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Crypto as Commodities, Securities, Debt Securities – Peter Dillon

Crypto as Commodities, Securities, Debt Securities

Last Updated on June 9, 2023

Commodities are natural or agricultural resources that can be bought, traded or exchanged, while securities yield return from a common enterprise or company, like a share in a company that trades on the stock market or a government bond.

Commodities are considered “stores of value” because they hold value over time, unlike securities, which fluctuate dramatically over time. 

Buying and selling securities involves buying a share in a corporation’s ownership and control, while buying commodities involves buying goods themselves before they actually exist.

In the United States:
1. Securities are regulated by the SEC (Securities and Exchange Commission)
2. Commodities trading is regulated by the CFTC (Commodities Futures Trading Commission)

Option contracts on a commodity futures contract are securities, and they can be used to mitigate losses or earn a premium.

Why Commodity?

Cryptocurrencies have emerged as a store of value or tool for speculation, leading many to say it’s closer to a commodity.

Commodities like gold have historically been used as a store of value. Meanwhile, both markets have also drawn speculators, those who bet on big swings in prices in order to capture profits, rather than buy and hold an asset.

In some cases, cryptocurrencies can look a lot like securities, like when they’re issued like stock in “initial coin offerings.” These are capital-raising processes for blockchain or crypto-related businesses.

Debt Securities

The Bitcoin lending market can also bear resemblance to debt securities. The Bitcoin lending market–more broadly known as yield farming–involves lending out cryptocurrencies and getting paid in interest or fees in return. A similar operation in the stock market is known as “share lending.”

Further Reading

The Ethereum Question: Why does the SEC avoid taking action against Ethereum when all else are fair game?:
https://cryptoslate.com/the-ethereum-question-why-does-the-sec-avoid-taking-action-against-ethereum-when-all-else-are-fair-game/

Binance was wrong to boot Monero, ZCash and other privacy coins:
https://cointelegraph.com/news/binance-wrong-monero-zcash-privacy-coins