The debate continues over the nature of cryptocurrencies and stablecoins, that is, whether they should be considered securities or commodities. This time to speak out is Rostin Behnam, the Chairman of the CFTC.
According to Behnam, neither Ethereum nor stablecoins should be considered securityies, but commodities, just like Bitcoin.
The clash is not coincidentally taking place between the SEC, which is the Securities and Exchange Commission, and the CFTC, namely the Commodity Futures Trading Commission, because it specifically concerns which agency will be in charge of overseeing the crypto markets.
The SEC would like to take this assignment, trying to convince the US legislature to consider cryptocurrencies as securities, while conversely the CFTC is pressing for them to be considered commodities so it can take over.
Indeed, in the new bill being worked on in Congress, it appears that the legislature is leaning toward giving this task to the CFTC, but the SEC has decided to put up a fight.
Ethereum and stablecoins, according to CFTC
Indeed, it is hard to imagine that Ethereum and stablecoins could be considered investment contracts that promise financial returns.
As far as stablecoins are concerned, there are no financial returns at all, unless they are, for example, lent out by taking advantage of special financial services, which then in their own right would fall under the definition of an investment contract.
So in itself stablecoin tokens do not seem to qualify as securities, whereas those financial products that allow them to be locked in exchange for interest should.
For Ethereum the issue is slightly different, because in addition to lending there is the issue of staking.
Someone who is staking on their own, meaning locking their ETH on a validator node belonging to them, does not enter into any contract with anyone, because in this case the reward is generated by validating the blocks.
However, if people entrust their ETH to an intermediary who in return promises them financial returns, then the grounds for considering such a product a security might be there.
Yesterday, during a hearing at the Senate Agriculture Committee, Behnam said that despite the regulatory framework regarding stablecoins, these in his view will be considered 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
In particular, he said that it is clear to the CFTC team that Tether (USDT) should be considered a commodity.
Regarding Ethereum, he stated that he would never have allowed futures pricing on ETH if he was not strongly convinced that it was a commodity.
On the fact that Bitcoin is a commodity, and not a security, there is no doubt, because even the Chairman of the SEC, Gary Gensler, recognizes this.
As to whether some cryptocurrencies are securities, there is no doubt, although there is still no clarity as to which ones should be considered as such.
The biggest doubts are precisely about Ethereum and stablecoins, but Behnam’s reasoning seems to make sense. Then again, who better to decide what should be considered a commodity than the CFTC.
The problems with this market
Right now, as the security/commodity issue is still being discussed, the biggest problem is hedging with collateral, and compliance with regulations.
In fact, it is precisely on these two points that the US authorities have taken issue against the issuer of BUSD (Binance USD), namely Paxos.
However, it seems that Binance has already found an alternative: True USD (TUSD).
In fact, from 16 to 24 February, the platform minted 180 million TUSD.
1/ With the SEC’s regulation of $BUSD, #Binance is looking to collaborate with other stablecoin projects.
– Minted 180M $TUSD from Feb 16 to Feb 24;
– Announced listing $LQTY in the Innovation Zone on Feb 28;
– Announced launching $TRU perpetual contract today.
A thread🧵 pic.twitter.com/YqCDWkd3hE
— Lookonchain (@lookonchain) March 6, 2023
On the other hand, the issuer of TUSD, TrustToken, has been a partner of Binance since June 2019.
So the solution to BUSD’s problem would seem to have already been found.
On the other hand, the problems that BUSD has suffered from, especially at the legal level, do not seem to exist on other stablecoins, such as USDC or USDT.
Therefore, it is enough to stop using the problematic stablecoins and start using those that have no problems.
It should be remembered that USDT and USDC dominate this market unchallenged. It is enough to mention that together they have almost 85% of the entire capitalization of all existing stablecoins, and they generate almost 89% of the entire trading volume of all stablecoins.
Moreover, while in terms of market capitalization Tether’s dominance is 53%, in terms of volume it is as high as 80%. It is therefore a market dominated by two stablecoins, one of which is even more dominant than the other.