Why the CFTC Chairman’s Comments About Ether’s Status Are Not That Big a Deal

On Thursday (October 10), Heath Tarbert, the Chairman of the U.S. Commodity Futures Trading Commission (CFTC), stated that it was his belief that "ether is a commodity." However, this does not mean that the U.S. Securities and Exchange Commission (SEC) agrees with this view.

Chairman Tarbert's comments on Ether (ETH) came while he was speaking on stage at Yahoo Finance’s All Markets Summit in New York City on Thursday (October 10).

In particular, the CFTC Chairman stated:

We've been very clear on bitcoin: bitcoin is a commodity. We haven't said anything about ether—until now. It is my view as chairman of the CFTC that ether is a commodity.

Although Yahoo Finance's report on the CFTC Chairman's remarks says that "Tarbert agrees with the SEC’s previous guidance that bitcoin and ether are not securities" and contrary to popular opinion on Crypto Twitter, in fact, the SEC has issued no such official guidance on Ether. 

Most people seem to believe that the SEC has officially declared that Ether (ETH) is not a security based on remarks made by William Hinman, Director of the Division of Corporate Finance at the SEC, at a Yahoo! All Markets Summit event on 14 June 2018:

Based on my understanding of the present state of ether, the ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions.

However, unlike with Bitcoin (BTC), where the SEC and its chairman (Jay Clayton) have on multiple occasions (most recently, earlier this month) reiterated that Bitcoin is not a security, the SEC has on no other occasion made similar declarations about Ether.

In fact, back in June 2018, a spokesperson for Coin Center told CoinDesk that Director Hinman's comments "while instructive, don’t represent a ruling." 

As for Chairman Tarbert's expectation of Ether futures trading on a U.S. crypto derivatives exchange in the near future, although the CFTC might be ready to approve Ether futures contracts, neither Cboe nor CME Group have announced plans for Ether futures even though there have been such rumors as far back as September 2018.

Update at 19:00 UTC on October 10:

About 40 minutes after the original version of this article was published, Preston Byrne, a senior partner at the U.S. law firm Byrne & Storm, P.C., sent out the following tweet:

In the blog post that this tweet links to, Byrne says that he believes that the CFTC Chairman's assessment of Ether is not correct:

I think this view is not correct. An Ether token has less in common with a soybean than it does with a share.

He then goes to say that it is unlikely that the CFTC Chairman would be saying that Ether is a commodity if the SEC has not decided to give Ethereum special treatment. As for why the SEC would choose to look the other way, Byrne says:

"Ethereum’s different 'because reasons,' not because of what the law says. Maybe it got too big. Maybe the harm to investors and crypto businesses that would arise from deeming it an investment contract would have been too great. The only reasons I can divine that Ethereum is treated differently is that the scheme was enormous and multiple major venture capital firms lobbied for this one coin offering to be treated in a particular way that sets it apart from every other coin offering.

And they succeeded, because money talks."


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Coinbase Invests 1.1 Million USDC in DeFi Platforms Uniswap, PoolTogether

San Francisco-based cryptocurrency exchange Coinbase has invested 1.1 million USDC into decentralized finance protocols Uniswap and PoolTogether.

According to an announcement published by the company, the funds came from its USDC Bootstrap Fund, which was created last September with $2 million of initial funding. The move came in a bid to encourage USDC growth in decentralized finance (DeFi).

With the USDC investment, Coinbase added $1 million of liquidity to Uniswap’s USDC/ETH pool. Uniswap is a decentralized exchange on the Ethereum blockchain that doesn’t have order books, but instead sees users trade against its reserves. Coinbase noted Uniswap’s liquidity has grown to $31 million in little over a year, adding it now has pool for over 880 tokens. The announcement reads:

Their constant market maker model makes it easy to launch a liquid exchange for any token, and is increasingly becoming critical infrastructure for tokens and applications that need liquidity.

PoolTogether is a no-loss lottery that gives users a chance to win for savings their funds with its smart contract. The PoolTogether savings game is built on Compound, and uses the interest earned from the deposits to pay out random winners.

Coinbase’s investment in PoolTogether added 100,000 USDC tokens to the pool to help increase rewards for depositors. At the end of the announcement, Coinbase encouraged developers and smart contract projects that want to integrate USDC to apply for the USDC Bootstrap Fund.

The fund has in the past invested in money market protocol Compound and margin trading platform dYdX. These new investments come shortly after Coinbase Wallet made it easier for its users to earn interest via decentralized finance platforms.

Featured image via Pixabay.