Bitcoin Is Officially a Commodity

Taco Cowboy writes: According to the Commodity Futures Trading Commission (CFTC), Bitcoin and other all virtual currencies have been officially categorized as commodities, just like crude oil or wheat. The CFTC on Thursday announced it had filed and settled charges against a Bitcoin exchange for facilitating the trading of option contracts on its platform.

By this action, the CFTC asserts its authority to provide oversight of the trading of cryptocurrency futures and options, which will now be subject to the agency's regulations. In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors. If a company wants to operate a trading platform for Bitcoin derivatives or futures, it will need to register as a swap execution facility or designated contract market, just like the CME Group. And Coinflip—the target of the CFTC action—is hardly the only company that provides a platform to trade Bitcoin derivatives or futures In other Bitcoin news, reader McGruber notes that the CFO of BitPay, a Bitcoin payment service, was successfully phished, costing the company $1.8 million worth of Bitcoins. The company is attempting to recover the money from its insurer.

Comments

The CFTC is United States only

[dgenr8]

Technically, this means BTC futures can only be manipulated with CFTC permission.

Not that they would ever allow such a thing.

Re:The CFTC is United States only

[Errol backfiring]

I don't know, but given the fact that futures are mainly baked air (you can trade in crops that will never be planted) and the finite amount of bitcoins, this gives an interesting situation.

Re:The CFTC is United States only

[Penguinisto]

Laugh and cry "tinfoil!", but I'm actually curious: would there be a way to backdoor/engineer a means to actually restrict/kill BTC by this route, or at least (eventually) corral it under official governmental control?

It appears that the CFTC has just declared a monopoly-by-fiat over trading a certain aspect of BTC (futures in this case). I don't think there's a route to do something nasty from here, but still, there's that nagging feeling...

Re:The CFTC is United States only

[Anonymous Coward]

You don't need to assume control over BitCoin as a technology. You simply enforce your restrictions on the people that use it, and the exchanges.

Re:The CFTC is United States only

[Anonymous Coward]

Interesting consequences:

1) The futures price will strongly influence the actual bitcoin price
2) "Legitimate" trading will increase liquidity of bitcoin
3) Given that bitcoin has no obvious intrinsic value, possibilities exist for large-scale market manipulation

Re:The CFTC is United States only

[Anonymous Coward]

>possibilities exist

Actually, in the pre-regulated state it was in yesterday, Bitcoin was already subject to ridiculous amounts of market manipulation to begin with. For example, what used to be one of the biggest Bitcoin exchanges, Mt.GoX, had been hacked and database data released. Analysis of this data reveals a whole ton of market-manipulating bots, one of which was able to buy or sell Bitcoin without actually providing or receiving USD or other currencies in exchange. Of course, the missing funds most likely wound up just disappearing from Mt.GoX's bank accounts without actually getting recorded on any balance sheets anywhere...

Re:The CFTC is United States only

[lgw]

you can trade in crops that will never be planted

No, that's not how it works. Every futures contract must be delivered (a small percentage are delivered by buying the commodity on the market the day the contract matures, mostly due to crop failure, but still: somebody planted and grew the crop that was delivered). The contracts are mostly written by farmers, and mostly expire in the hands of food manufacturers. They may pass through the hands of 1000 speculators in the meantime, but the contract always represents real product that must be delivered.

Re:The CFTC is United States only

[slew]

would there be a way to backdoor/engineer a means to actually restrict/kill BTC by this route, or at least (eventually) corral it under official governmental control?

The CFTC probably won't be able to restrict BTC mining or usage anymore than they can keep you from drilling for oil in your backyard or using oil to run the generator in your fallout shelter (although other parts of the government would probably have issue with you drilling for oil in your backyard or digging a fall-out shelter).

However, if you were wanting to buy or sell a delivery contract for BTC you will be potentially mining (or buying from someone else for delivery if it's cheaper) in the future, the CFTC would be able to regulate it just like it regulates futures contracts for stuff like oil pork bellies, (or frozen concentrated orange juice).

Futures contracts are generally used as hedges or insurance against price volatility, but like all financial instruments, people speculate on them all the time and this make it rife for manipulation. This is why they *attempt* to regulate it so it can still be used for its primary purpose (hedging and insurance) and not collapse into a black hole of speculation.

Re:The CFTC is United States only

[lgw]

It appears that the CFTC has just declared a monopoly-by-fiat over trading a certain aspect of BTC (futures in this case). I don't think there's a route to do something nasty from here, but still, there's that nagging feeling...

