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Bitcoin Is Officially a Commodity, According to U.S. Regulator

296 points by shill 11y ago

listic 11y ago
What is a commodity? Dictionary says it's similar to goods or merchandise.
nickff 11y ago
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.
- deleted 11y ago
  [deleted]
- krapht 11y ago
  In your view, are gold and other precious metals commodities or money? If your answer is commodities, why not money?
  - nickff 11y ago
    The most popular definition of "money" that I have seen is 'a medium of exchange'. I think that gold has been used as a money in the past, as have a number of other precious metals. The question you are asking is a good one, because it asks whether the use as a medium of exchange must be its primary use, and how popular it must be to be considered a money. It seems gold is an edge case, which could (currently) reasonably be judged to be either one.
    - danharaj 11y ago
      I disagree. You can't use gold nuggets to pay for your groceries. As a medium of exchange it is sorely lacking. Gold has been mostly a commodity for a very long time. Its main purpose with respect to money nowadays is that it is a store of value useful to backers of currency.
  - IkmoIkmo 11y ago
    I'd say both and mostly used as an asset class, just like bitcoin, both money and an asset class and mostly used as the latter today. Why must they be mutually exclusive? It's no different from the dollar which is both money and traded as an asset class everyday.
- tsotha 11y ago
  You still have to pay taxes on currency transactions that generate a profit, so I don't understand why this would be a tax boon. If I buy a million dollars worth of yen and sell it for two million, the taxman will be around.
  - josu 11y ago
    I'm guessing he is referring to sales tax or VAT, which currencies are exempt from.
  - icebraining 11y ago
    According to this[1] Reddit post by a supposed tax attorney: Note: There is a code section that might provide some relief here, but only if bitcoins are categorized as a foreign currency. Under this code section, the use of bitcoin to buy goods and services would be tax free as long as the transaction was personal (i.e. not for business or investment) and did not generate more than $200 of gain. Unfortunately, the IRS ruled in Notice 2014-21 that bitcoin is not a currency for tax purposes. So, this code section is inapplicable unless the IRS changes its position sometime in the future. [1] https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_attorney_here_are_my_answers_to_the/ https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_...
- icebraining 11y ago
  In the same way that a language is a dialect with an army and navy, so is money any commodity that's officially recognized as currency.
- protomyth 11y ago
  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 11y ago
    Why does the issuer have anything to do with the question of whether something is a money?
    - ithkuil 11y ago
      indeed the two terms are orthogonal: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money Both are moneys
      - nickff 11y ago
        Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, as it is not supported by a government, and it is not based on a material.
        dragonwriter 11y ago
        > Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, Those two categories that were discussed upthreads are not exhaustive. Non-commodity, non-representative, non-government money existed long before bitcoin -- probably the best known fairly modern example is in Local Exchange Trading Systems and variations on those, which use units of accounts that (while they are often denominated in fiat currencies -- largely to simplify use and tax compliance for users) are neither the fiat currency they are denominated in (if they are denominated in one) nor backed by that currency in the sense that representational money is (in that no issuing entity promises to exchange them for the currency, even if the members of the system agree to treat them as equivalent to the fiat currency in exchange) -- and some variations intentionally divorce their units from the fiat currency entirely.
- ThrustVectoring 11y ago
  A bitcoin represents a portion of the blockchain, the dominant distributed-consensus protocol. Since the ability to do blockchain-stuff that takes a huge amount of processing power to revert is valuable economic activity, bitcoin is basically a cryptographic commodity.
  - nickff 11y ago
    What you are saying is that bitcoin is a claim on the use of the blockchain, and that the blockchain is a resource. This is not incompatible with the bitcoin itself being money. A US Dollar can buy you a computer which has a huge amount of processing power, but the dollar is no commodity, though the processor may be.
    - mikekchar 11y ago
      Just off the top of my head, I'm not sure that the blockchain itself could be seen as a resource. However, the mining pool that makes transactions happen (and expensive to cheat) could certainly be seen as a resource. In fact, one might be able to make an argument that the overall mining hashrate sets an upper bound on the value of BTC. It would be related to the cost of the CPU resources necessary to cheat.
