U.S. Regulator: Bitcoin Is Officially a Commodity

In first action against an unregistered Bitcoin options trading platform, the U.S. Commodity Futures Trading Commission (CFTC) has declared that Bitcoin and other virtual currencies are a commodity covered by the Commodity Exchange Act.

The decision came to light when the regulator issued an order against Coinflip stating, “The CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities.”

In a press release published on Thursday, the CFTC issued an order against a San Francisco-based Bitcoin options trading platform Coinflip, Inc. d/b/a Derivabit (Coinflip) and its chief executive officer Francisco Riordan to cease and desist from further violations of the Commodity Exchange Act (CEA) and Regulations, as charged, and to comply with specified undertakings. Derivabit is an online facility that connected buyers and sellers of bitcoin option contracts.

Aitan Goelman, the CFTC’s Director of Enforcement, commented: “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 press release further noted that under Section 4c of the CEA and Part 32 of the CFTC’s Regulations, commodity option transactions must either be conducted in compliance with provisions of the CEA or Regulations otherwise applicable to swaps, or conducted pursuant to Regulation 32.3, the “trade option” exemption.

The order found that Coinflip conducted activity related to commodity options transactions without complying with the CEA and CFTC Regulations.