A crypto commodity is a general term used to describe a tradable or fungible asset
A crypto commodity is a general term used to describe a tradable or fungible asset that may represent a commodity, utility, or contract in the real- or virtual world through exclusive tokens on a blockchain network. In an interview with Talks on Law, Christopher Giancarlo, the former head of the Commodity Futures Trading Commission (“CFTC”) stated that “cryptocurrencies are not all created equally. The former CFTC chairman explains that all crypto is essentially computer code. As a result, when determining when and whether a cryptocurrency is a commodity, the government must examine what function they serve.”
What the U.S. Commodity Futures and Trading Commission (CFTC) considers crypto to be:
In its lawsuit against the crypto exchange Binance and its CEO, the CFTC alleged the firm violated trading and derivative rules, and referred to the two largest cryptocurrencies, bitcoin and ether, as commodities.
Per the CFTC’s filing against Binance, the regulator said certain digital assets, including bitcoin, ether, Litecoin, and “at least two fiat-backed stablecoins,” tether and the Binance USD, “as well as other virtual currencies as alleged herein, are ‘commodities.’”
The complaint also alleged that Binance and the respective parties charged “solicited and accepted orders, accepted property to margin and operated a facility for the trading of futures, options, swaps and leveraged retail commodity transactions involving digital assets that are commodities.”
Giancarlo, who was at the CFTC when they made the initial determination to treat Bitcoin as a commodity, explains the reasoning behind the decision. He describes the calculations that go into determining whether crypto is a commodity.
Like traditional commodities, such as raw materials or primary agricultural products, Bitcoin and Ethereum are mined (or “staked” in the case of Ethereum) around the world by multiple disparate parties.
Also, as with traditional commodities, crypto commodities must be fungible. One Bitcoin, for example, is worth no more or less than another Bitcoin. A cryptocurrency’s classification as a commodity (rather than a security or something else entirely) determines which organization, if any, regulates the crypto and which rules or principles must be followed. As of the date of publication, the CFTC or its leadership has labeled Bitcoin and Ethereum as commodities.
