Commoditizing Bitcoin

What is Bitcoin? In answering that question, a US ruling stirs of up plenty of controversy.

On September 17, the Commodity Futures Trading Commission (CFTC) decreed that Bitcoin should be regulated as a commodity, stirring much controversy in the virtual currency’s community.

“What is Bitcoin?” asks a Bloomberg article. “Is it property, something to be owned? Is it a currency, something to be spent? Or is it a commodity … ‘any useful thing,’ and/or ‘anything bought and sold; any article of commerce.’”

The ruling by the CFTC has an immediate practical aim: to regulate the trading of the cryptocurrency in the futures markets where Bitcoin deals are plentiful and possibilities for wrongdoing just as easy to come by.

Bloomberg asked members of the Bitcoin community for their reactions to the CFTC ruling.

Vili Lehdonvirta, a research fellow at the Oxford Internet Institute, acknowledges that perspectives on Bitcoin abound. “These rulings, he said, concerning what Bitcoin is or is not are for certain purposes only, but they often get taken out of context.”

“It’s just not sensible,” comments Gareth Grobler, founder of the IceCUBED Bitcoin exchange. “If this ruling does affect anyone, they’ll just move to offshore jurisdictions. Bitcoin has many uses – sometimes it’s used, traded as a commodity, but it’s also used as a currency and a technology.”

Stephen Kinsella, senior lecturer in economics at the University of Limerick, considers it “very prudent to classify Bitcoin as something relatively uncontentious, simply something bought and sold for a price, rather than something contentious, like a currency or other financial asset.”

“As money,” Kinsella says, “Bitcoin is terrible – a deeply deflationary currency that’s within a bubble. It’s an OK commodity, but it’s the equivalent of selling real estate on the moon. There’s no inherent value. I applaud the ability of speculators to make money from selling it to other people, but I don’t think even calling it a commodity is enough. It’s a kind of shadow asset.”