Earlier today, the Commodity Futures Trading Commission (CFTC) revealed an enforcement action against KuCoin, one of the largest crypto exchanges in the world.
While KuCoin is based outside the US and apparently does not provide services to US users, the CFTC claims that the technology employed was not dependable enough to block US activity, including the ability to utilize a VPN to access the crypto exchange.
At the same time, criminal charges were filed by the US Department of Justice.
While this may take some time to sort out, of note was the fact that the CFTC complaint described several digital assets as “commodities” and not securities. While the SEC under the guidance of Chairman Gary Gensler has consistently stated all digital assets are securities, with the exception of Bitcoin. In the complaint the CFTC states:
“During the Relevant Period, KuCoin solicited and accepted orders, accepted property to margin, and operated a facility for the trading of futures, swaps, and leveraged, margined, or financed retail transactions involving digital assets that are commodities including Bitcoin (BTC), Ether (ETH), and Litecoin (LTC).”
And;
“Many digital assets, including BTC, ETH, LTC, and stablecoins like USDC and USDT, are “commodities”.
At least on the surface, this appears to challenge the SEC’s assertion that all digital assets are securities. At the same time, it is true that digital assets may hold the characteristics of securities, commodities (currencies), and utilities. Some crypto may be all of the above.
While we have not yet heard the chatter about whether the enforcement action is being coordinated with the SEC or not, what is really missing is legislation from Congress that actually sorts everything out.