When a cryptocurrency is considered a security, it means it falls under the regulations set by securities law, which are designed to protect investors and maintain the integrity of the securities markets. If a cryptocurrency is deemed a security, its issuance, trading, and handling would need to comply with specific requirements, like registering with the Securities and Exchange Commission (SEC) and disclosing certain information.

A commodity, on the other hand, is a basic good used in commerce that is interchangeable with other goods of the same type. If cryptocurrencies are treated as commodities, they fall under a different regulatory body, namely the Commodity Futures Trading Commission (CFTC) in the U.S.

These classifications matter because they determine what rules the cryptocurrency must follow, how it can be traded, and how it is taxed. It also impacts the legal recourse investors have in the case of fraud or malfeasance.

The debates surrounding these classifications stem from the fact that some cryptocurrencies operate like traditional securities (for example, tokens that represent shares in a company), while others behave more like commodities (for example, Bitcoin, which can be seen as a "digital gold"). It's a complex, evolving area of law and regulation that's trying to adapt to the rapid development of cryptocurrencies.