Bitcoin and virtual currencies are now officially commodities that have to register with and be regulated by the government.
That is the groundbreaking ruling issued Thursday in settling a case against San Francisco-based startup Coinflip in which the company was ordered to cease operations.
Coinflip Inc., which does business under the name Derivabit, and its CEO, Francisco Riordan, were charged with conducting activity related to commodity options without registering with the Commodity Futures Trading Commission or meeting rules for exemption.
“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 a press release about the matter.
The CFTC didn’t impose any penalties on Riordan or his firm. The case was settled without him admitting or denying the charges.
The question of whether or not bitcoin might be defined as a commodity governed by the CFTC has long been discussed, but this is the first time it has been officially declared that way.
Aitan Goelman, the agency’s enforcement chief, said digital currency companies will be held to the same standards as other businesses it regulates.
“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,” he said in a prepared statement.
The ruling is likely to bring other bitcoin companies under review by the CFTC if they don’t fall in line and will probably increase their cost of doing business in the U.S.
The value of bitcoin has been relatively stable this year in the $200 to $300 range after wild swings previously that saw it jump over $1,100.
But most in the venture investment community have been focusing on the underlying blockchain technology behind the currency rather than on the businesses like Coinflip that have sprung up around bitcoin.
