From technical legal perspective the definitions have all sorts of ramifications, from regulatory and reporting rules and requirements to money laundering laws, etc. In most jurisdictions the laws as currently framed make clear distinctions between real currency (legal tender in a country) and trading of other tokens such as e-metals, etc.
Here, for example, is the US Treasury's policy doc wrt money laundering laws and being classified as a dealer in foreign exchange:
Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies.
E-Currencies and E-Precious Metals
The first type of activity involves electronic trading in e-currencies or e-precious metals.13 In 2008, FinCEN issued guidance stating that as long as a broker or dealer in real currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of the real currency or other commodities for or with a customer, such person is not acting as a money transmitter under the regulations.14
However, if the broker or dealer transfers funds between a customer and a third party that is not part of the currency or commodity transaction, such transmission of funds is no longer a fundamental element of the actual transaction necessary to execute the contract for the purchase or sale of the currency or the other commodity. This scenario is, therefore, money transmission.15 Examples include, in part, (1) the transfer of funds between a customer and a third party by permitting a third party to fund a customer’s account; (2) the transfer of value from a customer’s currency or commodity position to the account of another customer; or (3) the closing out of a customer’s currency or commodity position, with a transfer of proceeds to a third party. Since the definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies, the same rules apply to brokers and dealers of e-currency and e-precious metals.
However, from a personal income tax viewpoint, the nett effect for ordinary people like us buying and selling altcoin, the practical consequence is the same as operating a foreign currency bank account.
Since the national and international regulatory frameworks on transmissions of money and near-money are a byzantine web of technicalities, rules, and mutual disclosures defined in pre-crypto days, most countries don't yet have an adequate or systematic way of dealing with altcoin.
Ideologically and practically, that has great appeal to me and to many, because I really have little faith in government money and central banks. Governments are threatened by the loss of control and especially the loss of tax. The monitoring and control aspect is by nature of the technology largely beyond their reach. But the income tax element isn't since it places a disclosure obligation on the individual, and that's why the nett practical effect of cryptocoin is much like that for ordinary legal-tender real currencies. Classifying it as currency or commodity is a technicality since it has perfect fungibility and persistence, at least while the blockchain is accessible.
At least for now.
We'll have to see how governments respond. And those responses will be different and inconsistent, as we see for example in Australia, where sales tax (GST) is levied on altcoin "commodity/barter" transactions over $10K.
In SA, the effects would be the same if altcoin were legally classified as a commodity. VAT would be due on the transactions themselves and not just on payments for real goods and services.