This limits the nasty. Goldman Sachs can destroy any unregulated market for profit, and quickly. This helps prevent that.

The biggest single cause for the 2008 financial crisis was GS doing exactly that to unregulated mortgage-backed securities. The CBT went to the SEC to ask that mortgage-backed securities be traded just like other securities (financials are a bit different from commodities, most of the same market rules apply, but different regulators), but the SEC rebuffed them. But then, most senior SEC officials used to work for GS, or will soon work for GS, so that's hardly a surprise. Had the MBS market been a normal financial market, the risks would have been understood, and the crisis would only have been one of banks writing mortgages they shouldn't have (and just letting those banks fail was no big deal).

Re:The CFTC is United States only

[lgw]

Oh, I should add that indirectly, there is one very nasty side-effect here: taxes. The worst outcome for BTC tax-wise is to be treated as a commodity, as commodities have higher tax rates for small investors, compared to other capital gains. This isn't an IRS ruling, but the IRS already seemed to be leaning this way.

Re:The CFTC is United States only

[TsuruchiBrian]

They can claim all the authority they want. The source code is open. They can also claim authority to regulate the process of calculus too. They can pay rewards to snitches who turn in people doing unreported calculus, and some people will probably get caught.

The US government does have a great deal of control over the US dollar. So they might be able to regulate the trading of US dollars with bitcoin, but this will be as limited as the government's ability to prevent other illegal things with US currency. And they will have zero control over trading bitcoin with currencies they do not control.

Re:The CFTC is United States only

[Anonymous Coward]

You don't know what you're talking about. Futures contracts can be cash-settled.
 

Re:The CFTC is United States only

[david_thornley]

What makes you think anybody's trying to regulate Bitcoin? There are laws here on transactions with US dollars, and now there's laws applying to trading certain contracts about Bitcoin. There's similar contracts about lots of things, and the government doesn't regulate them.

What this means is that the government is taking Bitcoin seriously as something of potential value.

Re:The CFTC is United States only

[TsuruchiBrian]

What makes you think anybody's trying to regulate Bitcoin?

What makes you think that I think anybody is trying to regulate bitcoin?

If you had read the post I was responding to, you'd see that that person was specifically asking if it would be possible for the government to do this.

Re:The CFTC is United States only

[Troed]

Given that bitcoin has no obvious intrinsic value

What's the intrinsic value of a global transaction network that cannot be censored?

Or in other word, Bitcoin lacks intrinsic value in the same way as the Internet does.

Dump!

[Anonymous Coward]

Somebody at Slashdot must have a ton of this dunning-krugerands they need to dump.

Need a new cryptocurrency

[Anonymous Coward]

I don't like all these "business" and "manager"-like people involved in bitcoin.

It was fine before all these assholes-in-suits got involved.

Re:Need a new cryptocurrency

[Anonymous Coward]

You should launch your own, I bet no one else has done that yet.

Re:Need a new cryptocurrency

[Anonymous Coward]

The funny part is where they think they are in control.

Re:Need a new cryptocurrency

[Rob Riggs]

The funny part is where they think they are in control.

It's all fun and games until someone brings a gun to the party.

Re:Need a new cryptocurrency

[Anonymous Coward]

The funny part is where they think Bitcoin has any value outside of a few people's heads.

Re:Need a new cryptocurrency

[Anonymous Coward]

The funny part is where you can change "Bitcoin" to any currency and your sentence would still hold true.

Re:Need a new cryptocurrency

[Anonymous Coward]

No, real currency is legal for all debts public and private.

Re:Need a new cryptocurrency

[Anonymous Coward]

The difference being, I only accept real currency, specifically the legal currency for my location or USD, for goods and services, I don't accept bitcoins.

Bitcoins are also a good measure as to whether or not someone is a crook. If someone accepts real currency, they may or may not be a crook. If someone only accepts bitcoins, I just assume they're a crook and take my business elsewhere.

Re:Need a new cryptocurrency

[doublebackslash]

I tend to not think of Bitcoin as currency. A commodity fits rather well but isn't quite perfect.
I view it as a medium for the transfer of value. That gives it some value since it is competing with costly and complex alternatives such as credit card processors.

Everything else that people do with it can be seen as being derived from that. Speculation and trading are natural consequences of anything that people ascribe value to.

When used as an individual not wanting to engage in futures or investment, but only in the exchange of value for goods and services Bitcoin is interesting.

