US regulators define Bitcoin and other virtual currencies as commodities

U.S. regulators have officially defined virtual currencies such as Bitcoin as commodities, the same classification as crude oil or wheat.

The U.S. Commodity Futures Trading Commission (CFTC) said in a press release that in the document, the CFTC for the first time reasonably defines Bitcoin and other virtual currencies as commodities.

Investors have long discussed whether Bitcoin can be defined as a commodity, and the CFTC has also been considering whether the virtual currency should be regulated by itself. Last year, the CFTC chairman told the U.S. Senate Committee to regulate Bitcoin derivatives. Thursday's document is also the first time that U.S. regulators have reasonably defined Bitcoin and other virtual currencies as commodities.

Now, bitcoin futures and options are subject to CFTC regulations and oversight, and if there is improper behavior such as futures market manipulation, the CFTC will be able to punish such behavior.

If a company wants to operate a bitcoin derivatives trading platform, it needs to register, as CME Group has done. U.S. regulators ordered Coinflip and its CEO Francisco Riordan to shut down Derivabit, an unregistered bitcoin options trading platform, for not complying with the Commodity Exchange Act and other regulations. The trading platform provided financial derivatives to manage bitcoin volatility.

CFTC Enforcement Director Aitan Goelman also said that although Bitcoin and other virtual currency transactions are active, innovation is not an excuse and they must also comply with all commodity derivatives market rules.

The concept of Bitcoin was first proposed by Satoshi Nakamoto in 2009. The open source software designed and released based on Satoshi Nakamoto's ideas and the P2P network built on it are Bitcoin is a P2P digital currency. Peer-to-peer transmission means a decentralized payment system.

Unlike most currencies, Bitcoin does not rely on a specific monetary institution to issue it. It is generated through a large amount of calculations based on a specific algorithm. The Bitcoin economy uses a distributed database composed of many nodes in the entire P2P network to confirm and record all transactions, and uses cryptographic design to ensure the security of all aspects of currency circulation. The decentralized nature of P2P and the algorithm itself can ensure that the currency value cannot be artificially manipulated by producing a large number of Bitcoins. The design based on cryptography can make Bitcoin only be transferred or paid by the real owner. This also ensures the anonymity of currency ownership and circulation transactions. The biggest difference between Bitcoin and other virtual currencies is that its total number is very limited and has a strong scarcity. The currency system had no more than 10.5 million in 4 years, and the total number will be permanently limited to 21 million thereafter.