In a regulatory victory for the largest cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH) were officially classified as commodities during Wednesday’s Digital Commodities Senate AG hearing.
Court Backs Bitcoin And Ether’s Commodity Status
According to live coverage of the hearing by Fox journalist Eleanor Terret, Rostin Behnam, Chairman of the US Commodities Futures Trading Commission (CFTC), it was confirmed that an Illinois court had validated the status of BTC and ETH as digital commodities under the Commodity Exchange Act.
The decision aligns with the CFTC’s position, which is notoriously at odds with previous statements by Securities and Exchange Commission (SEC) Chairman Gary Gensler.
Gensler had previously stated that only Bitcoin falls under the securities classification, leaving the majority of other tokens subject to securities regulation based on the Howey test, leading to increased enforcement actions over the past year with lawsuits against key industry players such as Binance, Coinbase, Ripple, and Uniswap Labs.
CFTC Chair Recognizes Regulatory Challenges
During the hearing, Fox Journalist Eleanor Terret reported that Senator Sherrod Brown questioned what lessons the CFTC has learned from past crypto frauds.
Behnam responded by acknowledging the uniqueness of the technology behind Bitcoin and digital assets, which necessitates a different approach to cybersecurity and operational resilience than traditional asset classes.
On the other hand, Senator Cory Booker expressed concerns about the prevalence of abuse in the market and the responsibility placed on the SEC and CFTC to address it. He noted that nearly half of the cases on the CFTC’s enforcement docket are related to crypto, describing it as an “extraordinary” statistic.
Behnam admitted Booker’s point, highlighting the challenges faced by an agency that oversees trillion-dollar markets while regulating a market that Behnam said is outside its jurisdiction and lacks dedicated funding.
Urging action, Senator Booker highlighted the potential for increased exploitation and financial losses in the crypto market if regulatory measures are not promptly implemented.
Streamlined Oversight Of Digital Assets
Terret also reported that Senator Roger Marshall addressed the jurisdictional conflict between the SEC and the CFTC in recent months, determining the classification of digital assets.
Marshall suggested that the entire responsibility be placed under the jurisdiction of the CFTC, to which Behnam agreed, citing expertise and capacity; if this goes through, it would be a win for the entire regulation of the industry, as Behnam has previously stated his pro-crypto thoughts.
As previously reported, during the Milken Institute’s 27th annual Global Conference in May, Behnam emphasized the urgent need for regulatory frameworks and transparency in the rapidly growing crypto industry.
In addition, the CFTC Chairman predicted an increase in enforcement actions over the next two years due to increased interest from retail investors and the appreciation of digital assets without clear guidance.
The issue of taxation in the crypto space was also discussed during the hearing. Senator Tommy Tuberville raised concerns about the fairness of the (Internal Revenue Service) IRS taxing BTC miners regardless of their profitability.
Behnam admitted his limited knowledge on the matter, prompting Tuberville to assert the need for a swift resolution to prevent harassment of individuals entering the crypto market.
Worryingly, Behnam highlighted that while the SEC and CFTC coordinate enforcement actions, the two agencies lack regulatory coordination.
At the time of writing, Bitcoin was trading at $57,870, down more than 4% in the past week, after a sharp decline of more than 20% in the past month from a June high above $70,000.
Featured image from DALL-E, chart from TradingView.com