact that all cryptocurrencies are not alike. Some are commodities and some aren’t. A cryptocurrency like Bitcoin is valued because investors hold that the cryptocurrency has value in itself as a payment protocol. Thus, Bitcoin like cryptocurrencies are similar to commodities. In contrast, most Initial Coin Offerings (ICOs) tie the value of the coins offered to some other revenue generating process, thus acting like securities (equity). The challenge now lies in how cryptocurrencies are going to be sorted into these types and regulated.

It is notable that some countries like Switzerland have already published regulations for cryptocurrencies, classifying them into commodities, securities and hybrid tokens that have features of both. Many other countries including the U.S and India are yet to take a definitive stance on the legal status of cryptocurrencies. Calls for regulation of cryptocurrencies are only growing louder with the massive increase in market capitalisation since last year. Some regulation might be needed to protect government revenues and prevent fraud. However, regulations must be uniform across jurisdictions and state overreach must be curbed for global and decentralised cryptocurrencies to thrive.


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