United States CFTC Rules Calls Ethereum a Commodity
During the past two years, one of the major battles in the ongoing fight to legitimize cryptocurrency is determining which assets are securities, and which are commodities.
Calling a digital asset a commodity versus a security has drastically different consequences. Commodities are things like gold, corn, and oil, whereas securities are shares in companies that give holders an expectation of profit.
Why is it important that the CFTC believes Ethereum is a commodity? Because the implications for holding it from a tax and trading perspective changes big time.
In the first place, securities are regulated by the SEC, whereas commodities are regulated by the CFTC. Each agency deals quite differently with the assets under its oversight, and each has very different standards regarding the rules for offering assets of commodity or security status.
Expectation of profit
The expectation of profit is a major deciding factor between the two types of assets. You might argue that holding gold has a similar expectation of profit when compared with holding stock.
While that may be true, the difference between the two is the expectation of profit is built into securities as a share, whereas scarcity is the value driver of commodities. Gold increases in value because there isn’t enough of it to go around and cover demand. Apple stock increases in value because the company performs well over a period of time and meets investor expectations.
The beauty of Bitcoin and Ethereum
Bitcoin and Ethereum are cryptocurrency’s first and second assets – in many ways, they set the bar for all other projects arriving on the scene. It’s very encouraging, therefore, that both the SEC and CFTC have declared that neither BTC nor ETH are securities, and are therefore perfectly legal as they are.
What does that mean for you as an investor or buyer of these digital assets? It means you can feel safe in your investments knowing that there is no effort to undermine either of them with legal questions. Both BTC and ETH have perfect legal standing as they are now in the US financial market, which often sets the standard for other global markets.
How are BTC and ETH regulated?
Both Bitcoin and Ethereum are regulated in the same way that other commodities are. They’re taxed in the same way as normal equities and are better positioned for long term gains than other forms of assets.
The bottom line is that two of the world’s most powerful financial entities have given the green light to crypto’s biggest projects. Buying Bitcoin or Ethereum has one less hurdle for investors around the world.