Introduction
Cryptocurrencies like Bitcoin and Ethereum are a growing trend, but they’re not yet widely used as payment methods. They’re closer to securities than commodities in some respects. They have full fungibility and raise funds through the issue of digital coins. If you want to trade in bitcoin, there are platforms at this Page.
They’re closer to securities than commodities.
While Bitcoin and Ethereum are considered decentralized, the market for cryptocurrencies is more akin to securities than commodities. The main difference is the nature of the underlying technology. An item is a raw material used in production. While things are bought and sold on the cash market, they can also be traded via futures contracts. These futures are derivatives that are tied to a commodity’s price in the future. Examples of items include food, agricultural goods, and natural gas.
Regulatory agencies have been looking for ways to regulate cryptocurrency markets, especially Bitcoin and ether. Recently, the CFTC issued a public call for comments on ether and Ethereum. In response, the Commission chairman, Heath Tarbert, has determined that ether is a commodity. As a result, he anticipates the trading of ether futures on U.S. markets shortly. However, he echoes SEC guidance that Bitcoin and ether are not securities.
Although both cryptocurrencies are considered commodities, their classification largely depends on how they’re regulated. Securities are tradable financial assets with a regulated issuer. Bitcoin and Ethereum are considered commodities if they have no issuer.
They have full fungibility.
In August, Senators John Boozman and Debbie Stabenow introduced a bill to make cryptocurrencies a commodity. While this legislation is not yet law, it would give the Commodity Futures Trading Commission exclusive jurisdiction over cryptocurrencies. The bill does not address the fungibility issue, but it defines a “currency” as one that can be traded like other currencies.
While cryptocurrency is not legal tender in many countries, it is still considered a currency in some. Austria, for example, aims to tax digital currencies at a rate of 27.5%, which is higher than the current capital gains tax. In Guernsey, a Crown Dependency not part of the United Kingdom, the cryptocurrency market is regulated by the Guernsey Financial Services Commission.
They raise funds by issuing digital coins.
ICOs are a growing method of raising funds for digital currencies such as Bitcoin and Ethereum. Unlike traditional public offerings, ICOs allow companies to access instant liquidity. The digital coins issued by these companies are sold on a 24-hour global market, making them attractive investments for investors. These projects attract the attention of traditional VC firms such as Sequoia and Andreessen Horowitz, who are interested in using the new technology to finance their portfolios.
Conclusion
Ethereum and Bitcoin are soon to be classified as commodities. This will give them greater regulatory oversight. The SEC and CFTC have asserted jurisdiction over digital assets such as bitcoin and ether, which will be regulated under the same rules as traditional commodities. But the definition of commodities may not include other digital assets like ICOs or ERC-20 tokens.
The new law would allow the SEC to regulate the crypto market more quickly than it can regulate traditional financial products. The bill also explicitly defines digital assets as commodities. It would also require the CFTC to do numerous studies on energy consumption, gender, and race. It would also require a report on digital asset users’ demographics.
While Ethereum and Bitcoin are currently considered commodities, the CFTC and SEC have indicated that they should be classified as securities. This classification would protect investors, as a whole, from losing their money on ICOs. While some think that Ethereum and Bitcoin are securities, others think differently.
The cryptocurrency market is already affected by rising inflation. This could force the Federal Reserve to raise interest rates. This could be good or bad for the cryptocurrency market. Those who favor inflation will benefit from the higher prices, while those against it will likely be penalized.
