Commodities vs. securities: A third option for crypto regulation makes sense

ambcrypto.com:

One of the main topics that dominated the crypto market so far this year is the topic of regulation. The numerous black swan events that occurred last year highlighted the need for crypto regulation.

Many industry participants agree that cryptocurrency regulation is the right path for the industry mainly for consumer protection.

Coinbase CEO Brian Armstrong was among the executives who expressed their opinions about the industry and regulation. As far as regulation is concerned, Armstrong noted that Coinbase sought out money transmission licenses from the beginning.

— Squawk Box (@SquawkCNBC) March 1, 2023

Armstrong’s statement underscores just one of the numerous regulatory facets of the crypto industry. The companies are easy to regulate but there is a gray area when it comes to regulating cryptocurrencies.

Existing regulatory frameworks have dictated that cryptocurrencies can either be categorized as commodities or securities.

Categorizing cryptocurrencies based on the rules set in place for the traditional financial system might not necessarily be the best way to go. The reasons for this point of view cut across multiple factors including definition and underlying technology.

There have been attempts to classify cryptocurrencies and tokens based on consensus mechanisms or the method of distribution.

Bitcoin and Ethereum were both considered commodities because of the proof of stake consensus mechanism. However, Ethereum transitioned to