The SEC and the CFTC have been trying to identify traits of Bitcoin and other cryptocurrencies that would qualify them to fall under their respective jurisdictions.

Clearly they have something to gain if they had the ability to regulate the cryptocurrency markets otherwise they wouldn’t be very motivated to regulate it.

That being said, let’s take a look at the definitions of a security and a commodity.

Security

According to Investopedia, “a security is a fungible, negotiable, financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation (via stock), a creditor relationship with a governmental body or a corporation (represented by owning that entity's bond), or rights to ownership as represented by an option.”

With this definition it’s easy to see why so many ICOs have come under the SEC’s scrutiny. Newly created tokens for platforms that hardly exist are sold to individuals with the promise or hope that they will one day provide a valuable use case for them.

Now let’s take a look at commodities.

Commodity

From that same source, “A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers…”
“…Some traditional examples of commodities include grains, gold, beef, oil and natural gas. More recently, the definition has expanded to include financial products, such as foreign currencies and indexes. Technological advances have also led to new types of commodities being exchanged in the marketplace. For example, cell phone minutes and bandwidth.”

What’s interesting with commodities is that the sales of these things are often done via futures contracts.
You might have heard that word thrown around with Bitcoin for the past couple years.
Futures contracts at the very basic level are agreements to buy or sell an asset at a predetermined price on a predetermined date, sometime in the future.
When the price of a commodity is volatile, futures contracts can provide producers of that commodity with some form of guarantee of income. While for speculators and day traders, volatility and futures contracts can provide a chance to make some decent money.

The SEC and the CFTC both have very stoic goals. Both want to protect investors, maintain fair markets, and prevent fraud, manipulation and abusive practices.
But it only takes a quick duck duck go search to discover that there have been plenty cases of fraud that exist in both the securities and futures markets despite these agencies existence.
They may be intimidating enough to prevent a certain amount of fraud but no doubt, scams can be found everywhere, and most of the time these agencies are reactionary after damage has already been done.
All you have to do is take a look at Charles Keating, Ken Lay, and Bernie Madoff.

While the SEC is a U.S. government agency, the CFTC is not. Regardless, both have the power to enforce regulations if a new asset falls into their jurisdiction.

The way that either of these agencies choose to enforce regulations can have huge effects on how everyday people like you can me interact with cryptocurrencies.

Heavy regulations could mean that cryptocurrencies can only be traded on certified exchanges. Access to these exchanges will most likely require KYC compliance as a minimum, and also could go so far as to placing minimum investment requirements that could very easily put most individuals out of trading altogether. It could even go so far as to require the hiring an agent to handle your cryptocurrencies for you.

For those who have not been paying close attention, or who don’t really grasp what these kinds of regulations can mean for other individuals’ involvement with cryptocurrencies in the future, they are no doubt in a boiling frog scenario. Everything seems fine and reasonable until one day it hits them that everything has changed and restrictions are everywhere.

No doubt there are reasons for the SEC and CFTC to withhold from implementing severe regulations.

For example, if the U.S. wants any chance of facilitating the growth of cryptocurrency related companies within its borders, friendly regulations will of course help this. If you want to know how regulations can play an effect on where companies set up shop in the U.S, take a look at the companies who left New York shortly after BitLicense was instated: Kraken, Bitfinex, Genisis Mining, Poloniex and LocalBitcoins among others.
There are also states like Wyoming which are allowing residents to pay their state taxes in cryptocurrencies.
Globally, Switzerland and Malta are no doubt benefitting from being “crypto friendly” and this could very well ensure their significance in this new tech era.

It’s a delicate balance of finding the right amount of regulations that can curb fraud but also facilitate innovation. A balance, mind you, that can very easily be disturbed by those hungry for power and influence which can very easily and most likely result in benefiting the big corporations and snuffing out any chance of success for new, smaller companies.

I can’t write about all of this without the reminder that Bitcoin has existed for nearly 10 years now. It has allowed for a great number of people, people of all ages, from all walks of life, from all levels of income to take part in the purchasing and trading of cryptocurrencies in a very free way.

It’s a beautiful thing and something that can very easily continue on without the introduction of these agencies.

If heaven forbid the iron fist comes down, you better believe you’ll be thankful that decentralized exchanges exist. But keep in mind that only the truly decentralized exchanges will be able to survive. Before I end up in a another rant I’ll leave you with that thought and the encouragement to explore decentralized exchanges! I’ve done quite a few videos that go over how to use different platforms and what to expect so go forth and explore.