According to the U.S. Commodities and Futures Trading Commission (CFTC), bitcoin and other digital currencies can now be officially defined as commodities, like oil and gold. On Thursday, the regulatory agency announced that it had settled charges against the San Francisco-based cryptocurrency exchange Coinflip for trading bitcoin options through its platform without complying with CFTC regulations.
“In this order, the CFTC for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities,” the agency said in the press release.
The CFTC says that Coinflip and its CEO Francisco Riordan managed an online facility Derivabit that facilitated the sale of digital currency option contracts. According to the order, issued by the agency, commodity option trading was not performed in accordance with the CEA and Regulations. The order requires the exchange to cease its operations in order to keep it from further violations.
“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,” the agency stated.
The CFTC’s Director of Enforcement, Aitan Goelman, 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.”
Any company that wants to trade bitcoin futures or derivatives will have to register as Designated Contract Market or a Swap Execution Facility. If a firm is caught involved in activities violating the law, including futures manipulation, it will face charges against the CFTC.
Many companies working with digital currency face regulatory uncertainty due to the novelty of digital currency. The supporters of bitcoin even viewed digital currency as a tool to avoid the burdens of regulation in the financial sector.
Bitcoin has for a long time been considered by many analysts as the equivalent of a virtual currency. There is only a limited number of bitcoins that can be generated, what makes it like silver or other commodities that have been utilized as currency.
As Coinflip is not the only company that offers a platform for bitcoin options trading, other exchanges, not operating in compliance with regulations, could attract the attention of the agency in the near future.
The CFTC made an announcement on September 17 and added that bitcoin operators should register immediately under the appropriate regulations.