People mining bitcoins are the facilitators of that exchange, hence the reward for mining a block. The focus for many has been on the act of mining, but the actual use of it in buying / selling is much more compelling for most. You can use the exchanges to turn money into bitcoins and vice-versa and then use them to buy goods or services.

You're right that is isn't money, but that is the goal. To take it from a commodity-like to a full blown fiat currency. It is a great experiment.

Re:Need a new cryptocurrency

[GLMDesigns]

This. Bitcoin is a medium of exchange. The blockchain is the new and interesting technology that is independent of Bitcoin.

Re:Need a new cryptocurrency

[Kjella]

It's definitively not a commodity, that simply describes a market where the product is generic like say coal but it's still being sold from producers to consumers. It's a pseudo-currency, but more like a collector's item like (expired) stamps than a bottle of whiskey. You're not really sure why they're valuable in the first place since they don't have any inherent value, but as long as there's collectors who want them they can be bought and sold as a substitute for money. The more interesting part is that the "transfer of value" works no matter what the stamps are worth, it's only the people gathering or selling their collection who care if a stamp is $10 or $100 or $1000. The transactions where A buys bitcoins with cash, transfers bitcoins to B who sells them for cash again are net neutral. So the price is basically all speculators speculating against each other on what they'll do.

Re:Need a new cryptocurrency

[Troed]

A blockchain cannot function without verification ("mining"). There needs to be incentives for "mining" to occur. Those tokens of incentives don't need to be called "coins" - but they must have some sort of value.

Thus, for any blockchain to be successful it needs to have have "coins".

Re:Need a new cryptocurrency

[GLMDesigns]

There's blockchain technology being developed by big banks that don't require miners in the Bitcoin sense. The blockchain is there to show, for instance, that document x was signed at a set date/time by parties a,b and c.

Re:Need a new cryptocurrency

[TheTurtlesMoves]

err not really. Hash cash, which the current bitcoin is, is really just a method of selecting who gets to stamp the next block. It doesn't need to be billions of hashes, it can be something different. There are other algorithms proposed, and they don't have to be non centralized (bitcoin nutters not withstanding). As for the resource of running a server/blockchain stamper whatever the fuck you want to call it. There are many reasons outside earning "coin" to run one. Banks love the idea of getting rid of visa/mastercard for example. To participate you agree to run X amount of official servers or whatever.

Re:Need a new cryptocurrency

[Troed]

... and you're unable to secure that blockchain without mining. Without it it's just another, regular, database.

Re:Need a new cryptocurrency

[GLMDesigns]

Mining is a proof of work there need not be a reward ("bitcoin") attached to it. Banks and large entities can mine, expand the blockchain, in order to prove the validity of contracts - not necessarily in order to "mine" bitcoin.

Re:Need a new cryptocurrency

[Troed]

There's no added security in that scenario compared to a regular database. That is, they must contractually agree not to try to outmine (thus risk a rogue bank doing double spends) each other. From that follows they cannot be sure that an external actor won't outmine them unless they keep the blockchain secret. From that follows ...

https://www.myblockchain.xyz/

Re:Need a new cryptocurrency

[GLMDesigns]

Thanks! That was funny.

A blockchain (seriously now) is a distributed database. It allows multiple parties to "own" and validate the data. There is a value to this beyond bitcoin and other cryptocurrencies.

Re:Need a new cryptocurrency

[Troed]

If multiple parties distribute the block-chain, how do you protect it from validation unless mining is an arms race? ... and the incentive for an arms race will be a token of value. It doesn't need to be named a "coin", but will in effect be one.

(PoS etc are nice theories but we're back to the equivalent of a regular database in effect)

But but but

[Anonymous Coward]

But according to Slahbots, Bitcoin is a fraud and a "Ponzi Scheme" for cows! How is this possible???

Re:But but but

[squiggleslash]

If tulips suddenly started being speculated upon in the style of a commodity, the regulators would treat tulips the same way. This is not the government blessing or recommending Bitcoin, merely recognizing that trading it fits certain regulatory laws and structures.

Re:But but but

[Archwyrm]

Tulips?! No one wants tulips. Now, lupins on the other hand..

Re:But but but

[Anonymous Coward]

Already happened. (which I'm sure you already known)

Uh huh

[Anonymous Coward]

Nothing to see here. Next...

That's inline with the rest of nonsense

[roman_mir]

Bitcoin is a speculation vehicle, nothing else, but given the state of American economy, total lack of production and real economic growth, the fact that this 'economy' is only held together by the strings of 0% interest rates the Fed's Yellen thinks she can keep up forever... I guess it makes sense that some officials in the government think that electronic currencies not backed by anything actual in real life are a 'commodity'. Why not...

