Cryptocurrencies’ numerous properties
have caused lawmakers to scratch their heads about how to categorize and regulate crypto. The SEC
considers crypto to be a security, the Commodity Futures Trading Commission (CFTC)
considers tokens to be a commodity, the IRS
considers tokens to be property, and FinCEN
evaluates tokens as currency.
This regulatory uncertainty, along with various other concerns (exchange hacks! smart contract vulnerabilities! massive selloffs!), has led to the ongoing bear market.
The problem is, none of them are wrong.
Cryptocurrency has three significant properties (at least), which makes it challenging to categorize:
It’s an Asset and/or a Security: think of ICOs, which, like IPOs, are investment vehicles for utility or security in a company or product.
It’s a Commodity: You can trade it just like precious metals.
It’s Property: It sometimes acts like a currency (i.e., you can transfer it to someone else far away in exchange for a service or goods) it is considered a property. It’s in the name!
How do we reconcile these apparent differences in the single entity of cryptocurrency, and how do we stabilize and recenter from the resulting confusion, ambiguity, and uncertainty that’s likely the primary cause of the market downturn?
Regulation, like it or not, is coming, but until these various agencies can come to a consensus on just how to treat cryptocurrency, the chaos is likely to continue unchecked.