The CFTC chief has triple-downed his opinion that Ether and stablecoins are commodities in the tug-of-war between the US regulators over control of crypto assets.
At a recent Senate hearing, the head of the US Commodities Futures Trading Commission (CFTC) reiterated that Ether and stablecoins are commodities and therefore fall under its jurisdiction.
When Senator Kirsten Gillibrand questioned CFTC Chair Rostin Behnam on the divergent perspectives held by the regulator and the Securities and Exchange Commission (SEC) following the CFTC’s 2021 settlement with stablecoin issuer Tether, Behnam responded as follows:
“Notwithstanding a regulatory framework around stablecoins, they’re going to be commodities in my view.”
The fact that Tether, a stablecoin, was a commodity was evident to the commission and our enforcement staff, he said.
Ether and stablecoins on Twitter
In its complaint against FTX creator Sam Bankman-Fried in mid-December, the CFTC claimed that some digital assets, including Ether, Bitcoin, and Tether, were commodities.
This is a pretty stark (almost impassioned?) rebuke of the ‘everything except BTC is a security’ and ‘stablecoins are securities’ positions. Would be great if the CFTC released the legal analysis on these issues Chairman Behnam says it did. https://t.co/RIeTgUxTFd pic.twitter.com/LGtuEPs4X3— Lawtoshi (@lawtoshi) March 8, 2023
When asked what proof the CFTC would present to gain regulatory control over Ether at the Senate hearing, Behnam said that if it “did not believe firmly that it was a commodities asset,” it “would not have permitted” Ether futures contracts to be listed on CFTC exchanges. He also added:
“We have litigation risk, we have agency credibility risk if we do something like that without serious legal defenses to support our argument that [the] asset is a commodity.”
The remark has solidified Behnam’s occasionally ambivalent view on the categorization of Ether. He said that, excluding Ether, Bitcoin was the only cryptocurrency that could be seen as a commodity during an invitation-only event at Princeton University in November last year. He had already argued that Ether might also be considered a commodity a month earlier.
Gary Gensler, chairman of the SEC, asserted in an interview with New York Magazine on February 23 that “anything other than Bitcoin” is security. Several cryptocurrency attorneys rejected this assertion, and Behnam’s most recent remarks go against Gensler’s point of view.
As each competes for regulatory control of the cryptocurrency economy, the divergent perspectives of the market regulators might pave the way for confrontation.
The SEC asserted its power against stablecoin issuer Paxos in mid-February, stating that it may file a lawsuit against the company because its Binance USD stablecoin violates investor protection rules since it is not registered as a security.
The SEC also attacked Terraform Laboratories simultaneously and classified their algorithmic stablecoin TerraUSD Classic (USTC) as security. According to Gabriel Shapiro, general counsel of Delphi Labs, this action might serve as a “roadmap” for future SEC legal actions against other stablecoin issuers.
The sector has reacted negatively to the SEC’s crackdowns on cryptocurrencies. Circle founder and CEO Jeremy Allaire stated he doesn’t think “the SEC is the regulator for Ether and stablecoins” and that they should be supervised by a banking regulator instead.