
Bitcoin Is Officially a Commodity, According to U.S. Regulator - shill
http://www.bloomberg.com/news/articles/2015-09-17/bitcoin-is-officially-a-commodity-according-to-u-s-regulator
======
superuser2
Set aside what Bitcoin enthusiasts _want_ it to be for a moment, and think
about the transactions that are actually happening.

Is the majority of the usage pattern currency-like, where people are getting
paid in BTC and buying things with BTC?

Or is the majority of the usage pattern that of a commodity, where people are
mostly buying and selling it for fiat currency, and trying to do so at a
profit?

I would strongly suspect the latter: the _vast_ majority of BTC transactions
(other than transfers between personal wallets) are the buying and selling of
BTC for fiat currency.

Even most "Pay with Bitcoin" businesses are this way: in reality, all you're
doing is selling your Bitcoin to an exchange who will convert it to USD and
pay the USD-denominated price of the item you're buying. Gold certainly can't
do this so conveniently, but the principle is the same: I want to buy
something, so I sell some gold and use the USD to buy things.

~~~
mikekchar
I actually know someone who receives her salary in Bitcoin. She's a remote
contractor who lives in a country where the banking industry imposes really
unreasonable fees on international transfers. To me, she is using Bitcoin the
way it was originally intended: to break the stranglehold of the monopolies in
banks for financial transactions.

Similarly, I'm not entirely sure that the "Pay with Bitcoin" approach, where
an exchange converts the currency for you is that far removed from this idea.
Before Bitcoin, my options for payments were pretty limited. Either credit
card or Paypal -- both of which are convenient in the US, but at the time very
inconvenient (to the point of impossibility) for people living in poorer
countries.

I've read the early mailing list archives for Bitcoin to see if I could
understand Saotoshi's intent in creating Bitcoin. Interestingly, he doesn't
seem to discuss it much at all. It seems to be all about the tech. I think the
"bitcoin is going to replace fiat currency" narrative is something that was
adopted by overenthusiastic people who arrived on the scene later.

I think Bitcoin (and potentially other digital currencies) still has a number
of hurdles to get over, but it's succeeded at wresting the payment industry
from the banking monopoly (plus Paypal) far better than I originally suspected
it might. I certainly hope it can continue.

~~~
the_mitsuhiko
> She's a remote contractor who lives in a country where the banking industry
> imposes really unreasonable fees on international transfers.

And she most likely converts her bitcoins into whatever local currency she
needs to pay for her goods.

~~~
jabgrabdthrow
I'm not sure if this is supposed to be a criticism of bitcoin's utility or
not, but if it is I think you missed the point. The point is she has more
currency units now than before, because she didn't have to pay the bid bad
bank, even if she had to use local fiat to buy bananas.

~~~
monochromatic
I'm curious how she does use it though. Is there a local exchange willing to
trade bitcoin for the local currency? Because she can't exactly do it through
Coinbase, or she's right back where she started...

~~~
aianus
Coinbase is available is 28 countries:
[https://www.coinbase.com/global](https://www.coinbase.com/global)

(I work for Coinbase)

~~~
mikekchar
You might want to update your FAQ:
[https://support.coinbase.com/customer/en/portal/articles/182...](https://support.coinbase.com/customer/en/portal/articles/1826671-what-
countries-us-states-are-supported-for-coinbase-exchange-)

It only lists 4 countries.

~~~
aianus
According to our lawyers we're not allowed to advertise exchange services in
certain jurisdictions but if users happen to stumble upon it we're allowed to
offer them the service ;)

------
chrisduesing
This is an interesting development. Typically commodities futures and options
contracts can only be traded on a DCM (designated contract market) like ICE or
CME. After leaving once DCM, the Chicago Climate Exchange, I started an
exchange as a service startup, Exchangery, and sought DCM status. It requires
a 12-18 month approval process, typically > 500k in legal fees, and a
guarantee fund that is based on the amount of money moved across the platform.
The last requirement could easily be 10s of millions for something like
Bitcoin. It used to only be imposed on clearing firms, but post Dodd-Frank it
is applied to the exchange as well.

This is drastically going to thin the players in the space, and probably force
most bitcoin exchanges to stay strictly in the non-derivative trading world.
It might also tempt players like CME and ICE in to trading futures on Bitcoin
if they think the volumes are potentially large enough.

As far as SEFs go, they are limited to swap trading, which can be dressed up
to act like an option but isn't really the same thing.

Fun times ahead.

