Is bitcoin a currency or a commodity? According to the United Stated Commodity Futures Trading Commission (CFTC), bitcoin is the former. Its recent decision mirrors former verbiage by the IRS declaring bitcoin to be, as TechCrunch reported at the time, “property, not currency.”
What’s going on? As it turns out, the CFTC recently settled charges with a bitcoin shop that allowed investors (gamblers?) to trade options on bitcoin. Given that the CFTC views bitcoin as a commodity, those actions place the cryptocurrency squarely inside of its own jurisdiction.
Here’s the CFTC, from its blog post announcing that it has at once filed, and settled charges relating to the matter:
The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Coinflip, Inc. d/b/a Derivabit (Coinflip) and its chief executive officer Francisco Riordan for conducting activity related to 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.
It was over a year ago that the IRS decided that bitcoin was property, and not some form of currency. The difficulty with that distinction is the potential for tax headaches. If every bitcoin transaction is worthy of tax treatment over the fluctuation of the market price of bitcoin, the United States government is essentially begging to make a swath of technologists tax cheats by accident.
Regardless, here’s the CFTC laying down some law [emphasis TechCrunch]:
In the Order, the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities. The Order further finds that the activities related to commodity option transactions were not conducted in compliance with a provision of the CEA or a provision of the Regulations otherwise applicable to swaps, and were not conducted pursuant to the Regulation 32.3 “trade option” exemption.
What matters there is that the agency is not merely throwing bitcoin into a specific categorization, but also other cryptocurrencies in something akin to a blanket ruling. Litecoin can’t hide, in other words, by claiming that this was a bitcoin-only decision. It is not.
The price of bitcoin hasn’t moved much in the wake of the news, managing to stay in the mid-$230 range. Perhaps that’s due to the government managing something only akin to a retweet of its former position.