When is cryptocurrency a commodity?

When is cryptocurrency regulated as a commodity rather than as a security? We ask Christopher Giancarlo, the former head of the Commodity Futures Trading Commission ("CFTC"), the nation's commodities regulator to explain. According to Giancarlo, cryptocurrencies are not all created equally. The former CFTC chairman explains that all crypto is essentially computer code. As a result, when determining when and whether a cryptocurrency is a commodity, the government must examine what function they serve.

Giancarlo, who was at the CFTC when they made the initial determination to treat Bitcoin as a commodity, explains the reasoning behind the decision. He describes the calculations that go into determining whether a crypto is a commodity. Like traditional commodities, such as raw materials or primary agricultural products, Bitcoin and Ethereum are mined (or "staked" in the case of Ethereum) around the world by multiple disparate parties. Also, as with traditional commodities, crypto commodities must be fungible. One Bitcoin, for example, is worth no more or less than another Bitcoin. A cryptocurrency's classification as a commodity (rather than a security or something else entirely) determines which organization, if any, regulates the crypto and which rules or principles must be followed. As of the date of publication, the CFTC or its leadership have labeled Bitcoin and Ethereum as commodities.

Christopher Giancarlo served as the 13th Chairman of the United States Commodity Futures Trading Commission. He is Senior Counsel to the international law firm, Willkie Farr & Gallagher.