Recently, U.S. regulators have made a series of major rulings and actions regarding cryptocurrency regulation, which has attracted widespread attention.
In July 2024, Rostin Behnam of the U.S. Commodity Futures Trading Commission (CFTC) announced at a digital asset industry hearing that an Illinois court had confirmed that Bitcoin (BTC) and Ethereum (ETH) are digital commodities under the Commodity Exchange Act.
Behnam stressed that the CFTC is “very pleased” with the ruling because it is now clear that Bitcoin (BTC) and Ethereum (ETH) are commodities, not securities. This is an important milestone and means that the two cryptocurrencies, BTC and ETH, will be primarily regulated by the CFTC rather than the Securities and Exchange Commission (SEC).
Moreover, according to the CFTC's research, 70-80% of cryptocurrencies cannot be considered securities, but are just ordinary commodities, and only a small part of cryptocurrencies may fall into the category of securities. This position is in sharp contrast to the view of Gary Gensler of the SEC that most cryptocurrencies are securities.
Behnam said that the CFTC is ready and "willing" to become the main regulator of digital assets to reduce the SEC's regulatory responsibilities in this area. The CFTC has rich regulatory experience and can effectively regulate the rapidly developing cryptocurrency industry. Currently, he is calling on Congress to pass legislation as soon as possible to give the CFTC more regulatory powers.
This statement undoubtedly represents a major shift in the CFTC’s regulatory stance on cryptocurrencies. In the past, the SEC has been leading the regulation of cryptocurrencies and defined most cryptocurrencies as securities. But now, the CFTC has made it clear that BTC and ETH have been identified as commodities and claims that most cryptocurrencies do not fall into the category of securities, which will significantly reduce the SEC’s regulatory power over cryptocurrencies.
At the same time, this will also be a major development for the cryptocurrency industry. Whether cryptocurrencies should be considered securities has long been controversial, which has brought uncertainty to investors and businesses. If most crypto assets are classified as commodities rather than securities, they will feel a different regulatory attitude, which may bring more room for development for the entire industry.
In response to Behnam's statement, U.S. Senator Debbie Stabenow said that lawmakers are working to pass a new bill to give the CFTC more regulatory power over cryptocurrencies to increase regulatory efficiency. And this move is urgent because there are many loopholes and uncertainties in the current regulatory framework. This shows that the U.S. government is taking measures to allow the CFTC to play a greater role in cryptocurrency regulation while limiting the SEC's regulatory power, which may have a far-reaching impact on the entire cryptocurrency industry.
Additionally, it’s worth noting that in June 2024, the United States Supreme Court (SCOTUS) made two important decisions that could have lasting effects on the Securities and Exchange Commission’s (SEC) enforcement actions against companies, including cryptocurrency companies.
First, in the June 27 case of SEC v. Jarksey, the Supreme Court ruled by a 6-3 majority that defendants in SEC civil cases involving securities fraud are entitled to a jury trial rather than a single administrative judge ruling. The conservative justices believed that securities fraud in SEC civil cases should be equated with the "common law fraud doctrine" in criminal fraud cases.
Then, on June 28, in LoperBright Enterprises v. Raimondo, the Supreme Court overturned the "Chevron presumption" principle established in 1984. Although the ruling did not directly involve the SEC, it required lower courts to "exercise independent judgment to determine whether federal agencies acted within their statutory authority" rather than simply presuming that the federal agencies' interpretation of the law was correct. (Chevron principle: a long-standing and well-known administrative law concept that requires courts to generally defer to the interpretation of relevant government agencies when interpreting vague statutory provisions).
Both of these decisions are believed to limit the SEC’s enforcement power in the cryptocurrency field. This is because it is difficult for the SEC to rely on its previous broad regulatory powers to lead cryptocurrency regulation, and it will be more cautious and more limited in interpreting and enforcing cryptocurrency-related laws.
Experts say that these rulings have imposed clear restrictions on regulatory overreach that has stifled U.S. crypto innovation and have called into question the "firepower" of regulators such as the SEC, which is conducive to innovation in the crypto industry and has brought significant benefits to the entire cryptocurrency industry.
In summary, the current cryptocurrency regulatory landscape in the United States may be undergoing a major power shift. The CFTC is becoming a key force in leading cryptocurrency regulation, while the SEC's influence is weakening. This change may bring more certainty and development space to the cryptocurrency industry.
However, there is still a lot of controversy and uncertainty about which cryptocurrencies should be considered securities and which should be considered commodities. Therefore, the regulatory civil war between the CFTC and the SEC deserves our continued close attention, as it will have a significant impact on the future development of the cryptocurrency industry.
