- The Commodity Futures Trading Commission (CFTC) just aligned Ethereum (ETH) and Litecoin (LTC) alongside Bitcoin (BTC) as commodities.
- The regulator’s classification of these digital assets as non-securities came in its recent court filing against KuCoin.
KuCoin in Hot Waters with US Authorities
An explosive news came in yesterday after the US Attorney’s Office of the Southern District of New York announced the indictment of the two co-founders of KuCoin, namely Chun Gan and Ke Tang. The charges stemmed from their alleged blatant disregard of the licensing laws and the provisions of the Bank Secrecy Act in the US.
The criminal case filed by the NY district attorney was followed by a civil enforcement action filed by the Commodity Futures Trading Commission. The regulator claimed the company failed to register its digital asset derivatives exchange, which has been serving US customers since 2019. The lawsuit also raised the same issues mentioned in the earlier court filing, including its non-compliance with know-your-customer (KYC) requirements.
Due to the legal battle it is entangled with, KuCoin has reported an outflow of $1.78 billion in Ethereum and Ethereum Virtual Machine (EVM) chains. Crunching down the numbers, Nansen revealed $842 million worth of Ether and $938 worth of EVM chains were pulled out from the platform as of 9:00 AM UTC on Wednesday. This represented over 15% drop in the assets under its custody.
Ethereum and Litecoin Classified by CFTC
If there’s something good that came out with the recent developments, it’s the fact that the CFTC referred to Ethereum and Litecoin as commodities in connection to the KuCoin case. Interestingly, the second page of the complaint submitted by the agency read, “KuCoin solicited and accepted orders, accepted property to margin, and operated a facility for the trading of futures, swaps, and leveraged, margined, or financed retail transactions involving digital assets that are commodities including bitcoin (BTC), ether (ETH), and Litecoin (LTC).”
The pronouncement of the CFTC somehow comes as a relief amid the ongoing deliberations and probe within the US Securities and Exchange Commission (SEC) that allegedly looks to classify Ethereum as security because of the proof-of-stake (PoS) mechanism it employs. SEC Chair Gary Gensler reportedly considers the workings of the protocol mirroring the design of investment contracts where investors pour their money into a common enterprise with the expectation of profits from the efforts of others.
The distinction made by the SEC’s counterpart could help boost confidence in the real status of Ethereum in the crypto community. It could also serve as an ace up the sleeve of the people responsible for Ether, which they could pull out if push comes to shove.