Bitcoin, Ethereum and Litecoin are commodities, CFTC says – Trustnodes

The Commodities Futures Trading Commission (CFTC) has declared ethereum and litecoin to be commodities, in addition to bitcoin.

In an action against Binance, one of the world’s largest crypto exchanges, the CFTC said “digital assets that are commodities include bitcoin (BTC), ether (ETH) and litecoin (LTC).”

This is the first time the commission has explicitly stated that litecoin is a commodity, referring to it as such several times in the complaint.

Litecoin is one of the first forks of bitcoin launched in 2011. It’s pretty much a copy-paste of bitcoin, except block times are every 2.5 minutes instead of 10 minutes.

Ethereum, of the three, has been the subject of most speculation about whether it could be a security, especially by its opponents.

Securities and Exchanges Commission (SEC) Chairman Gary Gensler has stated or implied that all cryptos, except bitcoin, are a security.

However, the CFTC makes it clear that three such cryptos are not securities but commodities, namely bitcoin, eth and litecoin.

Since their action against Binance is primarily due to them offering ‘commodity’ futures without registering with the CFTC, the CFTC must determine that there are indeed some commodities being traded on Binance, therefore specifying the classification of the three cryptos.

However, some argue that all three are actually currencies or money, and that is the position of another US department, FinCen.

They require registration with FinCen as a money transmitter, a currency, even if you just sell a few bitcoin, eth or litecoin on something like Localbitcoins.

While the IRS classifies them as property, whatever that means, and with respect to asset reporting for publicly traded companies, cryptos are intangible assets with indefinite lives on the balance sheet.

These inconsistencies have led to criticism of the law from enforcement, but in the case of ethereum in particular, its repetition as a commodity confirms that a crypto can potentially start as a security, in this case through an ICO, and eventually become a commodity.

The CFTC does not oversee spot trading of cryptocurrencies, so an exchange that offers only the purchase and sale of eth, bitcoin or litecoin does not need to register with them, although they must comply with FinCen.

However, if they offer futures, options, swaps or other derivatives to US citizens, they must register with the CFTC.

In the case of Binance, the CFTC said 16% of the accounts on the exchange belong to US citizens, while Binance maintains that it takes all necessary measures to prevent access to the exchange by Americans.

The CFTC also says that Binance itself does not have an executive office, and claims that it is not under the applicable regulations of any jurisdiction.

However, it is a bit more complex because Binance started as an ICO and technically it is supposed to be owned by BNB token holders worldwide.

It was meant to be run by them as well, through a DAO or some other similar mechanism, all of which are very different from a traditional company.

About six years since that ICO, but Binance in its current form is quite traditional with a top-down organization, a CEO, employees, and with the DAO part not existing except as a semi-legal design of Binance’s initiation.

Simple therefore, it is for a regulator to say this is the law, but the public must first decide whether there is any innovation in Binance’s corporate design, if we can call it that, and whether it is the law that is outdated and needs to be changed or whether Binance, regardless of its current or prospective structure, must still comply.

As the largest and rather centralized attempt to implement this new thinking that we call DAO, Binance has been a confusing entity, certainly for regulators, but also for some of the public like Bloomberg who claims Zhao owns all of Binance, when it was an ICO that does not quite the case, if Changpeng Zhao obviously complies with the terms of that ICO.

Regulators, and the public, must therefore begin to consider what a DAO is and how it fits into the current regulatory system, as well as whether any updates need to be made to accommodate experimentation and potential innovation.

Because Zhao doesn’t do all this just for fun. He could incorporate somewhere, in the Bahamas as FTX or some other lax jurisdiction and get it over with. He does not because he is part of a community that has, since at least 2016, wondered whether the company as a legal form – invented around 500 years ago – can be updated or innovated in the digital age.

Since Binance is a fairly centralized entity, these complex and nuanced arguments are harder to make, and you’d think the reaction from regulators would be something like “pfff, what.”

But hopefully the crypto space at least understands exactly what is going on in regards to this “no HQ” experiment which is a first as far as we are aware.

And it’s potentially a prelude to what’s to come when we get to the actual DAOs, which are being built, refined and experimented in the corners of crypto.

Since they require significant input, their debut hasn’t come yet, partly because it’s a very hybrid company model to the extent that you need the centralized aspect of a management staff, and how dao-nians hire and fire them are complex matters.

But, it’s an exciting experiment, and Binance, perhaps in a very small way, is trying to push it forward. That is the reason why the stock exchange has generally received support in this area.