      - ThrustVectoring 11y ago
        Yeah, `/s/blockchain/mining pool` on my original statement. The mining hashrate also helps set the value of BTC in my model as well - it means that other valuable activities can piggyback on the hard-to-forge nature of the blockchain.
  - icebraining 11y ago
    "A portion of the blockchain"? How so? The blockchain stores transactions, not Bitcoins.
    - SeeDave 11y ago
      As a bitcoin 'owner' you have the right to mark the transfer of unspent transaction outputs from one or more addresses to one or more other addresses in the blockchain.
stygiansonic 11y ago
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)
xacaxulu 11y ago
Good thing mine are in a non-US based wallet :-)
- c0achmcguirk 11y ago
  How are wallets "non-US based" or "US-based"? A wallet is just a collection of private keys...
  - s73v3r 11y ago
    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 11y ago
      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 :)
brayton 11y ago
So far we have gotten Bitcoin classified: * CFTC: Commodity * IRS: Property * Judge: Currency * SEC: Security * TSA: Cash One step closer to world domination.
- bduerst 11y ago
  The NY Judge defined it as a currency so they could adequately prosecute someone using bitcoin in a ponzi scheme. If the law redefined ponzi scheme to use something other than a currency, it might be defined differently.
- jerf 11y ago
  In other words, every government entity happens to believe it is entitled to regulate it. Not sure this is cause for celebration.
  - irixusr 11y ago
    Careful, increasingly the governments expect you to agree they have a right to whatever they claim.
  - jMyles 11y ago
    ...or that's it's remarkable. It's the default belief for a government entity.
    - cowsandmilk 11y ago
      Yep, regulators generally want to broaden their reach to cover anything and everything that could be interpreted as being under their regulation. Narrow readings are not for the regulator. You have to go to court (or have the legitimate ability to threaten going to court) to hope for a narrower reading.
      - Retric 11y ago
        [citation needed] it's often more about what industry and politics vs regulators. Ex: EPA often has a rather hands off policy and is frequently sued for failing to regulate industry. SEC is often described as asleep at the wheel. FDA carved out lots of things as outside their preview like 'natural' remedies even if it was created in Large part to deal with exactly that type of snake oil.
rockshassa 11y ago
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?
- wuliwong 11y ago
  Although I don't think many regulators in the US govt. are really concerned with the explicit purpose Bitcoin was created with, you are touching on something I think is interesting. My perspective is that the real promise of Bitcoin is to be "successful" regardless of government regulations and categorizations. I know it sounds idealistic but I think if the Bitcoin community needs the US govt. to cooperate in order to be successful then it's probably not going to happen. I guess "success" could be defined as widespread use. Somewhat stable (non-zero) value for Bitcoin would also probably be part of "success." :)
- s73v3r 11y ago
  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 11y ago
    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
chrisduesing 11y ago
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 11y ago
  Isn't there a startup that's already applied for CFTC approval?
  - chrisduesing 11y ago
    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.
  - kanzure 11y ago
    > Isn't there a startup that's already applied for CFTC approval? Well, there's TeraExchange which applied with the CFTC for trading dollar-denominated bitcoin swaps that are written, quoted and settled in US dollars. Recently (days ago) the CFTC approved LedgerX for temporary registration as a Swap Execution Facility, which is one of the (multiple) registrations required pursuant towards LedgerX providing bitcoin options trading, as well as bitcoin clearing and settlement in actual bitcoin. Disclaimer: guess what
superuser2 11y ago
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.
- Steko 11y ago
  This. Also don't forget that currency and commodity are not always mutually exclusive: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money
- danharaj 11y ago
  Commodities are increasingly behaving like this, though not to the extent that BTC does. The economy is very, very financialized. Bitcoin is an asset that appeared well into the financialization trend, so I don't think it is that surprising that such activity dwarfs actual uses of BTC as a medium of exchange. Who is interested in bitcoin? Consumers for whom the use of bitcoin is better than currency (so, like, contraband over the Internet), technophiles, libertarians and investors, really.
- digi_owl 11y ago
  From the outset bitcoin was set up to be digital gold...
  - joeyspn 11y ago
