Under the proposed new legislation, most altcoins would likely be considered securities, say US Senators Kristen Gillibrand and Cyntia Lummis. But they highlighted that the world’s top two cryptocurrencies Bitcoin and Ethereum will be classified as commodities.
Both the lawmakers agreed with the US Securities and Exchange Commission (SEC) chair that most cryptocurrencies are securities under the Howey Test. Senator Gillibrand pointed out that most cryptocurrencies go to the SEC. As such, BTC and Ether would most certainly be commodities. She brushed off reports describing the legislation as making the Commodity Futures Trading Commission (CFTC) the primary regulator. Gillibrand doesn’t think that CFTC is the primary regulator. She said the watchdog has the obligation to regulate Bitcoin and Ethereum.
Rostin Behnam, the chair of CFTC, said that while there are hundreds of coins that replicate security coins, there are also commodity coins like BTC and ETH that should be regulated by the Commodity Futures Trading Commission. He believes it’s pretty clear that many of the digital assets either replicate or look like commodities. Behnam said they are more like stores of value than they are securities.
Tony Tuths, the head of the digital assets team at KPMG US, believes the proposed legislation is unlikely to move forward in the foreseeable future. He said it was unclear what coins will ultimately fall within the purview of the SEC versus the CFTC. On the regulatory side, Tuths said the legislation calls for the CFTC to be the primary regulator. But it carves out a wide swath of tokens that have characteristics similar to securities for regulation by the SEC. He said there would be a struggle to decipher what exactly SEC wants.
Experts say the proposed bill leans heavily on the Howey Test to establish whether a particular coin is classed as a security or a commodity. Senator Lummis said that they are just trying to fit the digital asset world into US’s current regulatory framework. She pointed out that they spent a lot of time on the definition of the modern Howey Test.