It’s official: Bitcoins are a commodity in the U.S.
The Commodity Futures Trading Commission (CFTC) said today that bitcoin, the cryptocurrency that has been gathering traction globally since the financial crisis of 2008, will be treated as a commodity for regulatory purposes, much like gold and oil.
As such, trading in bitcoins should come under the same type of scrutiny that commodity trading does. The ruling is aimed specifically at derivatives trading firms that have been transacting in bitcoins without complying with CFTC rules.
Must Follow Rules Like Others
“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,” Aitan Goelman, CFTC’s director of enforcement, said in a press release.
For a long time, there’s been a debate on whether bitcoins should be classified as a currency or a commodity. The distinction matters to the extent that it dictates regulatory standards that apply to the still largely unregulated cryptocurrency.
Last year, the Internal Revenue Service began to offer some clarity about the status of bitcoins by saying that virtual currencies such as bitcoins are “treated as property for U.S. federal tax purposes.”
Winklevoss Bitcoin Trust
In the ETF space, the ruling should have little—if any—impact on the Winklevoss Bitcoin Trust (COIN), which is currently in registration. COIN, if approved, could be the first bitcoin ETF in the market. The ARK Web x.0 ETF (ARKW | D-30) has an allocation to bitcoins, but it’s an Internet equity fund.
According to the prospectus filed with the Securities and Exchange Commission, COIN is designed under the assumption that bitcoin is a “digital commodity,” much like the SPDR Gold Trust (GLD | A-100) is a physical commodity trust that owns gold, or the smaller Merk Gold ETF (OUNZ | B-100), which owns physical gold and allows individual investors of any size to redeem shares for actual assets.
“The trust [COIN] is expected from time to time to issue baskets in exchange for deposits of bitcoins and to distribute bitcoins in connection with redemptions of baskets,” according to the prospectus.
Contact Cinthia Murphy at [email protected].