The Ripple lawsuit that has been going on for quite a while now has triggered a fundamental question about cryptocurrencies. This question is whether the cryptocurrency you are holding is deemed to be a security or a commodity. So, you might be wondering what the difference between the two is? In the case of commodities, you get a significant value/use out of the coin’s derivatives. On the other hand, security gives you a share of the company. For example, if XRP is considered a security, owning it technically makes you a shareholder of Ripple.
Regulation in the US
After this debate on what is a security and what is not, it has been important to note that recent crypto growth products will fall under one of the two. If it falls under securities, then it will be regulated by the SEC. And if it falls under commodities, then all is good as it won’t be regulated. The CFTC only regulate the derivates of the commodities, which makes it clear that Bitcoin won’t be regulated directly. This is because they don’t even have the authority to regulate cash commodities, said the CTFC commissioner.
This suggests that future products, ETFs and other derivatives of BTC will be observed by them. But there is still no set guidelines to determine what is considered a security and what is not, even though the SEC say they do. The officials are calling XRP security right now, but Ethereum has been called commodity back in 2017. And this didn’t bode well with the judges. In fact, the logic was even presented by Ripple in their defence some time back.
We more or less know how the SEC manages the markets and tries to keep them free from manipulation and fraud. And the CFTC also does a similar job. They are going to be very important for the future and derivative products of cryptocurrencies like Bitcoin.
Are my holdings security or commodity?
If your coins give more value out of their derivative products, they are likely to be considered a commodity. In the other case, it will be security. Do note that BTC and ETH, the top 2 cryptocurrencies, are already considered commodities. And it is most likely that smaller currencies will fall under the security label.
What coins are your holdings, and is your cryptocurrency security? If yes, how did you figure it out? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.