With their first-ever cryptocurrency regulatory framework, the regulators in the United States are showing accelerated efforts to keep up with the controversial sector.
However, classifying crypto assets between securities and commodities is always a topic of debate. It is particularly true when the two bodies in charge, SEC and CFTC, are far from drawing a line under the definition of the legal nature of cryptocurrency.
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In a public speech revolving around the crypto market, CFTC chairman Rostin Behnam reaffirmed that Bitcoin and Ether are commodities, not securities. According to Behnam, Ethereum’s transition to Proof-of-Stake doesn’t make it securities.
“I’ve suggested [Ether] is a commodity, and Chair Gensler thinks otherwise,” the CFTC chair reiterated at the Manhattan event. The Monday panel also welcomed other key figures in finance such as Rutgers Law, Wall Street Blockchain Alliance, and Lowenstein Sandler.
This opinion is exactly the opposite to what Gary Gensler, chairman of the Securities and Exchange Commission (SEC), previously stated. Gensler has a very clear opinion on the legal status of Ethereum.
Following the major upgrade Merge that saw Ethereum abandoning the PoW consensus, the regulator qualified Ethereum as security, possibly like other PoS assets.
Ethereum is under the SEC’s Howey test. If passed, which means Ethereum meets the qualification of an “investment contract,” federal security laws would apply on the crypto asset.
The two leaders agreed that Bitcoin is not security.
Most crypto assets, according to Gary Gensler, could be defined as securities, which are governed by US securities regulations. In other words, the majority of the digital assets that are currently in existence are subject to regulation by the SEC.
The SEC continues to show the dominion role in the oversight of the cryptocurrency market as a result of this development. Gensler has exerted some initiative and developed some guidelines for the crypto industry’s compliance in the United States.
The SEC chairman gave orders to officials at the SEC to establish better relationships with crypto issuers. The purpose of this is to make it easier for them to register their digital assets as securities and to keep an eye on them if that becomes required.
Gensler also extended an invitation to his associates to work together with various service providers to assist them in formalizing their operations. Finally, he advised lawmakers to take a less rigid approach to the enforcement of disclosure rules, saying that it would be more effective.
Distribution of powers when it comes to regulating cryptocurrency is another focus of public interest and attention. The SEC’s tightening regulations on crypto entities is mostly considered a misuse of authority, as the community’s common sentiment.
CFTC appears as a more friendly regulator but the CFTC Chair made it clear in the event that the body’s openness to innovation wouldn’t make it more favorable. “Our enforcement record speaks for itself,” Behnam assured.
The chair of the CFTC noted that, contrary to popular belief, the Digital Commodities Consumer Protection Act would not grant the agency the authority to categorize cryptocurrencies.
Senators Debbie Stabenow and John Boozman, both members of the Agriculture Committee in the Senate, were the ones who initially proposed the bill.
The goal is to define the regulatory framework applicable to cryptocurrencies, Behnam noted, rather than to argue who will play the role of watchdogs for each of digital assets on the market.
The regulator stressed that it’s important to clarify the legal status of crypto assets and highlighted the joint collaboration of SEC and CFTC in endeavor to achieve this goal.
SEC chairman Gensler believes that only a very small number of cryptocurrencies cannot be considered securities. Gensler said earlier this month that the SEC supports the CFTC taking on greater responsibility in regulating stablecoins.
Gary Gensler, joining the Securities Industry and Financial Markets Association’s Annual Meeting, stressed the significance of treating everyone equally in the financial industry and emphasizing competition in terms of costs, quality of offerings, and other crucial elements.