Definition ∞ Digital commodity classification refers to the legal determination that a specific digital asset functions as a commodity rather than a security or currency. This classification typically implies that the asset is fungible, traded on open markets, and derives its value from market supply and demand dynamics, similar to traditional raw materials. Regulatory bodies, such as the Commodity Futures Trading Commission (CFTC) in the United States, often apply this designation. This status dictates the regulatory oversight and legal obligations for entities involved in its trading and distribution.
Context ∞ The classification of digital assets as commodities is a significant and often contested area within cryptocurrency regulation. Bitcoin and Ethereum, for instance, are widely considered commodities by some regulators, influencing how their spot and derivatives markets are supervised. This ongoing classification debate affects market participants, requiring clarity on which regulatory agency has primary jurisdiction and what rules apply to trading platforms and related services.
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