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At March 8th's hearing before the US Senate Agriculture Committee, Rostin Behnam, the US Commodities and Futures Trading Commission (CFTC) Chair, declared that stablecoins and Ether are commodities. It's a strong response to Gary Gensler, the US Securities and Exchange Commission (SEC) Chair. The two regulators not only differ in their definition of crypto, but also fight with each other for who should be in charge of regulating the market.
"Not withstanding that, they (stablecoins) are a commodity, and we have to police that market without a clear direction from Congress that they're some other type of asset," Behnam said. "Based on the cases that we've brought around stablecoins, I think that there's a strong legal argument that $USDC and other similar stablecoins would be commodities."
One of the cases is CFTC's settlement with Tether in October 2021, when the $USDT issuer was charged with violating the Commodity Exchange Act (CEA) and CFTC regulations, and was ordered to pay a $41 million fine. Talking about the case, Behnam said, "I know colleagues might have a different opinion, but we've done the legal analysis and examining the circumstances around the Tether case. It was clear to our enforcement team and the Commission that Tether stablecoin was a commodity and we needed to move forward and swiftly to police that market and that company."
CFTC's view on stablecoins is clearly at odds with SEC's, which ordered Paxos to stop minting more $BUSD last month because it saw the stablecoin was "an unregistered security".
Behnam explained why he thought otherwise. "As far as I know, with fiat-backed stablecoins, there's no expectation of profit and return to the stablecoin holder."
The divergence is not only in stablecoins. Last week, Gensler said in an interview that all digital assets except for Bitcoin are securities, and almost every type of crypto transaction falls under the jurisdiction of the SEC.
For Behnam, at least Ether is not a security. "I've made the argument that Ether is a commodity." He said, "it's been listed on CFTC exchanges for quite some time. And for that reason, it creates a very direct jurisdictional hook for us to police, obviously, the derivatives market but also the underlying market as well."
"We would not have allowed the product – in this case, the Ether futures product – to be listed on a CFTC exchange if we did not feel strongly that it was a commodity asset because we have litigation risk, we have agency credibility risk if we do something like that without serious legal defenses to support our argument that that asset is a commodity."
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