I posed a question to my Twitter audience about ETH being a commodity like BTC and LTC.
The answers were intriguing.
Let’s discuss, because this could be bigger than you think.
On the surface, it makes very little sense.
But let’s break it down on a remedial level and see why it’s so important.
The SEC, the United States Securities Exchange Commission, oversees securities.
The CFTC, the Commodities Futures Trading Commission, oversees commodities.
Google defines each as such…
<WARNING, MY SPACING GOT REALLY MESSED UP HERE AS A RESULT OF THIS, AND I DO NOT KNOW HOW TO FIX. THANKS IN ADVANCE FOR PUTTING UP WITH IT.>
BTC and LTC are virtually the same thing, at least in the eyes of the layperson or a government organization.
And they were officially named “Commodities”, so they will be overseen by the CFTC in the US.
While they really don’t fit the definition, as we outlined above, they are unique to most of the crypto market to where they are primarily used for modicums of exchange, and have a fixed amount (even though no other commodity can claim both of these things).
BCH would technically fit this category as well while we’re at it, but who cares.
Anyways, BTC and LTC are fairly unique this way.
To where ETH is much more like the rest of the crypto market, because it represents Ethereum, which is a blockchain company.
Just like AVAX is the token of Avalanche, which is a blockchain company.
Just like UNI is the token of UniSwap…….you get it.
Yet, the US has told us that not only is ETH different somehow, but it’s so unique to the rest of these other tokens, that they’re going to put it into the same classification as BTC and LTC??
This makes no sense to me. I needed answers. So I consulted the most inconsistently brilliant people I knew.
I asked my twitter followers.
Tweeps To The Rescue!
I got some jokey answers, got some serious answers that I couldn’t quite decipher because of the language barrier, then I got a couple that rolled in a bit later that began to make a bit more sense of it all.
Let’s start with Auwal…
Commodity is an asset without and Issuer , BTC and LTC have no issuers , ETH pretty well have issuers /controllers
— AuwaL Abubakar ™ (@princeauwall) April 5, 2023
This is plausible. Kind of.
Because all it does is further illustrate my confusion. If they’re different, why are they classified under the same heading now?
But what makes ETH different from AVAX, MATIC, or SUSHI? So different that one is a security, and the other a commodity???
This is the other question I want answered.
For clarity’s sake, because I didn’t do this before, here’s what I want to get to the bottom of…
1 – Why is ETH the same as BTC in the eyes of the law, when they are two very different things?
2 – Are we saying ETH is unique to other Layer Ones and other blockchain companies? How? If you can’t answer this, you’re then saying damn near everything in the cryptoverse is a commodity.
Let’s look at a couple more.
James Claverie chimes in a day later with this explanation, which I found very interesting. We’ll break it down.
$ETH is a currency because it's used to pay for transactions on the Blockchain. All currencies are commodities and are governed by the CFTC not the SEC. Securities represent a partial ownership in a company. $ETH doesn't give you ownership in anything but $ETH
— James Claverie (@JPClaverie) April 6, 2023
This has legs, because currencies are commodities by the govt’s definition.
And, this would separate it from a share of AMZN (a security) for example, because of what he just said about how it’s used to pay for transactions on chain (can’t do that with a share of AMZN).
Okay, we may be getting somewhere here.
But this still leaves the other question open, and I ask because I don’t know — is ETH the only token in the world doing this?
AVAX does not do this? NEAR does it completely different then ETH does?
And then the bigger question is this — Let’s the the answer to my above question is “no”. Couldn’t these other blockchain companies simply restructure the way they do things to make it so, and then have all of the legal precedence necessary to qualify as a commodity too??
Why…is…ETH…so unique here?
Then here comes Indigo James with an unsatisfying, yet probably very accurate answer here.
James (different James than the previous) is an acquaintance of mine who works on the Indigo team. Think of Indigo as the Synthetix of the Cardano blockchain. Some really cool things going on over there, including a working stablecoin called iUSD.
James chimes in with a unique point all of us contrarians can probably get behind…
Feds avoiding fights they are less likely to win. When they think they have the momentum they'll call ETH a security if they can.
— Indigo James (@indigolabsjames) April 5, 2023
Beautifully conspiratorial, and speaks directly to the sinister nature of government organizations.
But here is the problem…
By doing this, they’ve set a precedent.
Which means if they try to make a power move like he explained, they will get their brains sued off, and likely lose.
Gone apparently are the days where the SEC was undefeated and had hand-picked kangaroo judges on the bench.
They need to tread a bit more lightly these days, especially when it comes to going after these companies that are not afraid (and well-capitalized enough) to hit back.
I don’t see this plan working out, assuming James is right here.
And all of this could be a major turning point, down the line, in the history of Web3 and the new way we do finance.
This is bigger than I think most of you realize.
And believe me, right or wrong, I will be referencing this blog post again.
(If you want to continue this discussion on Twitter with me, please don’t. By rule, I do not engage in conversations there.)