U.S. District Judge Jack Weinstein ruled that cryptocurrencies will be regulated as commodities, with the task of regulation falling into the hands of the US Commodities Futures Trading Commission (CFTC).
The ruling came through a case the CFTC brought against Patrick McDonnell, operator of CabbageTech that claimed he absconded with his client’s digital assets.
Judge Jack Weinstein, a District Court Judge in New York, claimed that "virtual currencies can be regulated by CFTC as a commodity."
"Virtual currencies are 'goods' exchanged in a market for a uniform quality and value. ... They fall well within the common definition of 'commodity'." The judge said in his report released Tuesday.
A key issue in this case was whether or not cryptocurrencies were in the jurisdiction of the CFTC, and whether they should be regulated as securities or commodities. Another key issue was whether the CFTC could claim fraud against things that are not directly futures or derivative contracts. Judge Weinstein ruled in the affirmation for both of these questions, confirming that the case can be brought against McDonnell.
The definition of cryptocurrencies goes back to 2015, when the CFTC first reported that the emerging cryptocurrency markets would fall in the domain of commodities. In recent months, questions have ensued as to the definition of cryptocurrencies as securities or commodities, and whether regulation would be the responsibility of the US Securities and Exchange Commission (SEC) or the CFTC.
At a hearing in early February, CFTC Chairman Christopher Giancarlo gave a bullish outlook of the cryptocurrency markets to SEC Chairman Jay Clayton, saying in part, “We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balance response, and not a dismissive one.”
Giancarlo also spoke positively about blockchain technology and its use cases, saying, “Sixty-six million tons of American soybeans were just handled through a blockchain transaction by the Dreyfus Company to China. So, Bitcoin is now being used, it’s being used in our American transportation and logistics system.”
Although the SEC regulates securities with greater scrutiny than the CFTC regulates commodities, Clayton spoke positively about blockchain technology, saying, “I hope people pursue it vigorously.”
The Judge’s ruling, in addition to the government’s hearing, is considered to be bullish by many crypto-enthusiasts. The SEC has, so far, taken a harsher stance on the crypto markets than the CFTC, with recent news of ICO regulations and exchange investigations.