Understanding how the cryptocurrencies were declared as commodities
In business terms basically, a commodity is defined as any good or service that can be bought or sold by only means of price. A commodity can also include a particular product which is not much different from its counterparts based on benefit, brand, and many other factors.
Cryptocurrencies are the currencies which are only available online but not in any physical form and is secured by cryptography. The first cryptocurrency that came into existence using the blockchain technology was Bitcoin and it completely revolutionized the way people did transactions. The cryptocurrencies have a distributed ledger technology which makes it even more secure and thereby making it difficult for the hackers to hack. The security is bound to increase with time has a number of users join the network. It would be better and easier for a hacker to break into some of the most secure banks and loot money, instead of wasting his resources to hack the blockchain network. As the blockchain technology is very new kind of technology the financial regulators of various countries are finding it difficult to categorize cryptocurrency into a kind of financial asset and hence are finding it difficult to fit the cryptocurrencies into their legal framework. The categorization of the cryptocurrencies is very crucial as it only means by which we can decide what kind of regulation will be implied upon the cryptocurrencies.
Bitcoin and other cryptocurrencies as commodities
This particular confusion was cleared by the US Federal Court on March 6th, 2018 when it clearly classified Bitcoin and other cryptocurrencies as commodities. Under this categorization, the cryptocurrencies can effectively be regulated by the Commodity Futures and Trading Commission (CFTC). However since 2015, the Commodity Futures and Trading Commission was trying to categorize cryptocurrencies into commodities, but it was only in March 2018 that the argument has been accepted.
This categorization was a result of a lawsuit which was filed by the commodity futures and trading Commission against the defendants namely Patrick K. McDonnell and his company CabbageTech, Corp. Following a particular hearing, the judge of the Federal Court finally realized that the defendants are likely to continue the violation of the Commodity Exchange Act after the Commodity Futures and Trading Commission presented a reasonable likelihood of the same.
In particular on January 18th, 2018 the commodity futures and trading Commission in u.s. the district court for the Eastern District of New York filed a lawsuit against Patrick K. McDonnell and CabbageTech, Corp. Charged them with disproportionate and fraudulent transactions relating to Bitcoin and litecoin.
Commodity Futures and Trading Commission
The main confusion was regarding the issue that during the absence of Federal level rules pertaining to the cryptocurrencies, do Commodity Futures and Trading Commission have the right to take action against the frauds that are conducted in the cryptocurrency world. The answer to which the federal court revealed that the CFTC had complete rights and jurisdiction over the cryptocurrency related matters. However it is to be kept in mind that CFTC is not the only one in the race to gain control and imply its rules and regulations on the cryptocurrency world but there is also Securities and Exchange Commission which has classified the cryptocurrencies as securities and also has set up a dedicated cyber unit in order to keep a close eye on the fraudulent initial coin offerings in order to protect the interest of the investors.
The Bitcoin IRA Inc. an American company that ties up between the Individual Retirement accounts as well as the cryptocurrency into one domain. One of the most important ways in which the purchase of the cryptocurrencies from the retirement fund was done, was through the brokers. But the decision of the Federal Court by treating the cryptocurrencies as a commodity will affect them as now the brokers would have to register themselves with the Commodity Futures and Trading Commission in order to carry on their work.
In a nutshell, classification of the cryptocurrencies as commodities buy the commodity futures and trading commission and as a security by the Securities and Exchange Commission is making a clear indication that the financial regulators are trying to pull the cryptocurrencies into the regulation in order to make huge amounts of profits by taxing the cryptocurrency world. In this way, the decentralized nature of the cryptocurrency might have vanished since they might come under the regulations of the financial WatchDogs.