    Exactly this. The precursor was Szabo's bitgold [0]. Also, the feeling in the community has always been that bitcoin would remain as the gold of the cryptos, used as both money and a commodity with some industrial applications. [0] http://unenumerated.blogspot.com.es/2005/12/bit-gold.html http://unenumerated.blogspot.com.es/2005/12/bit-gold.html
Kinnard 11y ago
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 11y ago
  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 11y ago
    Would the IRS rat you out when you pay taxes on your illegal income?
    - sethhochberg 11y ago
      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.
ciscoriordan 11y ago
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.
shmerl 11y ago
So, should cash also be declared commodity now?
- revdrmlkjr 11y ago
  Money is already treated as a commodity
joslin01 11y ago
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?
- snogglethorpe 11y ago
  > Sure, we want it to replace money We do...? -.-;
- aianus 11y ago
  > 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.
- dovereconomics 11y ago
  Some EM companies issue bonds in international markets not using their national currency
bmmayer1 11y ago
Anyone else think it's weird that regulators of X can decide what is defined as X?
- iamdave 11y ago
  I don't follow. Isn't that the point?
  - aianus 11y ago
    No, because they have a clear incentive to categorize everything as X so they can collect their taxes and fees and feel important and powerful.
    - iamdave 11y ago
      If not them, then who?
      - aianus 11y ago
        Congress? The courts? Some third party at least.
        iamdave 11y ago
        But...Legislatures and courts designate regulatory agencies, through enabling acts[1] that allows said agency to exist and which lists its jurisdiction and areas of responsibility. That's how regulatory bodies exist, it's what they're for. A court established regulatory body defining what it regulates is 100% within the scope of that body under the law. So in a way, this already happens. I'm not exactly seeing the issue here. Regulatory bodies don't just appear out of nowhere, they have to be established by a legislature or a court. You're asking for a feature that already exists. [1] https://en.wikipedia.org/wiki/Enabling_act#United_States https://en.wikipedia.org/wiki/Enabling_act#United_States
    - Frondo 11y ago
      It seldom happens that government agencies enact new regulations to "feel important and powerful". Far more often, they enact new regulations because new circumstances are similar enough to the old ones. It's usually the case that, to anyone with some knowledge of history, that the regulations are a good idea to put in place before people really start getting scammed/hurt/etc. To say that government agencies take action to "feel important and powerful" certainly casts the agencies in a trivial or pointless light, but I don't think it is accurate.
jeremonda 11y ago
The fact the Bitcoin is officially a commodity, is why we need ethics in Bitcoin regulation.
- civilian 11y ago
  Whenever I hear the word "ethics" I hear: "I don't understand this new paradigm in culture or technology and there outta be a law!" It's a fearful desire to control something you aren't a part of.
- tzs 11y ago
  Note: jeremondo is posting comments of the form "The fact that X, is why we need ethics in Y" in several different threads concerning a wide variety of topics. So far he's got: X="Bitcoin is officially a commodity", Y="Bitcoin regulation" X="D-Link published code-signing private keys by mistake", Y="code-signing" X="we're welcoming Anne, Ben, and Joe", Y="welcoming Anne, Ben, Joe" X="China's booming middle class is creating world's most dynamics consumer market", Y="creating dynamic consumer market" X="reporter C.J. Chivers had to suddenly stop", Y="war journalism" I can't tell if this is some sort of trenchant meta commentary, performance art, or he's just an idiot.
  - kushti 11y ago
    Or maybe a trolling bot? While most of statements are just nonsense, some of them could start hot discussions.
tgflynn 11y ago
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 ?
Animats 11y ago
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.
cturner 11y ago
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 11y ago
  Do you consume gold and silver?
  - hajile 11y ago
    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 11y ago
      You can also eat it, I've seen it on truffle pies. Silver can also be used as an antibiotic as well.
    - deleted 11y ago
      [deleted]
andy_ppp 11y ago
Is Bitcoin used for money laundering? It seems simpler than London property for disappearing large chunks of cash
- Rmilb 11y ago
  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_fincen_cash_is_still_the_best_means_of/ https://www.reddit.com/r/Bitcoin/comments/1qx7ik/head_of_fin...
- monstruoso 11y ago
  Disappearing? You better think twice, everything is recorded publicly.
oncebitten 11y ago
Prediction: BitCoin will be the cause of the great world depression, watch the news.
PretzelPirate 11y ago
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.

