Recently, a news posted by NewsBTC claimed that cryptocurrencies can be viewed legally as commodities. At least that’s what a federal judge decided yesterday. According to him, digital currencies should be viewed legally as commodities, as they fall under the Commodity Exchange Act.
The decision came out as a fraud case solution against My Big Coin Pay Inc., where Randall Crater was sued by CFTC ( Commodity Futures Trading Commission) for a $6 million fraud. A class lawsuit with 28 investors was created against Randall – people accusing him that he used marketing that made it sound like Bitcoin as well as claiming it was backed by real gold. U.S. District Judge Rya Zobel decided that Bitcoin fall under the Commodity Exchange Act by his futures products that already exist, and so does My Big Coin under the same category as Bitcoin. She declared:
“That is sufficient, especially at the pleading stage, for plaintiff to allege that My Big Coin is a ‘commodity’ under the Act.”
The good, the bad and the ugly
The good part of Bitcoin being a commodity and the case above is the fact that the scam ICOs will decrease drastically over the next few months or years. Less and less shady projects will appear. As soon as the decision will be official, people will think twice before creating a Bitconnect 2.0. The funds will be safu again and ICOs will be created more for the crowdfunding purpose, than for scamming people out of their BTC.
The bad part is related to the good part. If CFTC now have a word to say regarding Bitcoin and other cryptocurrencies, they can probably influence the market as they want. For example, an investor might jump in after Bitcoin will be legally declared as a commodity and purchase $100 billion dollars worth of BTCs. This will probably grow the BTC price with at least 30-40%. Now, CFTC may think someone is manipulating the market – which is not the case here – and can fine the investor a large amount of cash for doing that.
The ugly truth is that Bitcoin is losing its purpose. Nakamoto’s headline was ” A Peer-to-Peer Electronic Cash System” and declared Bitcoin as an “electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party”. But now the third party is here. And they might get too much control over a project that was supposed to eliminate the third party involved. Instead of being based on trust and cryptographic proof, it can be put under the CFTC’s supervision that can create some regulatory issues.
Can any cryptocurreny be defined as a commodity?
Taking into consideration the CFTC’s decision from September 2015, probably yes. Bitcoin was already mentioned as a crypto-commodity by Investopedia. There’s also the term of Smart Assets presented there. So, which one is correct?
Well, Bitcoin isn’t surely a soft commodity. Wikipedia defines soft commodities as good that are grown. But Bitcoin can easily be defined as a hard commodity – as the value comes from the mining process and the supply is limited. We can consider that a large number of cryptocurrencies can be defined as commodities, if we take that into consideration.
Even though Bitcoin and other cryptocurrencies can be defined as commodities, there’s also the term of ‘smart assets’ that define the cryptocurrency industry better. Ethereum would be a perfect example for a smart asset, as Austria will just use Ethereum’s blockchain to issue $1.15 billion of government bonds – due to its immutability and transparent records.
It’s hard to find a specific category for the cryptocurrencies out there. Bitcoin was recognized as an asset, commodity and even as a currency. But from a global regulatory point of view, there’s nothing sure. However, the decision of whether Bitcoin is a currency or a commodity matters, as MarketWatch wrote in their article.
Image source: DanielsTrading
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