The regulatory feud in the United States has taken a new turn as the head of the Commodity Futures Trading Commission (CFTC) commented on the stablecoins. The CFTC head views most stablecoins as commodities, barring a new law that could change their classification.
On Wednesday, Rostin Behnam, the chairman of CFTC in a hearing of Senate Agriculture, said in a reply to a question on categorization that “they are going to be commodities in my view.”
Following the Senate session, Behnam briefed media that a number of cases under the regulator’s jurisdiction hint towards stablecoins being a commodity “unless lawmakers state otherwise.”
Notwithstanding that, they are a commodity, and we have to police that market without a clear direction from Congress that they’re some other type of asset. Based on the cases that we’ve brought around stablecoins, I think that there’s a strong legal argument that USDC and other similar stablecoins would be commodities.
The CFTC chair highlighted a specific enforcement action that the agency took against stablecoin issuer Tether and its sibling exchange BitFinex in 2021. That interpretation appears to put the CFTC and Securities and Exchange Commission (SEC) on different terms on another digital asset-related topic.
Behnam and SEC Chair Gary Gensler already seem to have different views of Ether, the second-largest cryptocurrency by market capitalization. In December 2022, the Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam said that Ether could be viewed as a commodity. A few days back, Gensler hinted that he views Ether as a security, along with nearly every cryptocurrency to be a security except Bitcoin.
Last month the SEC issued Wells Notice to Paxos, the issuer of the third largest stablecoin BUSD. The regulator claimed that the BUSD which is USD pegged stablecoin with Binance was an unregistered security. Following this, Paxos publicly acknowledged the notice but categorically disagreed and claimed that BUSD is not a security under federal laws.
Later Paxos announced that it was having talks with the regulators and had decided to stop minting BUSD tokens after receiving the SEC notice.
While Behnam reiterated that stablecoins and Ether are a commodity, he also made it clear that he was not sure how algorithmic stablecoins could be characterized. He stated:
As far as I know, with fiat-backed stablecoins, there’s no expectation of profit and return to the stablecoin holder. We have regulated ether derivatives. It’s not a coincidence that those futures were listed on CFTC markets. We did the analysis, the listing exchange did the legal analysis, and the analysis led to the conclusion that ether is a commodity, and I’ve been pretty consistent with that in the past.
On being asked about whether SEC’s action around Ether could lead to complications for the CFTC, Behnam responded that the regulator feels confident that their legal analysis is correct and Ether futures have been listed for several years now.
It is important to note that it is still unclear which cryptocurrencies can be categorized into commodities and which cannot be bringing uncertainty in the regulation in the US. This myopic vision of regulatory bodies could impact the trust of users in the long run. Todayq News reported that around three bills were proposed in Congress last year to make the CFTC the primary regulator for cryptocurrency spot markets in the country, however, there are no clear results yet.