CFTC Chair Categorizes Stablecoins as Commodities

Chairman Rostin Behnam, Head of the Commodity Futures Trading Commission (CFTC) says stablecoins would be classified as commodities unless Congress directs otherwise.

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Behnam stated his opinion while speaking at a Senate Agriculture Committee hearing on Wednesday. He claimed the agency has a compelling legal argument for classifying USDC and other similar stablecoins as commodities.

The Chairman further explained that there is no expectation of profit or return to the stablecoin holder with fiat-backed stablecoins. Nonetheless, he made it apparent that he was unsure of the best way to describe algorithmic stablecoins.

Behman reiterated the necessity of comprehensive regulatory legislation from Congress when asked whether the US current regulatory framework for digital assets is effective. Interestingly, Behnam also believes that Ether should be classified as a commodity.

He highlighted that the agency had conducted an analysis together with legal analysis from listing exchanges to support his opinion. 

Notably, the CFTC and the Securities and Exchange Commission (SEC) appear to hold opposing views on the Ethereum classification. Gary Gensler, the SEC’s Chair gave comments that Ether could possibly be classified as a security due to a network switch from proof-of-work to proof-of-stake.

The implication of Classifying Stablecoins as Commodities

When stablecoins are categorized as commodities, it means that they are treated as traded goods with value and may be purchased and sold similarly to other items like gold and oil.

This classification has a number of effects. First off, it means that stablecoins are governed by the CFTC which may ask stablecoin issuers to register as commodity trading advisors or commodity pool operators. If the CFTC takes the broader view that all stablecoins are commodities, it may spark a conflict with the SEC.

For instance, the SEC earlier threatened Paxos, Binance stablecoin issuer, with a lawsuit for failing to register the BUSD token as a security. Paxos eventually delisted the token from its platform even though it disagreed with SEC that the BUSD token cannot be referred to as security.

Furthermore, if stablecoins are classified as commodities, they may be subject to tax laws that apply to commodities, such as capital gains tax when they are sold at a profit.

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