I have just started a virtual currency in my head.

[Anonymous Coward]

It's called know-how. We can trade it between each other. You tell me something I might not know and I will tell you something you might not know. The currency has a unique feature: it is accumulative but it can leak. It is however regulated by the CFTC so it has that going for it.

<sarcasm>What an awesome world we live in.</sarcasm>

Manipulation

[tmosley]

"In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors"

HAHAHAHAHAHAHAHAHAHAHAHAHA! These idiots couldn't regulate their way out of a paper bag. And they fold up exactly like one whenever manipulators are at big banks or other financial institutions. The only people I have ever seen that actually got prosecuted were either scapegoats, independent traders, or people who have fallen out of the good graces of their companies.

There is a revolving door between the upper echelons of the CFTC and the companies they are supposed to regulate, with officials receiving MILLIONS in compensation for looking the other way during their time in office.

It's absolutely criminal.

Re:Manipulation

[tomhath]

with officials receiving MILLIONS in compensation for looking the other way during their time in office.

For example, if the state's Attorney General or Governor has a close relationship with someone accused of wrongdoing.

Re:Manipulation

[moeinvt]

True, but bitcoin doesn't have shareholders. There are also no big profits or lucrative post-government job offers to bribe regulators.
When it comes to the federal government, "selective enforcement" is the name of the game. If you're a government employee, banker, big corporation or just plain wealthy and you pay your protection money, the laws and regs don't apply to you. Bitcoin users and exchange operators don't fit that criteria, so there's nothing to prevent Big Brother from cracking down on them at every opportunity.

Re:Manipulation

[tmosley]

Commodities don't have shareholders either, and those have been manipulated up the wazoo. The same will be done to bitcoin, given half a chance.

New categorization

[tompaulco]

I have categorized bitcoins as flibbywhatxits, and my organization, the flibbywhatxits trade commission, is therefore in charge of all bitcoin trading and exchange and anyone trading or operating an exchange must do so by my rules.

Re:New categorization

[Anonymous Coward]

And if you can get the US government behind you (like the CFTC can, presumably), you're all set.

Old News

[Anonymous Coward]

I hate to break it to you, but bitcoin has been classed as a commodity by the world's major governments for more than a year. Not exactly news. Perhaps the headline should be: "U.S.A. finally catches up with Europe, China and Japan"? I'm glad to see the third world getting on board.

Came here to laugh and eat popcorn.

[Anonymous Coward]

The impotent rage of true believers. The fantasy that a basement full of graphics cards will grant you wealth, power, prestige, and women.

Thanks for the laughs.

Re:Came here to laugh and eat popcorn.

[willworkforbeer]

The impotent rage of true believers. The fantasy that a basement full of graphics cards will grant you wealth, power, prestige, and women.

Wwwwait.... there's gonna be women down here? Mama's not gonna approve of that... no, Mama's not gonna approve of that at all.

what the hell?!

[slashmydots]

"In other Bitcoin news, reader McGruber notes that the CFO of BitPay, a Bitcoin payment service, was successfully phished, costing the company $1.8 million worth of Bitcoins."
If there's one thing I learned from the job I just quit, if the president/CEO is an nontechnical moron with a low intelligence level who can't make proper decisions or perceive threats correctly, you should leave immediately. Ready for the scary part? Amazon and Newegg use bitpay to power their bitcoin payment backend.

I rate

[Anonymous Coward]

I rate bitcoin as halfway between a scam and method for criminals to launder money/conduct illegal transactions. It needs to be killed!

LOL

[r-diddly]

The US government, which has proven it cannot and will not prosecute any form of wrongdoing whatsoever in the financial rackets, sorry markets, and which thereby loses all claim to legitimacy, now appoints itself to be in charge of prosecuting wrongdoing in Bitcoin futures markets? Harr deee harrr.

CFTC will be able to bring charges ...

[Anonymous Coward]

" In the event of wrongdoing, such as futures manipulation, the CFTC will be able to bring charges against bad actors ". They never did anything to stop the manipulation in the gold and silver markets. Why should they stop manipulating ( I mean start regulating ) currency markets now ?

Yeah because it's hard to hide.

[Anonymous Coward]

So we can track it.
Soon we'll make all y'all use it.

Re:This haiku costs zero Bitcoins

[Anonymous Coward]

for entertainment
you make up bad poetry
featuring gay sex

paging dr. freud...