U.S. derivatives regulators have defined the virtual currency Bitcoin as a commodity in an enforcement action against a Bitcoin options trading platform.
The U.S. Commodity Futures Trading Commission (CFTC) on Thursday brought charges against a San Francisco-based firm, Coinflip, Inc, and its CEO, Francisco Riordan, alleging that they violated CFTC rules and derivatives laws by engaging in activity related to commodity options transactions by operating a facility for trading commodity options with registering of complying with its rules.
In its order against the firm, the CFTC, for the first time, found that Bitcoin and other virtual currencies are properly defined as commodities. And, the regulator concluded that trading in options on the virtual currency must be conducted in compliance with U.S. rules and laws for derivatives trading.
In the case of Coinflip, the order found that from March 2014 to at least August 2014, Coinflip and Riordan operated an online facility named Derivabit, offering to connect buyers and sellers of Bitcoin option contracts, that these activities were not conducted in compliance with its rules, and that the firm operated a facility for trading swaps without registering with the CFTC.
“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,” said Aitan Goelman, director of enforcement at the CFTC, in a statement.
Coinflip and Riordan co-operated with the CFTC’s investigation, and settled the case, which requires Coinflip and Riordan to cease and desist from further violations and to comply with specified undertakings.