The US Senate Agriculture Committee introduced a bill that would regulate Bitcoin AND Ethereum at CFTC (Commodity Futures Trading Commission). The pill is certainly bitter for the SEC…
Security or Commodity?
“The string of regulations at the state level is ineffective in protecting investors from fraud”said Senator Boozman. “Our bill will task the CFTC with regulating the spot market for ‘digital commodities’. »
What is a “spot” market? The COMEX (Commodity Exchange) is a spot market where commodities are traded. The New York Stock Exchange is a spot market where stocks are traded. For bitcoin, there are different exchanges exchanges like Coinbase.
It is surprising that the US Senate wants to oversee exchanges to the CFTC. As its name suggests, the CFTC regulates derivative markets such as Futures. Supervision of exchanges usually dedicated to CSS (Securities and Exchange Commission)
The second surprise is that the bill from the introduction declares that Ethereum would be a commoditieswithout giving a clear definition.
As a reminder, the securities they are stock market shares, ETF shares, debt securities, etc. The IS commodities refer to raw materials (gold, copper, uranium, wheat, etc.).
However, Ethereum seems to have all the characteristics in place security. Even Michael Saylor is clear:
“If you want to create a commodity, you have to look at what Satoshi did. The recipe for Bitcoin was to create it without making a profit. Satoshi didn’t do an ICO. […] The beauty of bitcoin is that it traded without any commercial value for a year and a half. Satoshi disappeared, leaving his BTCs untouched, leaving all of Bitcoin as a gift to mankind. »
On the contrary, 60% of ETH was sold for a few tens of cents when it was launched in 2014. For Cory Klippsten, CEO of Swan Bitcoin, this ICO (Initial Coin Offering) which is similar to sales illegal of securities.
It should also be noted that the eight co-founders of Ethereum shared 9.9% of the free pre-mined 50 million ETH. As well as the Ethereum Foundation (also 9.9%).
More importantly, the CEO of Microstrategy believes that the Ethereum network is not decentralized:
“To be able to conclude that a network is decentralized and resistant to censorship its protocol must be operated without modification for five to ten years. The problem with Ethereum is that even after switching to Proof of Stake, all kinds of questions will remain unanswered. How much ETH will be created in the next thousand years? What are the betting rules? The protocol keeps changing. However, DNA structure in constant mutation usually results in monstrosity. What I see is something sold to the public through an ICO and controlled by the Ethereum foundation. It is an investment contract. It has undergone several hard forks. And not just hard forks to fix a fatal bug. These are hard forks that have already changed the speed of ETH creation. A small group of developers control the network. It is a software company. Ethereum is like a multinational stock. They keep changing the protocol. Hard forks are mandatory, so it’s not a decentralized network and it’s not a commodity. No reasonable person who understands law or ethics can conclude that Ethereum is a commodity. SEC Chairman Gary Gensler doesn’t think so. Ethereum passes the Howie test. This is an investment contract [security]. »
We should also remember that there is a competing bill on the way which, by the way, provides for tax exemption on any payment in BTC less than $200. Senator Cynthia Lummis has been leading the charge since early June and here’s what she told Decrypt in early July in this podcast:
“I really don’t think the SEC will lose its regulatory control. I think she will keep it when the digital assets become investment contracts [security]. »
The SEC believes that the vast majority of altcoins securities which falls under his jurisdiction. He has just launched legal action against Coinbase.
It is true that previous SEC administrations have said that Bitcoin and Ethereum should be considered commodities. However, this does not seem to be the opinion of Gary Gensler, the current chairman of the SEC.
Michael Saylor, who has been very vocal in interviews this week, believes that whatever happens, these regulatory clarifications are good news for bitcoin:
“All major institutions and major banks need regulatory clarity before participating in this asset class. Fidelity wants it, JP Morgan wants it, Goldman Sachs wants it. I don’t know what the end of this back and forth regulation will be [entre le sénat et la chambre des représentants]. Or what bills were passed by Congress. Nor what kind of compromise will be found. But I know everyone wants regulatory clarity. And it will be good for bitcoin. »
The Senators intend to vote on it before the end of the year. That is to say before the legislative elections in November, which could return the majority to the Republicans. Senator Cynthia Lummis would then have the wind in her sails. That could be sick for Ethereum.
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Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.