CFTC commissioner: tokens that start as securities may “transform” into commodities.

Yesterday I participated in a panel discussion on cryptocurrencies at Georgetown University’s first annual “fintech week,” where the subject of ICOs was unsurprisingly much discussed. One thing that stood out for me were comments by CFTC Commissioner Brian Quintenz that echoed a policy view we have long held: that a crypto-token may initially emerge through a securities offering, but later be considered a commodity just as Bitcoin is. Here’s what he said, according to Politico:

Digital currencies “may actually transform at some point from something that starts off as a security and transforms into a commodity,” CFTC Commissioner Brian Quintenz said at the event hosted by Georgetown’s law school. “That’s going to be a very difficult but important conversation for us to have to give the market certainty, to allow for innovation to flourish and continue, but to make sure that we’re being consistent in how we apply commodity law and protection of consumers across all products.”

And here is Bloomberg’s account:

“It was right to classify it as a commodity, but we still have a lot of work to do,” he said yesterday to reporters at the FIA conference. “ICOs, these things can transform. They may start their life as a security from a capital-raising perspective but then at some point — maybe possibly quickly or even immediately — turn into a commodity.” His comments were some of the most specific from the CFTC on the nature of ICOs. “There are new challenges all over the place with virtual currencies and commodities,” Quintenz said.

This is a very welcome statement that helps clarify how regulators are seeing this innovative space.