Christy Goldsmith Romero, Commissioner of the Commodity Futures Trading Commission Valérie Plesch—Getty Images
Proof of State is the Wednesday edition of Fortune Crypto in which Leo Schwartz provides insight into policy and regulation..
No topic excites the crowd when it comes to cryptocurrency regulation more than whether cryptocurrencies are securities or commodities, an esoteric question that should be relegated to law school electives, but which could instead determine the American future of the industry.
Without rehashing the particularities of the Howey test for umpteenth, the relevant result here is that while cryptocurrencies are securities, they fall under the jurisdiction of the Securities and Exchange Commission, an agency that has demonstrated marked hostility toward the industry. If cryptocurrencies are commodities, the more open-minded Commodity Futures Trading Commission is in charge.
That government agencies constantly compete for judicial review – and the funding and bragging rights that come with it – is no secret. In recent months, as debates over cryptocurrency regulation have intensified following the collapse of FTX, the CFTC and SEC have appeared to wage a proxy war against the sector, claiming oversight by declaring their position on the classifications of various cryptocurrencies. public testimonies And lawsuits.
However, when asked directly, leaders of both agencies will dismiss any notion of a turf war. Christy Goldsmith Romero, CFTC Commissioner, sponsor of his technology advisory committeeand former SEC attorney, did so last week at the Chainalysis Links conference at a Midtown Manhattan Marriott, where we caught up one floor above the assembled law enforcement officials, crypto detectives and at least one K-9 police dog.
Every time the CFTC declares a digital asset to be a commodity in a lawsuit, as it recently did with its complaint against Binance in March, Crypto Twitter erupts in joy. Romero rejected the idea that this should be seen as an affront to the SEC.
“It’s not a question of choice: almost everything is a commodity unless it is a commodity. an onion or a cinema ticket,” she told me. “Something can be both a commodity and a security.”
In other words, for the CFTC to have jurisdiction over a company like Binance, it must classify the assets in question as commodities. This does not automatically preclude these assets from also being securities, which would remove them from the CFTC’s jurisdiction. As Goldsmith Romero explained, the decision on whether an asset like Ether is also a security is up to the SEC and not the CFTC.
“It’s not this or that that’s really being discussed,” she said. “The question is whether it’s just this, or this and that.” (I sincerely apologize for turning this newsletter into an LSAT logic question.)
While Goldsmith Romero’s argument does not deny the reality of the jurisdictional conflict between the SEC and the CFTC – a fundamental reality created by the lack of Congressional action – it cautions against reading too much into the enforcement actions in policy development.
“It doesn’t reflect my reality to call this a turf war,” she said.
The responsibility of decentralized autonomous organizations will be more pressing on its agenda, a hot topic that has been put in the spotlight with the The CFTC decision last year to target members of one such group, Ooki DAO. Expect this to be a major theme of its technology advisory board this year. Still, Goldsmith Romero warned that the immaturity of the DeFi sector – and crypto in general – will mean that future cases will be based on facts and circumstances, rather than a clear rule on what constitutes decentralization.
How does the structure of NFT markets affect artists. (Fortune)
Bitfinex received the first digital asset license in El Salvador ahead of schedule »Volcanic link.” (CoinDesk)
Hong KongAsia’s largest virtual bank launches into crypto and fiat currency transfers. (Bloomberg)
The state of Wyoming joined depositary bankthe crusade against fed. (CoinDesk)
Layer 1 blockchain Sei raised $50 million for its ecosystem fund. (Fortune)