US regulator says Bitcoin a commodity

September 18, 2015 09:00
The CFTC is seen asserting its authority to provide oversight of the trading of cryptocurrency futures and options. Photo: Bloomberg

Virtual money is a commodity, just like crude oil or wheat, according to a US regulator.

The Commodity Futures Trading Commission (CFTC) made this ruling as it announced on Thursday that it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform, Bloomberg News reported.

"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.

Market participants have long discussed whether Bitcoin could be defined as a commodity.

By declaring Bitcoin as a commodity, 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, the news agency said.

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.

“While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets," said Aitan Goelman, the CFTC's director of enforcement, in a statement.

Since Coinflip is not alone in providing a platform to trade Bitcoin derivatives or futures, Goelman's words imply that other unregulated exchanges could soon attract the attention of the CFTC.

As such, the CFTC is bringing dealings in Bitcoin, long prized for its anonymity, into the light.

While this could help clean up US trading around the product, potentially helping to avoid a repeat of the Mt. Gox escapade, it is also likely to increase the cost of doing business, Bloomberg said.

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