~~~
rory096
Isn't there a startup that's already applied for CFTC approval?

~~~
chrisduesing
Considering the CFTC didn't regulate Bitcoin until today I wouldn't think so.
Their application would have been received with a polite "save yourself some
time and money, we don't regulate that" I imagine.

Unless someone was working with the CFTC to have them move it under their
jurisdiction for a competitive advantage or something, but even then CME or
ICE could jump in so that would be a risky move.

I can't think of any other reason, but who knows.

------
brayton
So far we have gotten Bitcoin classified:

* CFTC: Commodity * IRS: Property * Judge: Currency * SEC: Security * TSA: Cash

One step closer to world domination.

~~~
jerf
In other words, every government entity happens to believe it is entitled to
regulate it.

Not sure this is cause for celebration.

~~~
gnaritas
Every government is entilted to regulate it, it's an asset like any other,
being new doesn't make it outside of existing law.

~~~
jsprogrammer
No, mathematics makes it outside of existing law. There is nothing a
government can do to stop or alter Bitcoin.

~~~
techdragon
And murdering someone is just applied physics... Of course they can do things
to regulate mathematics. Hell they can regulate Knowledge itself, just look up
the "born secret doctrine". Through the sanctioned monopoly on violence, the
government is given final rights over everything via their ability to leverage
the threat of violence.

~~~
jsprogrammer
What could a government do to prevent or alter Bitcoin? Shut down the
Internet?

~~~
Synaesthesia
They cannot destroy it but they can hinder it in major ways and drive it
underground. For example if major governments announced that they're banning
bitcoin it would drive off a lot of users and we would have to find ways
around their legislation. Major exchanges will have to go underground, it
would be a lot harder to buy bitcoin, maybe the value would drop.

~~~
jsprogrammer
Exchanges are peripheral noise.

What would 'banning bitcoin' even mean? All that is required is the
computation of a number and its transmission to the blockchain. It's
impossible to block such a message without blocking all other communications.

~~~
lotharbot
likely, "banning bitcoin" would take the form of barring companies from
accepting it. It definitely changes the value proposition if Amazon, Target,
Overstock, Subway, TigerDirect, Home Depot, etc. can no longer accept bitcoin
as payment. There's no need to mess with the blockchain if you can simply
eliminate mainstream use and force it onto black markets.

~~~
jsprogrammer
On what basis could a company be banned from accepting it? No physical items
are exchanged. It's simply a record in a long chain of integers.

~~~
dragonwriter
> On what basis could a company be banned from accepting it?

If by basis you mean authority, the Commerce Clause is most likely, though I
suppose the Coinage Clause might be invoked as well.

If by basis you mean policy motivation, there's an infinite number of
possibilities.

> No physical items are exchanged.

Government regulates acts that don't involve an exchange of "physical items",
but just electronic data, all the time (pretty much all instance of wire
fraud, CFAA violations, among many examples.)