296 points by shill 11y ago

What is a commodity? Dictionary says it's similar to goods or merchandise.

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.

deleted 11y ago
[deleted]
krapht 11y ago
In your view, are gold and other precious metals commodities or money? If your answer is commodities, why not money?
- nickff 11y ago
  The most popular definition of "money" that I have seen is 'a medium of exchange'. I think that gold has been used as a money in the past, as have a number of other precious metals. The question you are asking is a good one, because it asks whether the use as a medium of exchange must be its primary use, and how popular it must be to be considered a money. It seems gold is an edge case, which could (currently) reasonably be judged to be either one.
  - danharaj 11y ago
    I disagree. You can't use gold nuggets to pay for your groceries. As a medium of exchange it is sorely lacking. Gold has been mostly a commodity for a very long time. Its main purpose with respect to money nowadays is that it is a store of value useful to backers of currency.
- IkmoIkmo 11y ago
  I'd say both and mostly used as an asset class, just like bitcoin, both money and an asset class and mostly used as the latter today. Why must they be mutually exclusive? It's no different from the dollar which is both money and traded as an asset class everyday.
tsotha 11y ago
You still have to pay taxes on currency transactions that generate a profit, so I don't understand why this would be a tax boon. If I buy a million dollars worth of yen and sell it for two million, the taxman will be around.
- josu 11y ago
  I'm guessing he is referring to sales tax or VAT, which currencies are exempt from.
- icebraining 11y ago
  According to this[1] Reddit post by a supposed tax attorney: Note: There is a code section that might provide some relief here, but only if bitcoins are categorized as a foreign currency. Under this code section, the use of bitcoin to buy goods and services would be tax free as long as the transaction was personal (i.e. not for business or investment) and did not generate more than $200 of gain. Unfortunately, the IRS ruled in Notice 2014-21 that bitcoin is not a currency for tax purposes. So, this code section is inapplicable unless the IRS changes its position sometime in the future. [1] https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_attorney_here_are_my_answers_to_the/ https://www.reddit.com/r/Bitcoin/comments/1uccfz/i_am_a_tax_...
icebraining 11y ago
In the same way that a language is a dialect with an army and navy, so is money any commodity that's officially recognized as currency.
protomyth 11y ago
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 11y ago
  Why does the issuer have anything to do with the question of whether something is a money?
  - ithkuil 11y ago
    indeed the two terms are orthogonal: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Fiat_money https://en.wikipedia.org/wiki/Fiat_money Both are moneys
    - nickff 11y ago
      Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, as it is not supported by a government, and it is not based on a material.
      - dragonwriter 11y ago
        > Interestingly, Bitcoin does not fit neatly into either of Wikipedia's categories of money, Those two categories that were discussed upthreads are not exhaustive. Non-commodity, non-representative, non-government money existed long before bitcoin -- probably the best known fairly modern example is in Local Exchange Trading Systems and variations on those, which use units of accounts that (while they are often denominated in fiat currencies -- largely to simplify use and tax compliance for users) are neither the fiat currency they are denominated in (if they are denominated in one) nor backed by that currency in the sense that representational money is (in that no issuing entity promises to exchange them for the currency, even if the members of the system agree to treat them as equivalent to the fiat currency in exchange) -- and some variations intentionally divorce their units from the fiat currency entirely.
ThrustVectoring 11y ago
A bitcoin represents a portion of the blockchain, the dominant distributed-consensus protocol. Since the ability to do blockchain-stuff that takes a huge amount of processing power to revert is valuable economic activity, bitcoin is basically a cryptographic commodity.
- nickff 11y ago
  What you are saying is that bitcoin is a claim on the use of the blockchain, and that the blockchain is a resource. This is not incompatible with the bitcoin itself being money. A US Dollar can buy you a computer which has a huge amount of processing power, but the dollar is no commodity, though the processor may be.
  - mikekchar 11y ago
    Just off the top of my head, I'm not sure that the blockchain itself could be seen as a resource. However, the mining pool that makes transactions happen (and expensive to cheat) could certainly be seen as a resource. In fact, one might be able to make an argument that the overall mining hashrate sets an upper bound on the value of BTC. It would be related to the cost of the CPU resources necessary to cheat.
    - ThrustVectoring 11y ago
      Yeah, `/s/blockchain/mining pool` on my original statement. The mining hashrate also helps set the value of BTC in my model as well - it means that other valuable activities can piggyback on the hard-to-forge nature of the blockchain.
- icebraining 11y ago
  "A portion of the blockchain"? How so? The blockchain stores transactions, not Bitcoins.
  - SeeDave 11y ago
    As a bitcoin 'owner' you have the right to mark the transfer of unspent transaction outputs from one or more addresses to one or more other addresses in the blockchain.

