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Bitcoin is an official commodity, says US gummint

Rogue traders told to do their paperwork if they want to sell BTC options

By Simon Sharwood, 17 Sep 2015

The Commodity Futures Trading Commission (CFTC) has declared that Bitcoin, and indeed all virtual currencies, are officially commodities.

The ruling arose after the CFTC ordered two outfits, Coinflip, Inc. d/b/a Derivabit (Coinflip), to stop their Bitcoin-trading activities. The FCTC says the companies offered “commodity options transactions without complying with the Commodity Exchange Act (CEA) and CFTC Regulations, specifically, by operating a facility for the trading or processing of commodity options without complying with the CEA or CFTC Regulations otherwise applicable to swaps or conducting the activity pursuant to the CFTC’s exemption for trade options.”

Coinflip sold options for Bitcoin buying and also operated a facility for the trading of swaps. Neither the options nor the swap-selling operation were registered and approved in the proper ways. The announcement of the ruling therefore sees Aitan Goelman, the CFTC’s director of enforcement, intone the canned quote that “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.”

The order telling Coinflip to do its paperwork from now on shows that "... the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities."

In other words, the Bitcoin crowd may think they're virtual currency pioneers who don't have to play by the rules, but Uncle Sam intends to treat the market for Bitcoin just like it treats the markets for pork bellies or frozen concentrated orange juice. Those who don't do the paperwork will get visits from folk in suits pointing to legislation and mentioning substantial fines.

On the upside, the definitive definition of Bitcoin as a commodity gives those who would trade it certainty. 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. Wall Street wins again! ®

The Register - Independent news and views for the tech community. Part of Situation Publishing