Photographer: George Frey/Bloomberg

The Bitcoin Community Disagrees on What Happens Next

The cryptocurrency is now a commodity – but it’s still many things to many regulators.

What is Bitcoin? Is it property, something to be owned? Is it a currency, something to be spent? Or is it a commodity, defined by Webster’s Dictionary as “any useful thing,” and/or “anything bought and sold; any article of commerce.”

The U.S. Internal Revenue Service thinks bitcoin is property; a federal judge thinks it's a currency; now the Commodity Futures Trading Commission (CFTC) has decreed it a commodity. That means the regulator can now bring charges against any wrongdoers trading cryptocurrency futures and options.

In a statement, the CTFC’s Director of Enforcement, Aitan Goelman, said:

“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 Aitan Goelman, the CFTC's director of enforcement of the decision.”

Does the ruling change the fundamental nature of what Bitcoin is, and how its advocates will use and develop it? We asked leading members of the bitcoin community for their views.

Yuriko Nakao/Bloomberg

The Developer: ‘A Bizarre Ruling That Will Be Challenged’

“There are so many regulators in the U.S., and they all want more jurisdiction, which leads to a constant stream of bizarre rulings. None of them has much work to do because there’s not a whole lot of financial innovation happening in the States. So when they find a small one-man startup they can’t resist giving themselves work to do – so they go in and whack it, especially in California.

“I’m not terribly surprised and not terribly worried. I think the CFTC has a very weak case here and it’s a very creative reinterpretation of what the word commodity means. The ruling will be challenged and judges will apply common sense and decide it to be a currency" as happened in the Silk Road case.”

- Mike Hearn, software developer specializing in Bitcoin

The Researcher: ‘Don’t Take it Out of Context’

“This ruling is obviously very consequential to U.S.-based Bitcoin futures trading platforms, but it’s important not to overplay the implications. Last year, the U.K. tax authority ruled that Bitcoin is a currency. Last month a Japanese judge ruled that Bitcoin is not property. These rulings concerning what Bitcoin is or is not are for certain purposes only, but they often get taken out of context.”

- Vili Lehdonvirta, Research Fellow at the Oxford Internet Institute

The Exchange Founder: ‘It Will Send Companies Offshore’

“In the U.S. there are regulators that look at Bitcoin from their own perspective and just arbitrarily make up a rule or guidance. New York regulates it as a currency, for example. It’s just not sensible. 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.”

- Gareth Grobler, founder of the IceCUBED Bitcoin exchange

The CEO: ‘Regulators Need to Work Together’

“Regulators need to be talking with each other and engaging with industry. The CFTC doesn’t seem to have done either of those. Just claiming a platform is illegally offering bitcoin options isn’t helpful if they’re trying to have a relationship with these companies.

Commodity or currency?
Commodity or currency?
Tomohiro Ohsumi/Bloomberg

“There’s a lot more collaboration in the U.K. between the Treasury, the FCA, HMRC and the top Bitcoin companies. To date the government hasn’t taken a public position that they’ve had to take back.

“Having said that I’d rather Bitcoin were regulated as a commodity because commodity regulations are the lightest.”

- Mark Lamb, CEO of Coinfloor Bitcoin exchange

The Lecturer: ‘A Very Prudent Move’

“As money, 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.

“Moving towards a system where proponents of Bitcoin could use a less stark designation for marketing purposes would have been a mistake. So it’s 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.”

- Stephen Kinsella, Senior Lecturer in Economics at the University of Limerick

The Entrepreneur: ‘Compliance Will Cost Startups’

“If you’re using Bitcoin as a remittance tool you’re not going to like this, but if you’re using it as a business this regulation gives you a framework that’s predictable. However a lot of the value proposition of Bitcoin is tied up in the non-compliance aspect. With the cost of compliance can companies stay competitive?

“Regulation of Bitcoin is necessary and premature at the same time. It’s the fault of the federal system. If you’re in England, everything happens in one city – regulators can easily visit the Chancellor, Bank of England and the companies. In the U.S. there’s a patchwork of inconsistent agencies who don’t coordinate their different fiefdoms.”

- Preston Byne, co-founder and COO of Eris Industries

More views:

Journalist and digital currency commentator David Seaman:

https://twitter.com/d_seaman/status/644637250349764608

 Bitcoin core developer Jeff Garzik:

https://twitter.com/jgarzik/status/644855267893637120

 

 Investor Roger Ver, AKA “Bitcoin Jesus”: 

https://twitter.com/rogerkver/status/644688870362120192

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