Jake Chervinsky, a recognized lawyer in the cryptocurrency space, wrote a tweet in which he says that digital assets can fit many US law categories at once. This comment is very important because it represents the current situation of the regulatory landscape in the United States and other countries.
Is Bitcoin a Commodity, Property or a Security?
There have been many discussions regarding whether Bitcoin (BTC) and other virtual currencies are securities, property, money or commodities. Nonetheless, there is no clear answer to those questions.
Jake Chervinsky, that has been analyzing several regulatory and legal aspects of the cryptocurrency market, says that digital asses could fit on many of these categories at once.
It seems a common belief that digital assets can only fit a single category under US law–in other words, that they can be commodities OR securities OR property OR money OR speech, but not more than one.
That's wrong. Digital assets can be, and likely are, many of these at once.
— Jake Chervinsky (@jchervinsky) March 25, 2019
Last year, the U.S. Commodity Futures Trading Commission (CFTC) confirmed that Bitcoin and other digital currencies such as Ethereum (ETH) are considered commodities covered by the Commodity Exchange Act (CEA).
At that time, CFTC director of enforcement Aitan Goelman, mentioned:
“While there is a lot of excitement surrounding bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets.”
It is also worth mentioning that Ethereum was considered a security as soon as it was released to the market. Ethereum was sold as a coin to investors in the market that were expecting returns for this investment. Nonetheless, as the market expanded and the Ethereum network became decentralized, ETH is now considered a commodity.
There are other digital assets such as XRP that have a more difficult situation. No regulatory agency in the United States has yet provided information on XRP and how they consider this digital asset. Thus, uncertainty surrounds this virtual currency in the market.
In general, coins released by Initial Coin Offerings are considered securities if they do not have a utility and if they are not decentralized.
About being considered a currency, the United States has been very clear on this issue. They will not be accepting a currency that could compete against the US dollar in their soil. Thus, it is far from being a reality considering Bitcoin a currency.
This shows that there is no clear opinion on how to consider digital assets and how a legal framework could apply to them. This is why Mr. Chervinsky shows that virtual currencies could have different characteristics.