US judge agrees that cryptocurrencies are commodities
All digital currencies are commodities, but are all crypto assets digital currencies?
A federal judge this week said that virtual currencies meet the definition of a commodity, Reuters reports. The immediate upshot is that the Commodity Futures Trading Commission (CFTC) can continue pressing its cryptocurrency cases.
The decision adds another piece to the puzzle of whether any individual branch will end up getting oversight over cryptocurrencies and digital assets.
So far it's simultaneously a currency, asset and commodity, which may or may not also be a security. This has led to the organisations responsible for policing each of these as seeing cryptocurrency through their own lens. For example, the SEC is looking at the space from the perspective of regulating security offerings and investment products, while the CFTC has been mostly occupying itself with some of the clearer scam and fraud allegations.
The current case at hand is against My Big Coin, whose creator Randall Crater is alleged to have misappropriated $6 million from 28 customers that they lured by naming My Big Coin to sound like bitcoin, and claiming it was backed by gold.
As an initial defence, Crater's lawyers argued that the case should be dismissed as the CFTC has no authority over My Big Coin, on account of it being neither a tangible good nor a service on which futures contracts are being traded.
But if it actually was backed by gold wouldn't that make it a tangible asset?
Either way, US district judge Rya Zobel said that it did meet the definition, because the law defines commodities in broad categories, rather than individual brand names. As the reasoning goes, bitcoin futures currently trade on US exchanges, and it's a digital currency. As a result, all digital currencies are arguably under the CFTC's purview.
That might not be that though. In an email to Reuters, Crater's lawyer said that they would be challenging "factual allegations" in the complaint, including "those which speak to the relatedness of bitcoin and My Big Coin and therefore the CFTC's jurisdiction."
However it ends for My Big Coin, that argument might be interesting to watch going forwards. As the cryptocurrency space evolves, more distinct crypto categories are emerging and it's probably not feasible to keep lumping all tokens together as digital currencies.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA