Are cryptocurrency coins actually currency, as their developers believe, or securities, as some investors believe — or just commodities, like gold?
The answer could determine the legal fate, and ultimately the value, of hundreds of billions of dollars worth of crypto already in circulation around the world.
In late February, U.S. District Judge Jack Weinstein declared that cryptocurrencies are to be treated as commodities.
The judge declared cryptocurrencies a thing of value that can bought or sold.
The ruling opened the door for U.S. Commodity Futures Trading Commission (CFTC) to regulate cryptocurrencies as commodities via its own interpretation of federal law.
The CFTC is federally mandated to legislatively oversee and regulate commodities, derivatives markets and futures on a nationwide basis.
While the decision allows cryptocurrencies to be regulated as a commodity, cryptocurrencies have yet to be regulated by any government or financial regulatory body as a bona fide currency.
In fact, Weinstein’s federal decision bolstered the CFTC’s previously held in-house position on cryptocurrencies. The regulator has viewed cryptocurrencies as commodities since 2015.
Many countries and financial regulatory bodies have spoken out on the need for strict cryptocurrency regulation as a stopgap against them being used for criminal and fraudulent purposes.
Nevertheless, aside from the court ruling, Congress has yet to pass any law regarding cryptocurrency regulation.
Separately, the Securities and Exchange Commission (SEC) is pursuing fraud cases against solicitors of cryptocurrency products along the argument that they are offering a security without proper vetting and oversight.
Big online platforms such as Google, Facebook and Twitter have moved to ban advertising of cryptocurrency products and services. Their fear is that users will fall victim to scams and then blame the search and social companies for allowing the advertisements.
Nevertheless, the heads of some of these same companies speak positively of cryptocurrency — as the future of currency.
Twitter CEO and co-founder Jack Dorsey, for instance, says that he believes that in 10 years or less everyone in the world will be using Bitcoin.
“The world ultimately will have a single currency, the Internet will have a single currency. I personally believe that it will be Bitcoin,” Dorsey told London news outlet The Times.
Although Dorsey believes that Bitcoin is still “slow and costly,” he strongly believes that “there are newer technologies that build off of blockchain and make it more approachable.”
Dorsey is investing in a startup business, Lightning Labs, which saw $2.5 million in seed financing last week. The mission of the startup is to speed transaction times on the blockchain.
Dorsey’s focus on cryptocurrencies has increased of late. In January his other company, the payment startup Square, launched an app, Cash, that offers Bitcoin buying and selling in most states.