The late half of 2022 has been marked by a dispute regarding the categorization of cryptocurrencies as whether security or commodity.
This debate gained traction after Ethereum’s transition to a “proof-of-stake” consensus mechanism. According to the SEC, the new “staking” consensus opens up talks for classifying the second largest cryptocurrency by market capitalization in the world as security.
The argument is that investors will now look to buy Ether and hold to receive monetary prizes – much like a company shares its dividends among its stockholders. That, according to the United States Securities and Exchange Commission would classify Ethereum as an investment, not a currency.
Recently, Rostin Behnam, chairman of the Commodity Futures Trading Commission (CFTC) pondered against classifying digital assets as securities.
During a Manhattan event featuring Rutgers Law, Wall Street Blockchain Alliance, and Lowenstein Sandler this monday – Behnam touched on the delicate subject regarding the SEC’s recurring scuffles with cryptocurrencies.
“I’ve suggested [Eth] is a commodity, and Chair Gensler thinks otherwise,” Behnam said.
Although SEC Chair Gary Gensler considers Bitcoin to be a commodity, he does not feel the same way about other assets like as Ether and XRP.
Following the Merge, which saw Ethereum go from Proof-of-Work (PoW) to Proof-of-Stake (PoS), Gensler warned that the asset may be classed as a security last month.
The CFTC Chair also refuted the widely held idea that, given the SEC’s aggressive takes on crypto companies, the CFTC would be a more friendly regulator. “Our enforcement record speaks for itself,” he remarked.
CFTC And SEC Working Together
The CFTC chair went on to say that, contrary to popular belief, the Digital Commodities Consumer Protection Act bill would not grant the agency entire authority to categorize cryptocurrencies.
Senators Debbie Stabenow and John Boozman of the Senate Agriculture Committee submitted the draft legislation.
Behnam assured that the CFTC and SEC will continue to collaborate based on this.
“It’s a pretty cynical view to suggest two agencies can’t figure it out and work together,” he said. “This is the million-dollar question – How do we engage with the SEC when a product is in the gray area?”
Behnam went on to say that both authorities would have to collaborate to find a solution to legal and policy issues that would provide clarity in classifying crypto assets. He said that the measure will aid in the development of a regulatory framework and provide resources to the CFTC.