~~~
jsprogrammer
I mean basis as, what technological basis would disallow the transmission of
Bitcoin transactions, but still allow all other digital communications?

~~~
dragonwriter
Most government prohibitions don't involve technological barriers. (E.g., the
prohibition on murder doesn't involve the existence of technological means
which obstruct homicidal acts but not other human interaction.)

------
ciscoriordan
Coinflip founder here. I'm not sure what this means for Bitcoin, but the CFTC
taking a clear stance is a plus for Bitcoin derivatives. The chance of a
serious player like CME listing Bitcoin derivatives just went from zero to
non-zero.

------
Animats
This makes sense. The CFTC regulates futures and derivatives in things other
than stocks. Futures and derivatives imply that at a future time, someone will
have to pay up. Without regulation, that tends to turn into a "take the money
and run" business. If there's some intermediary who holds customer deposits,
there's a huge temptation to speculate with customer funds. It takes
regulation, audits, and guarantees of financial strength to back up such an
intermediary.

This isn't unique to Bitcoin. It's a general property of futures markets.
Bitcoin, though, has had far too many intermediaries go under for the short
length of time it's been in business.

------
bmmayer1
Anyone else think it's weird that regulators of X can decide what is defined
as X?

~~~
hajile
Why does the US think it can regulate an international currency? They wouldn't
try the same sort of "define and regulate" tactics with other currencies. The
only reason they do so here is because it enables them to grab power over an
unclaimed, unregulated resource.

Digital imperialism has become a very real practice (and in more areas than
digital coinage).

~~~
icebraining
The US is not regulating the currency, it's regulating how US citizens and
companies use it. Coinflip is based in California.

(By the way, I'm not disagreeing that the US has plenty of imperialistic
tendencies. But this is not one such case.)

~~~
hajile
What would be the effect of the US dictating how it's citizens can use the
Euro? The US would be sued in international court and would lose. The only
difference is that the international court chooses not to recognize the
currency.

No legal recognition is the legal excuse used by imperialists a century and a
half ago and is the same excuse used in this case.

Not recognizing legitimacy is no excuse (especially when the primary intention
is greed and control).

~~~
icebraining
The Commodity Futures Trading Commission, which we're talking about, doesn't
exactly dictate how its citizen can use Bitcoin, but Bitcoin derivatives and
futures. And these are _also_ regulated for Euro in the US, and so are
derivatives of USD in European countries.

So Bitcoin isn't really being more regulated than the Euro; just treated as a
different class of regulable things.

~~~
hajile
There are a couple notes about this regulation. The first is that bitcoin is
not subject to many problems that other currencies have (eg. inflationary
devaluation or being tied closely to a country or group of countries). The
second is the nature of the ITC and other agencies treat foreign currencies
differently (as bitcoin is without representation).

The third and most disturbing is that normal regulations would not work
(because it doesn't suffer from being tied to some country or countries). For
this reason, the government decided that the only way to exert control was
reclassification. Even if we decide that this is somehow justifiable (no good
reason has been given and I believe there is no such reason), then the proper
process is to pass a bill through congress rather than the executive branch
once again deciding that it can do whatever it pleases.

~~~
icebraining
According to the US code, "The term 'commodity' means wheat, cotton, rice,
(...) and all services, rights, and interests in which contracts for future
delivery are presently or in the future dealt in."

As soon as Bitcoin derivatives and futures started to be traded, the
definition was met. I don't see the abuse by the Commission here.

------
cturner
Hmm. When I think of commodity, I think of something that can be traded or
consumed. Wheat? You can trade it or consume it. Metals, water rights, carbon
credits? You can trade or consume them. Bitcoin doesn't have a consumption
model. It's purely an exchange mechanism.

~~~
emodendroket
Do you consume gold and silver?

~~~
hajile
Every day from the ring on your finger to the circuits in your electronics
that you're using to access this webpage (in addition to many other uses).

~~~
Vexs
You can also eat it, I've seen it on truffle pies. Silver can also be used as
an antibiotic as well.

------
nickff
Governments appear to be classifying bitcoin as a commodity so that they can
tax and regulate it more heavily. I say this because I cannot find any
definition of 'money' which would not include bitcoin, and these are the
effects of the classification. If I am wrong, could someone please explain how
and why?

