Is Bitcoin a Commodity or a Security?

If you’re a crypto beginner, you’ve probably wondered at some point if Bitcoin is a commodity or if it’s considered a security. In this guide, we’ll explain what a commodity is and which cryptocurrencies are considered commodities. We’ll also discuss the difference between commodities and cryptocurrencies.

With that in mind, here’s all you need to know about crypto commodities.

What Is a Crypto Commodity?

Before we answer the main question — is Bitcoin a commodity? — let’s explain what is considered a commodity. Commodities are all products or materials that can be traded, sold, or bought. The best examples of commodities include oil and gold.

When it comes to crypto, commodities are considered tokens that represent physical commodities on a blockchain — a commodity token is a virtual currency that’s tradable. This term also refers to tokens that represent an underlying asset unless they represent a security.

That said, in 2015, the CFTC classified Bitcoin, Ethereum, and other virtual currencies as commodities. Why? Because virtual coins act like commodities — they are interchangeable, their price is driven by demand and supply, and they are decentralized.

On the other hand, the SEC considers most virtual assets to be securities, except Bitcoin.

Is Bitcoin a Commodity?

Is Bitcoin a currency or commodity? According to CFTC and SEC, BTC is a commodity. On September 17, 2015, the CFTC classified Bitcoin as a commodity since it is tradable, decentralized, and interchangeable. This means that BTC is treated like traditional commodities, such as precious metals and gold.

BTC also shares the same features as its traditional commodity counterparts. For example, BTC is durable, meaning it can be stored for long periods of time without being damaged. It’s also portable — it can be transferred at any time and it can be verified since it runs on a public blockchain.

Things are a bit complicated when it comes to the ETH commodity status. Namely, after ETH switched from PoW to PoS consensus mechanism, its decentralization status became compromised. Because of this, only the CFTC considers it a commodity — not the case with the SEC.

What Is the Difference Between a Commodity and a Cryptocurrency?

In a traditional sense, commodities are raw materials, like gold or precious metals, that can be extracted or mined. They can be used in the production process and they can be consumed. On the other hand, cryptocurrencies are digital assets that can’t be consumed. They are used as a payment method. Moreover, crypto transactions are decentralized, i.e., digital assets don’t have a centralized authority. This means that all transactions are verified via a cryptographic system.

Another difference between commodities and cryptocurrencies is that the former don’t produce returns — their value will be based on market demand and supply. If a certain cryptocurrency produces a return, i.e., if it’s created through an ICO, it will no longer be considered a commodity but a security.

On that note, crypto coins like XRP, EOS, GRAM, and CTR are considered security.

Which Cryptos Are Considered Commodities?

Bitcoin is the most popular commodity. Other digital assets that are considered commodities include stablecoins, such as USDT, PAXGold, SilverToken, and PlatinumCoin. You’ll also find real estate crypto backed by commodities, such as Elysian (ELY).

The role of commodity-backed stablecoins is to stabilize the price of cryptocurrencies. How? By tying them to reserve assets like gold and silver. Most stablecoins use BTC and ETH as collateral. Commodity-backed stablecoins are also more stable and less prone to inflation since they are backed by real-world assets. They also have the same value as their collateral.

With that in mind, other popular altcoins on CFTC’s crypto commodity list include the following:

As mentioned before, the SEC only considers BTC to be a commodity. However, the SEC recently approved the SPOT ETH ETF, which means that Ethereum could soon be classified as a commodity.

What Commodities Are Backed By Cryptocurrencies?

Not a single commodity is backed by a cryptocurrency. Instead, cryptocurrencies are often backed by a commodity. The best example includes the aforementioned commodity-backed stablecoins. This makes sense since cryptocurrencies, unlike commodities like gold and precious metals, are more volatile.

The most popular commodity stablecoins include gold-backed tokens, like PAXGold and XAUt, oil-backed tokens, like Petro, and energy-backed tokens, like KLIMA.

Conclusion

Is Bitcoin a commodity? Yes, according to the SEC and the CFTC. Why? Because it acts like traditional commodities — it’s tradable, interchangeable, and decentralized.

In fact, the CFTC considers almost all virtual currencies commodities, while the SEC declares only BTC as a commodity. Keep in mind that cryptocurrencies, such as ADA, SOL, and MATIC, are classified as securities by the SEC. This means that they’ll be subject to different regulations.

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