Bitcoin an official commodity: US trade commission

The US Commodity Futures Trading Commission has ordered that bitcoin be treated as an official commodity and regulated accordingly.
Written by Corinne Reichert, Contributor

Digital currencies have been granted the status of an official commodity by the United States Commodity Futures Trading Commission (CFTC), which said that bitcoin operators must immediately ensure that their companies are legally registered under the applicable trading laws and regulations.

The decision, published on Thursday, means transactions made in cryptocurrencies must now comply with CFTC regulations as well as the governing legislation, the Commodity Exchange Act. Under Section 4c of the Act and Part 32 of the regulations, bitcoin operators in the US must now be registered as a Swap Execution Facility or a Designated Contract Market.

"In the Order, the CFTC for the first time finds that bitcoin and other virtual currencies are properly defined as commodities," the CFTC's decision said.

Bitcoin operator Coinflip, based in San Francisco, was simultaneously ordered to cease from further violating the Act by continuing to trade without complying.

"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 CFTC director of Enforcement Aitan Goelman.

The Australian Taxation Office (ATO) similarly ordered last year that bitcoin be treated as barter; however, the Senate last month called for bitcoin to be instead made an official currency.

The Australian Senate Economics References Committee in its Digital currency-game changer or bit player report, argued that treating digital currencies as barter means it gets taxed twice, making its use difficult and uncompetitive.

"The committee is of the view that digital currency should be treated as money for the purposes of the goods and services tax," the report said.

Meanwhile, the Commonwealth Bank of Australia (CBA) along with banks worldwide, including Barclays and the Royal Bank of Scotland, are looking into using bitcoin technologies to drive global finance and create secure online payment services.

The consortium of banks has recruited New York financial technology company R3 to design and develop "distributive ledger" technologies based on the block chain system that facilitates bitcoin trading.

"These technologies have the potential to change the way we view not just payments, but business processes," CBA chief information officer David Whiteing said.

"We also believe it will help and develop innovations we can't yet even think of."

Australian bitcoin mining company DigitalBTC this month reported a net loss of $6.77 million for the year ending June 2015, and earnings before interest, tax, depreciation, and amortisation (EBITDA) of $3.16 million.

"Despite the unfavourable depreciation of the bitcoin price, I am pleased with the growth the company has achieved from its bitcoin trading and mining activities, which continue to provide strong revenue generation," DigitalBTC executive chairman Zhenya Tsvetnenko said.

The company's bitcoin mining operations produced revenue of $6.4 million during FY15.

By comparison, DigitalBTC reported an underlying net profit of $600,000 on revenue of $4 million and EBITDA of $2.5 million for FY14.

"Investors should of course remember that movement in the bitcoin price has little bearing on the technology and the digital currency revolution, of which we are a leading participant," Tsvetnenko said last year.

With AAP

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