stygiansonic 11y ago

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)

xacaxulu 11y ago

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

c0achmcguirk 11y ago
How are wallets "non-US based" or "US-based"? A wallet is just a collection of private keys...
- s73v3r 11y ago
  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 11y ago
    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 :)

brayton 11y ago

So far we have gotten Bitcoin classified: * CFTC: Commodity * IRS: Property * Judge: Currency * SEC: Security * TSA: Cash One step closer to world domination.

bduerst 11y ago
The NY Judge defined it as a currency so they could adequately prosecute someone using bitcoin in a ponzi scheme. If the law redefined ponzi scheme to use something other than a currency, it might be defined differently.
jerf 11y ago
In other words, every government entity happens to believe it is entitled to regulate it. Not sure this is cause for celebration.
- irixusr 11y ago
  Careful, increasingly the governments expect you to agree they have a right to whatever they claim.
- jMyles 11y ago
  ...or that's it's remarkable. It's the default belief for a government entity.
  - cowsandmilk 11y ago
    Yep, regulators generally want to broaden their reach to cover anything and everything that could be interpreted as being under their regulation. Narrow readings are not for the regulator. You have to go to court (or have the legitimate ability to threaten going to court) to hope for a narrower reading.
    - Retric 11y ago
      [citation needed] it's often more about what industry and politics vs regulators. Ex: EPA often has a rather hands off policy and is frequently sued for failing to regulate industry. SEC is often described as asleep at the wheel. FDA carved out lots of things as outside their preview like 'natural' remedies even if it was created in Large part to deal with exactly that type of snake oil.

rockshassa 11y ago

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?

wuliwong 11y ago
Although I don't think many regulators in the US govt. are really concerned with the explicit purpose Bitcoin was created with, you are touching on something I think is interesting. My perspective is that the real promise of Bitcoin is to be "successful" regardless of government regulations and categorizations. I know it sounds idealistic but I think if the Bitcoin community needs the US govt. to cooperate in order to be successful then it's probably not going to happen. I guess "success" could be defined as widespread use. Somewhat stable (non-zero) value for Bitcoin would also probably be part of "success." :)
s73v3r 11y ago
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 11y ago
  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

chrisduesing 11y ago

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 11y ago
Isn't there a startup that's already applied for CFTC approval?
- chrisduesing 11y ago
  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.
- kanzure 11y ago
  > Isn't there a startup that's already applied for CFTC approval? Well, there's TeraExchange which applied with the CFTC for trading dollar-denominated bitcoin swaps that are written, quoted and settled in US dollars. Recently (days ago) the CFTC approved LedgerX for temporary registration as a Swap Execution Facility, which is one of the (multiple) registrations required pursuant towards LedgerX providing bitcoin options trading, as well as bitcoin clearing and settlement in actual bitcoin. Disclaimer: guess what

superuser2 11y ago

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.

Steko 11y ago
This. Also don't forget that currency and commodity are not always mutually exclusive: https://en.wikipedia.org/wiki/Commodity_money https://en.wikipedia.org/wiki/Commodity_money
danharaj 11y ago
Commodities are increasingly behaving like this, though not to the extent that BTC does. The economy is very, very financialized. Bitcoin is an asset that appeared well into the financialization trend, so I don't think it is that surprising that such activity dwarfs actual uses of BTC as a medium of exchange. Who is interested in bitcoin? Consumers for whom the use of bitcoin is better than currency (so, like, contraband over the Internet), technophiles, libertarians and investors, really.
digi_owl 11y ago
From the outset bitcoin was set up to be digital gold...
- joeyspn 11y ago
  Exactly this. The precursor was Szabo's bitgold [0]. Also, the feeling in the community has always been that bitcoin would remain as the gold of the cryptos, used as both money and a commodity with some industrial applications. [0] http://unenumerated.blogspot.com.es/2005/12/bit-gold.html http://unenumerated.blogspot.com.es/2005/12/bit-gold.html

Kinnard 11y ago

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 11y ago
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 11y ago
  Would the IRS rat you out when you pay taxes on your illegal income?
  - sethhochberg 11y ago
    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.

ciscoriordan 11y ago

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.

shmerl 11y ago

So, should cash also be declared commodity now?

revdrmlkjr 11y ago
Money is already treated as a commodity

joslin01 11y ago

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?

snogglethorpe 11y ago
> Sure, we want it to replace money We do...? -.-;
aianus 11y ago
> 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.
dovereconomics 11y ago
Some EM companies issue bonds in international markets not using their national currency

bmmayer1 11y ago

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

iamdave 11y ago
I don't follow. Isn't that the point?
- aianus 11y ago
  No, because they have a clear incentive to categorize everything as X so they can collect their taxes and fees and feel important and powerful.
  - iamdave 11y ago
    If not them, then who?
    - aianus 11y ago
      Congress? The courts? Some third party at least.
      - iamdave 11y ago
        But...Legislatures and courts designate regulatory agencies, through enabling acts[1] that allows said agency to exist and which lists its jurisdiction and areas of responsibility. That's how regulatory bodies exist, it's what they're for. A court established regulatory body defining what it regulates is 100% within the scope of that body under the law. So in a way, this already happens. I'm not exactly seeing the issue here. Regulatory bodies don't just appear out of nowhere, they have to be established by a legislature or a court. You're asking for a feature that already exists. [1] https://en.wikipedia.org/wiki/Enabling_act#United_States https://en.wikipedia.org/wiki/Enabling_act#United_States
  - Frondo 11y ago
    It seldom happens that government agencies enact new regulations to "feel important and powerful". Far more often, they enact new regulations because new circumstances are similar enough to the old ones. It's usually the case that, to anyone with some knowledge of history, that the regulations are a good idea to put in place before people really start getting scammed/hurt/etc. To say that government agencies take action to "feel important and powerful" certainly casts the agencies in a trivial or pointless light, but I don't think it is accurate.

jeremonda 11y ago

The fact the Bitcoin is officially a commodity, is why we need ethics in Bitcoin regulation.

civilian 11y ago
Whenever I hear the word "ethics" I hear: "I don't understand this new paradigm in culture or technology and there outta be a law!" It's a fearful desire to control something you aren't a part of.
tzs 11y ago
Note: jeremondo is posting comments of the form "The fact that X, is why we need ethics in Y" in several different threads concerning a wide variety of topics. So far he's got: X="Bitcoin is officially a commodity", Y="Bitcoin regulation" X="D-Link published code-signing private keys by mistake", Y="code-signing" X="we're welcoming Anne, Ben, and Joe", Y="welcoming Anne, Ben, Joe" X="China's booming middle class is creating world's most dynamics consumer market", Y="creating dynamic consumer market" X="reporter C.J. Chivers had to suddenly stop", Y="war journalism" I can't tell if this is some sort of trenchant meta commentary, performance art, or he's just an idiot.
- kushti 11y ago
  Or maybe a trolling bot? While most of statements are just nonsense, some of them could start hot discussions.

tgflynn 11y ago

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 ?

Animats 11y ago

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.

cturner 11y ago

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 11y ago
Do you consume gold and silver?
- hajile 11y ago
  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 11y ago
    You can also eat it, I've seen it on truffle pies. Silver can also be used as an antibiotic as well.
  - deleted 11y ago
    [deleted]

andy_ppp 11y ago

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

Rmilb 11y ago
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_fincen_cash_is_still_the_best_means_of/ https://www.reddit.com/r/Bitcoin/comments/1qx7ik/head_of_fin...
monstruoso 11y ago
Disappearing? You better think twice, everything is recorded publicly.

oncebitten 11y ago

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

PretzelPirate 11y ago

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.