P.S. I have never mined, bought, sold, or possessed bitcoin.

~~~
protomyth
Gold is a commodity and bitcoin fits closer to that then a currency. Bitcoin
isn't issued by the US government and create by a process not by the
government's will. Given how Bitcoin works, I cannot think of how it fits the
definition of money as opposed to a commodity that is bartered.

~~~
nickff
Why does the issuer have anything to do with the question of whether something
is a money?

~~~
Turing_Machine
Bitcoin is not legal tender (i.e., required to be accepted in payment for any
debt). Government-issued money is. If someone owes you money you're required
to accept payments in U.S. dollars (in the U.S., of course, and the same in
other countries with their official government currencies). You're not
required to accept Bitcoin.

~~~
nickff
Legal Tender == Government Issued Money in Jurisdiction

Legal Tender != Money

~~~
protomyth
For the purpose of a government ruling, the definition of money and legal
tender are the same.

~~~
DanBC
Legal tender is what you're allowed to use to pay a debt. If you offer legal
tender and they decline it you can consider the debt paid. In the United
States all coins and notes of federal reserve banks are legal tender. In the
UK some coins are only legal tender for small amounts.

[http://www.treasury.gov/resource-
center/faqs/Currency/Pages/...](http://www.treasury.gov/resource-
center/faqs/Currency/Pages/legal-tender.aspx)

[http://www.royalmint.com/help/help/legal-tender-
amounts](http://www.royalmint.com/help/help/legal-tender-amounts)

[http://www.royalmint.com/aboutus/policies-and-
guidelines/leg...](http://www.royalmint.com/aboutus/policies-and-
guidelines/legal-tender-guidelines)

Scottish bank notes are currency but are not legal tender anywhere in the UK,
even in Scotland.

------
stygiansonic
Aside: I've always found it peculiar that there are separate agencies in the
US to regular commodities and derivatives markets (CFTS) vs. the SEC, which
seems to regulate only equity/stock markets and options on stock. (But not
options on futures or options on stock market indexes?)

Of course, it's nothing compared to Canada - which lacks a federal securities
regulator and had separate agencies for each province. (Though they are
associated with one another, it seems they still have significant
independence)

------
shmerl
So, should cash also be declared commodity now?

~~~
revdrmlkjr
Money is already treated as a commodity

------
PretzelPirate
The real issue with the video in the article is that the main two guys
answering questions don't seem to really understand Bitcoin. Making the
statement that as the number of transactions grow, that the price of bitcoin
will drop is just completely wrong. The number of transactions will only grow
if adoption grows and that will change the supply/demand curve in a way that
increases the value. And what's with the first guy being so obsessed with PhDs
and saying XT hasn't been peer-reviewed. The review process for Bitcoin is
seeing adoption by those running full nodes, if people approve of XT, they
will adopt it, if not, the fork will fail.

------
Kinnard
Any lawyers able to comment on what happens when untested federal government
agency policies conflict with each other? How can you blame any company
operating in this space? The agencies haven't figured their shit how. How
could a company?

~~~
dogma1138
There are no more conflicted policies for Bitcoin than there are for other
"financial doodads". Different agencies treat, bonds, stocks, currencies, and
commodities in different manner. This is fine because the interaction between
the agencies and those assets do not overlap. If you sell bonds/stock the IRS
will treat that sale according to their own guidelines for taxing investment
property, the SEC might regulate the sale, but each agency cares about
different things.

The SEC cares that trades are kosher, the IRS just wants to make sure you pay
your due taxes, heck even illegal income is taxable under IRS regulations so
if you sell drugs or decide to rob a bank well pay your taxes. Just like the
IRS doesn't care that state and federal laws make selling drugs illegal, they
still see that as property and income, they really don't care about what the
SEC or the CFTC think about bitcoin. And as far as i can tell the CFTC and SEC
regulations don't conflict with each other either since they go into effect
under different circumstances, and as far as i can tell both the CFTC and the
FEC regulate exchange-traded commodities at different points and under
different guidelines.

~~~
eru
Would the IRS rat you out when you pay taxes on your illegal income?

~~~
sethhochberg
Check out the case Garner v. United States - the Supreme Court essentially
ruled that your obligation to disclose your sources of income when paying
taxes cannot trump your 5th amendment right to not be compelled to self-
incriminate. If disclosing the source of income would incriminate you in a
crime, you can declare the income and decline to note the source on your
taxes.

~~~
eru
Thanks!

I wonder whether that protection is always available? Ie can I always decline
to note the source?

~~~
icebraining
If you couldn't, not declaring _would_ be self-incriminating!

(Don't take this as legal advice; the law is often nonsensical)

~~~
dogma1138
To a point, saying "not telling" is better than saying "my drug cartel". The
IRS might investigate but if they do not find any violations (of US tax law)
they wont and cant pursue this matter any further, at least on paper.

------
tgflynn
I know very little about regulations on commodities trading.

Is there a chance that the CFTC will decide to regulate not only trading in
bitcoin derivatives but also trading in bitcoin itself ?

------
andy_ppp
Is Bitcoin used for money laundering? It seems simpler than London property
for disappearing large chunks of cash

~~~
Rmilb
The head of Fincen ((Financial Crimes Enforcement Network)The US agency that
goes after money laundering) has said that it is still easier to launder US
dollars. [1]

1\.
[https://www.reddit.com/r/Bitcoin/comments/1qx7ik/head_of_fin...](https://www.reddit.com/r/Bitcoin/comments/1qx7ik/head_of_fincen_cash_is_still_the_best_means_of/)

------
joslin01
Is this a good thing? Or bad?

Sure, we want it to replace money but that doesn't seem feasible when all
debts in your given country must be paid with your given country's currency.
This now puts it in the running with things like silver and gold -- perhaps it
will spur more trading?

~~~
aianus
> all debts in your given country must be paid with your given country's
> currency

That's not true. If I owe you $100 and you're willing to accept Bitcoin that's
a perfectly legal way to settle the debt.

Taxes are the only debts that _must_ be paid in the national currency, at
least as far as the US goes.

------
rockshassa
Isn't bitcoin explicitly a currency? I don't see any ambiguity around that. Or
do you only get to be a currency if you're backed by a government entity that
can be manipulated?

~~~
s73v3r
Just because someone says that Bitcoin is a currency doesn't make it one. Keep
in mind that the Japanese Yen is a currency in Japan, but under US
regulations, it is not. Likewise, the US Dollar is probably not a currency in
Japan, but an asset/commodity.

~~~
icebraining
_Keep in mind that the Japanese Yen is a currency in Japan, but under US
regulations, it is not._

For many purposes, yes, it is, especially in tax law, which is why people also
wanted Bitcoins to be recognized as such.

Under Subtitle A of the Internal Revenue Code, foreign currency like the Yen
has special rules vis-a-vis commodities. In particular, when you buy something
with Yen (up to $200 in value), it is _not_ considered a realization of
capital gains and so it is not taxable, unlike if you used a commodity to pay.

[https://www.law.cornell.edu/uscode/text/26/988](https://www.law.cornell.edu/uscode/text/26/988)

------
listic
What is a _commodity_? Dictionary says it's similar to _goods_ or
_merchandise_.

------
oncebitten
Prediction: BitCoin will be the cause of the great world depression, watch the
news.

------
xacaxulu
Good thing mine are in a non-US based wallet :-)

~~~
c0achmcguirk
How are wallets "non-US based" or "US-based"? A wallet is just a collection of
private keys...

~~~
s73v3r
Depends on where the owner is. If you're in the US, you are supposed to
declare them as an asset, and pay taxes on the sale of them.

~~~
mdpopescu
I think US citizens are supposed to pay taxes on all income, no matter where
it was obtained (and even if they already paid local taxes, unless there are
specific agreements). Of course, I am not a lawyer and definitely not an US
one :)

