Bitcoin, the controversial virtual currency vexing financial regulators, is now officially a commodity—at least in the eyes of the Commodity Futures Trading Commission. On Thursday, with the CFTC’s first ever enforcement action against an unregistered Bitcoin options trading platform, the agency designated the virtual currency, and potentially others like it, as a commodity covered by the Commodity Exchange Act.
The definition comes from a settlement the CFTC reached with Coinflip, also doing business as Derivabit, and CEO Francisco Riordan for conducting activity related to commodity options transactions without complying with the Commodity Exchange Act and CFTC Regulations. Fron March 2014 to at least August 2014, Coinflip and Riordan operated Derivabit, an online venue for connecting buyers and sellers of Bitcoin option contracts. Coinflip also operated a facility for the trading of swaps, but did not register the facility as a swap execution facility or designated contract market, the CFTC says, drawing upon its new definition of the currency as a commodity. The settlement requires Coinflip and Riordan to cease and desist from further violations of the CEA and applicable regulations.
The enforcement action, for now, settles the question if which federal regulatory agency would position itself as the top cop on the Bitcoin beat.
“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,” Aitan Goelman, the CFTC’s Director of Enforcement, said in a statement.