What are the implications if Bitcoin is treated as a commodity?

Securities and Exchange Commission (SEC) Chair Gary Gensler told the House Appropriations Committee connected May 18 that Bitcoin could perchance beryllium a commodity token.

His nonstop words were:

“Bitcoin — possibly that’s a commodity token. That has a large marketplace value, but that goes implicit there.”

Previously, Gensler had argued that astir cryptocurrencies autumn nether the classification of a security. However, his stance is present clarified connected the matter, which raises the question of however classifying cryptocurrencies arsenic a commodity volition impact Bitcoin and the wide crypto industry.

The SEC is successful a lose-lose position

The U.S. crypto manufacture has agelong been marred by vague regulation, peculiarly regarding securities law.

The contented is exemplified by the ongoing SEC vs. Ripple lawsuit successful which the regulator alleged Ripple had sold unregulated securities, successful its XRP token, to the tune of $1.3 billion.

Ripple maintained that it had followed the instrumentality per its knowing of the rules. However, muddied waters person led to uncertainty connected what the rules are.

In 2021, Ripple CEO Brad Garlinghouse summed up the concern by blasting the SEC’s arbitrary attack to regulation. Commenting connected the erstwhile SEC Director William Hinman backtracking connected Ethereum’s non-securities status, Garlinghouse asked, “how is the marketplace expected to person clarity?!”

In 2018 Bill Hinman said ETH isn’t a information and Jay Clayton agreed. But conscionable weeks ago, Hinman filed a sworn affidavit successful Court saying the SEC inactive has “not taken immoderate presumption oregon expressed a view” connected ETH’s status…so however is the marketplace expected to person clarity?! https://t.co/FRAlsfcLoG

— Brad Garlinghouse (@bgarlinghouse) August 4, 2021

Klaros Group Partner Jonah Crane said the Ripple suit is simply a “high hazard case” for them. The tribunal ruling could unit the SEC to specify its policies much clearly. At the aforesaid time, this would permission nary uncertainty astir what constitutes a securities offering, opening up the bureau to ineligible challenges.

“If the SEC were to state a clump of tokens to beryllium securities, it would look ineligible challenges.

And close now, it’s astir apt waiting to spot however the Ripple/XRP lawsuit plays out.”

Bitcoin is simply a commodity, according to Gensler

With Gensler clarifying that Bitcoin “maybe” a commodity, Crane said it’s the clearest connection he’s heard to day connected the matter.

Gensler further explained that a commodity is similar maize oregon golden successful that it “doesn’t person an issuer,” and determination is nary azygous entity down it, with the nationalist expecting returns from the efforts of that entity.

“A commodity would beryllium a merchandise similar “corn oregon wheat oregon golden oregon oil” which “doesn’t person an issuer, doesn’t person 1 enactment sitting determination down it and the public’s not anticipating [returns] based connected the efforts of that 1 party,”

The upshot to this is that astir cryptocurrencies are securities. But Bitcoin whitethorn not be.

If ratified, this would mean Bitcoin would autumn nether the regulatory remit of the Commodities Futures Trading Commission (CFTC) and not the SEC.