What did the SEC just say about Bitcoin?

Commodities and securities face significantly different regulations in United States markets.

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Key points

  • Bitcoin labelled a commodity by US Securities and Exchange Commission chairman
  • Commodities are not regulated by the SEC but rather the Commodity Futures Trading Commission
  • No other cryptos were called out as commodities

Bitcoin (CRYTPO: BTC), the world’s top crypto by market cap, hasn’t exactly joined the commodity super cycle in 2022.

While most soft and hard commodities have soared this calendar year, this virtual commodity is down 56% since 1 January, currently trading for US$20,716.

Bitcoin is a commodity?

You may not have heard the world’s top crypto referred to as a commodity before.

But that’s how the United States Securities and Exchange Commission (SEC) chairman Gary Gensler labelled the token last night.

Speaking on CNBC’s Squawk Box, Gensler said that Bitcoin was the only crypto the SEC was ready to label a commodity as opposed to a security.

That’s a crucial distinction.

Under US regulations, the SEC oversees securities and companies must observe strict disclosure regimes. Issuers must register with the SEC before any securities can be sold.

Commodities trading is also regulated, but under a different regime overseen by the Commodity Futures Trading Commission (CFTC).

Gensler reiterated the need for more regulatory oversight and clarity in crypto trading. He said, “There’s a lot of risk in crypto, but there’s also risk in classic securities markets.”

He said that many cryptos display the same attributes as securities.

Gensler noted:

The investing public is hoping for a return just like when they invest in other financial assets we call securities. Many of these … crypto financial assets have the key attributes of a security.

Gensler wouldn’t be drawn into extending the commodity label to other tokens beyond Bitcoin. “That’s the only one I’m going to say,” he told CNBC.

He added that the SEC and CFTC are “two great market regulators in this country”. He said they can cooperate to increase transparency and protect investors in cryptocurrencies.

Why have cryptos come under pressure?

Bitcoin and almost every major altcoin are deep in the red in 2022.

While there have been a few headwinds, the biggest driver impacting crypto prices has been the new environment of high inflation and fast-rising interest rates.

Bitcoin has been trading much like other risk assets, such as high-growth ASX tech shares.

The same forces impacting crypto prices have seen the tech-heavy NASDAQ fall 27% year to date as investors reweight their holdings.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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