Virtual currency Bitcoin is officially a commodity – regulator

Coinflip, the company involved in the CFTC decision, said the cease and desist order issued by the regulator was a fair settlement.

With the recent crackdown, CFTC has sent a clear message to everyone watching that Bitcoin is now considered as a commodity and anyone interested in running a bitcoin trading platform would have to go through them (just like they have to go through three more different departments).

This case is significant in that it is the first CFTC enforcement action against a virtual currency options trading platform, and because the CFTC appears to be definitively asserting jurisdiction over digital currency.

Meanwhile, Coinflip Inc.’s illegal Bitcoin activity started in March 2014 when it facilitated the buying and selling of Bitcoin options and future contracts on the company’s “risk management platform” known as Derivabit.

The Commodity Futures Trading Commission (CFTC), a regulator in the US, ruled on Thursday that Bitcoin is a commodity.

However, as the CFTC considers Bitcoin options as deemed commodities, the agency says that the business should have been properly registered and subject to the laws governing swaps.

Does the ruling change the elemental nature of what Bitcoin is, and the way its advocates will use and develop it?

Last year, the Internal Revenue Service began to offer some clarity about the status of bitcoins by saying that virtual currencies such as bitcoins are “treated as property for USA federal tax purposes”. So its very prudent to classify Bitcoin as something relatively uncontentious, simply something bought and sold for a price, rather than something contentious, like a currency or other financial asset. None of them has much work to do because theres not a whole lot of financial innovation happening in the States.

Heard added that he is not terribly surprised and not terribly anxious. It also gives established traders, who have CFTC regulations tattooed on the inside of their eyelids, a bit of an advantage as the market for virtual currencies mature. “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.

Some commentators said that compliance with the Commodity Exchange Act and applicable CFTC regulations would be too costly for many Bitcoin startups, with the predictable result that many innovative US companies will be forced to move offshore.

Of all the places in the world, United States of America is the only country that has managed to come up with innovative ways of slapping extra paperwork, fees, penalties and regulations on bitcoin. To bank regulators, it’s a bank.