Virtual money is officially a commodity, just like crude oil or wheat. So says the Commodity Futures Trading Commission (CFTC), which on Thursday announced it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform.
„In this order, the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities,” according to the press release mentioned by Bloomberg.
While market participants have long discussed whether Bitcoin could be defined as a commodity, and the CFTC has long pondered whether the cryptocurrency falls under its jurisdiction, the implications of this move are potentially numerous.
By this action, the CFTC asserts its authority to provide oversight of the trading of cryptocurrency futures and options, which will now be subject to the agency’s regulations. In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors.
If a company wants to operate a trading platform for Bitcoin derivatives or futures, it will need to register as a swap execution facility or designated contract market, just like the CME Group. And Coinflip—the target of the CFTC action—is hardly the only company that provides a platform to trade Bitcoin derivatives or futures.
So, according to CFTC, the cryptocurrency is now a commodity – but it’s still many things to many regulators. The U.S. Internal Revenue Service thinks bitcoin is property while a federal judge thinks it’s a currency.That means the regulator can now bring charges against any wrongdoers trading cryptocurrency futures and options.
Bloomberg asked leading members of the bitcoin community for their views.
“I’m not terribly surprised and not terribly worried. There are so many regulators in the U.S., and they all want more jurisdiction, which leads to a constant stream of bizarre rulings. I think the CFTC has a very weak case here and it’s a very creative reinterpretation of what the word commodity means. The ruling will be challenged and judges will apply common sense and decide it to be a currency” as happened in the Silk Road case.”- Mike Hearn, software developer specializing in Bitcoin.
“This ruling is obviously very consequential to U.S.-based Bitcoin futures trading platforms, but it’s important not to overplay the implications. Last year, the U.K. tax authority ruled that Bitcoin is a currency. Last month a Japanese judge ruled that Bitcoin is not property. These rulings concerning what Bitcoin is or is not are for certain purposes only, but they often get taken out of context.”- Vili Lehdonvirta, Research Fellow at the Oxford Internet Institute.
“Regulators need to be talking with each other and engaging with industry. The CFTC doesn’t seem to have done either of those. Just claiming a platform is illegally offering bitcoin options isn’t helpful if they’re trying to have a relationship with these companies.” – Mark Lamb, CEO of Coinfloor Bitcoin exchange.
“As money, Bitcoin is terrible – a deeply deflationary currency that’s within a bubble. It’s an OK commodity but it’s the equivalent of selling real estate on the moon. There’s no inherent value. I applaud the ability of speculators to make money from selling it to other people, but I don’t think even calling it a commodity is enough. It’s a kind of shadow asset.” – – Stephen Kinsella, Senior Lecturer in Economics at the University of Limerick.
“If you’re using Bitcoin as a remittance tool you’re not going to like this, but if you’re using it as a business this regulation gives you a framework that’s predictable. However a lot of the value proposition of Bitcoin is tied up in the non-compliance aspect. With the cost of compliance can companies stay competitive?” – Preston Byne, co-founder and COO of Eris Industries.
„To commodities regulators, Bitcoin is a commodity. To bank regulators, it’s a bank. To stock regulators, it’s a stock. Everyone wants „in” – Journalist and digital currency commentator David Seaman.
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