In the Commodity Futures Trading Commission’s announcement of its first bitcoin-related enforcement action, the regulator confirmed that bitcoin and its alternative digital currencies are considered “commodities” under existing laws.
The U.S. derivatives regulator, which oversees futures and futures options trading, brought its first case against a Bitcoin trading platform on Thursday, declaring in a statement that virtual currencies are deemed “commodities” and bitcoin trading must adhere to existing law.
The CFTC said it had reached a settlement with San Francisco-based Coinflip and its Chief Executive Francisco Riordan. Coinflip, which does business under the name Derivabit, and Riordan allegedly conducted activity related to commodity options, without registering with the agency or meeting rules for exemption.
The CFTC said that Coinflip designated put and call options for the delivery of Bitcoins as eligible for trading on the Derivabit platform. The CFTC enforces laws backing the widespread trading of put and call options on a range of commodity futures, including contracts with future expiration dates on crude oil, gold, corn and coffee — as well as futures based on stock indices and foreign currency exchange rates.
In its Coinflip ruling, the CFTC stated that federal law defines commodity to include “all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in.”
“The definition of a ‘commodity’ is broad… Bitcoin and other virtual currencies are encompassed in the definition and properly defined as commodities,” the agency wrote.
Aitan Goelman, the CFTC’s Director of Enforcement, said: “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.”