The crypto market is still quite young. In fact, Bitcoin isn’t even ten years old at this point. And for different regulators all over the world, many are still not sure exactly how to approach this new type of digital asset. How cryptocurrencies are regulated remains a question for many even for lawmakers. In fact, the US Securities and Exchange Commission was even asked by lawmakers to clarify their take on cryptocurrencies.
In the past months, The US Securities and Exchange Commission ruled Bitcoin and Ethereum as commodities. However, the agency mentioned that most initial coin offerings (ICOs) are securities. But of course, there are thousands of other cryptocurrencies. Does that mean that other cryptocurrencies are commodities as well? Or should they be considered as securities?
Senior Judge Rya W. Zobel of the US District Court for the District of Massachusetts has ruled in favor of the Commodity Futures Trading Commission against the cryptocurrency My Big Coin. The lawyers of My Big Coin has attempted to stop the prosecution saying that the CFTC has no jurisdiction over the cryptocurrency.
Now, what exactly does it mean? It means that the CFTC considers all cryptocurrencies to be commodities.
This can be considered a landmark ruling. For CFTC director of enforcement James McDonald, he said that “This is an important ruling that confirms the authority of the CFTC to investigate and combat fraud in the virtual currency markets”. He also added that “This ruling…recognizes the broad definition of commodity under the (Commodity Exchange Act), and also the CFTC has the power to prosecute fraud with respect to commodities including virtual currencies”.
CFTC Chairman Christopher Giancarlo mentioned that there is a possibility of having a favorable regulation on crypto markets in the future. And also, he thinks that this can “solve” some of the problems that have been associated with fiat currency.
He said on CNBC that “I personally think cryptocurrencies are here to stay, I think there’s future for them”. He added that with the SEC, they will be going to be “strong and hard against fraud manipulation”.
Crypto Regulatory Changes
In 2018, cryptocurrencies dropped in value mainly because of regulatory changes. In China, as early as September 2017, Chinese regulators have stopped crypto-related activities. On the other hand, you have countries such as Japan and South Korea that have embraced cryptocurrencies despite the bearish market.
Many are saying that regulatory clarity is a necessity for institutional investors to join the market. Institutional investors are believed to be capable of providing fresh capital to the bearish market that could cause another bull run. In fact, ICE, Goldman Sachs, and NYSE are just some of the institutional investors that have already tried the crypto market.
In fact, the CBOE led Bitcoin ETF is highly anticipated by many investors thinking that this could actually help get more investors involved. And more importantly, it can get institutional investors involved with their fresh capital. Unfortunately, there were already numerous failed attempts. The reason for the failed attempts was the possibility of price manipulation. Among high profile applications included that of Tyler and Cameron Winklevoss. It was the second time that the twins submitted their crypto-ETF application.