Ether is a commodity according to CFTC chairman Heath Tarbert. He made the statements at Yahoo Finance’s All Markets Summit in New York City.
This news comes in the wake of unstable cryptocurrency markets and bans on cryptocurrencies in certain countries. Ether is not the first to be declared a commodity, Bitcoin was defined as a commodity in 2015.
The news is also a boost to the crypto community as a lot of regulations center around legal definitions. The EU recently made the news when they publicly declared Libra as damaging to their local economies. A solution was proposed where they would release their own cryptocurrency. However, they lack any definition or framework to implement their own cryptocurrency. The whole problem of cryptocurrencies is that no one can agree on whether they are a commodity, currency or securities. This leads to a lack of structured regulation that makes governments nervous.
With Ether being declared a commodity, the market can start moving forward with regulation and trading. However, this applies only to only Ether and not all cryptocurrencies.
“We’ve been very clear on bitcoin: bitcoin is a commodity. We haven’t said anything about ether—until now,” Tarbert said on stage at Yahoo Finance’s All Markets Summit in New York City on Thursday. “It is my view as chairman of the CFTC that ether is a commodity.”
The CFTC first stated that it views “bitcoin and other virtual currencies” as commodities back in 2015 (long before the SEC did), buried in a filing when it brought charges against a company called Coinflip. But this is the first time the CFTC has given guidance on ether.
Tarbert acknowledges “ambiguity in the market” on the status of many coins, but says that ultimately “similar digital assets should be treated similarly.”
“It stands to reason that similarly assets should be treated similarly. If the underlying asset, the original digital asset, hasn’t been determined to be a security and is therefore a commodity, most likely the forked asset will be the same,” Tarbert said, “unless the fork itself raises some securities law issues under that classic Howey Test.”
What is Ether?
Ethereum is an open source, public, blockchain-based distributed computing platform and operating system featuring smart contract (scripting) functionality. It supports a modified version of Nakamoto consensus via transaction-based state transitions. Ether is a cryptocurrency generated by the Ethereum platform and used to compensate mining nodes for computations performed. Each Ethereum account has an ether balance and ether may be transferred from one account to another.
Ethereum provides a decentralized virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. The virtual machine’s instruction set, in contrast to others like Bitcoin Script, is thought to be Turing-complete. “Gas”, an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.
Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. Development was funded by an online crowdsale that took place between July and August 2014. The system then went live on 30 July 2015, with 72 million coins “premined”. This accounts for about 68 percent of the total circulating supply in 2019.