CFTC Chairman Heath Tarbert spoke at length about Ethereum and decentralized finance (DeFi) protocols during the Invest Ethereum Economy Virtual Conference hosted by CoinDesk.
Heath Tarbert, President of the United States Commodity Futures Trading Commission (CFTC), discussed how Ethereum and decentralized finance (DeFi) fit within the securities and commodities laws of this country, noting that the migration of this network to its version 2.0, which will operate under the participation protocol (PoS), can make the cryptocurrency look more like a security. Tarbert has previously spoken about the second-largest cryptocurrency in the ecosystem by market cap, stating that at some point in 2020 he would see Ethereum futures contracts regulated in the United States.
Although Tarbert said he was not entirely sure whether Ethereum's migration to its Ethereum 2.0 upgrade will ensure that the cryptocurrency positions itself as a value, he does believe that such an appreciation is possible.
“I’m not necessarily willing to say that stake governance would definitely put Ethereum 2.0 into a securities classification”
During the virtual conference, Tarbert also discussed the entity's recent actions to comply with U.S. regulations, such as the charges brought against the BitMEX cryptocurrency exchange, and the potential benefits and risks of migrating current financial systems to digital networks based on new technologies.
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Decentralization as a key factor
Furthermore, Ethereum's classification as a security depends entirely on what the Securities and Exchange Commission (SEC) says, as Tarbert indicated, stating that this entity is subject to the opinions of the SEC on what it determines or does not determine as a security.
"We typically defer to the SEC's opinions on a security, so if the SEC says, 'This is not a security,' then we're generally confident that we can walk away at that point and say it's a commodity."
Tarbert also points out that decentralization is a factor that works against the classification of these types of products as securities, considering that the more decentralized they are, the more they are considered within the category of basic products or raw materials and the further they are from being classified as securities.
DeFi Classification
As for DeFi, Tarbert did not provide a clear answer on how tokens and other decentralized finance products will fit within U.S. securities laws, arguing that this classification may depend on what the digital contracts do and how the tokens are distributed.
A proscribed commissioner
The CFTC chairman has shown to the world as someone of benefit to the crypto ecosystem since his arrival at the CFTC in July 2019. In that year, Tarbert stated that Ethereum was a “commodity”, as well as Bitcoin, so the trade of derivative products based on this cryptocurrency would become a reality in 2020. More recently, Tarbert assured that it is essential for the United States to lead the development of new technologies, such as blockchain, from all points of view, such as technological and regulatory. The commissioner expressed during his participation in the Blockchain Summit LA who would like to see the United States at the forefront of blockchain technology.
The need for clear regulations in the country is essential for the healthy development of companies that provide services with cryptocurrencies, taking into account that Ripple has expressed its disagreement with current US laws on several occasions and is considering leaving the country due to the lack of a regulatory framework that allows it to grow.
The US Commodity Futures Trading Commission has cracked down on BitMEX, accusing its executives of enabling illegal trading.
Continue reading: BitMEX accused by CFTC and DOJ of evading the law and allowing illegal trading
