Government to regulate Bitcoin as a commodity

A federal regulatory agency declared Thursday that Bitcoin and other virtual currencies are properly defined as commodities that must be regulated, a decision that is being welcomed by the fledgling digital currency industry.

The Commodity Futures Trading Commission announced Thursday that it had taken action against a company that had been acting as a Bitcoin options market without complying with federal rules.

The company, the San Francisco-based Coinflip, was effectively running a commodities exchange without complying with the Commodity Exchange Act, the CFTC said, defining Bitcoin as a commodity.

The CFTC is the federal agency tasked with overseeing derivatives, which are financial instruments that are based on the price of an underlying good. Originally, the agency oversaw futures contracts for grains and other commodities that businesses like farms and ranches used to hedge against bad weather and other circumstances, but its mandate has grown along with the use of derivatives throughout finance.

“It is no surprise that the CFTC would exercise its jurisdiction over futures and options trading of Bitcoin, as it does with any other commodity such as precious metals, foreign currency, oil or soybeans,” Perianne Boring, president of the Chamber of Digital Commerce, said in a statement to the Washington Examiner.

Noting that one company, LedgerX, was recently approved as a Bitcoin options trading platform, Boring said that “a well functioning and appropriately regulated futures and options market in Bitcoin is an important step in the overall development of the Bitcoin ecosystem and that the CFTC is the appropriate regulator for such activity.”

Bitcoin, a decentralized, peer-to-peer digital currency, has long been thought by many analysts and some of its supporters as the equivalent of a digital currency. The total number of bitcoins that can be produced is limited, making it like gold or other commodities that have been used as currency.

Houman Shadab, an

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