However, as the CFTC considers Bitcoin options as deemed commodities, the agency says that the business should have been properly registered and subject to the laws governing swaps.
In fact, Carolyn Jackson, partner at Katten Muchin Rosenman told FOW that the market has been effectively waiting since then, after Chilton stated that, “there was more than a colourable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction”. So even though the ruling came about as a slap on the wrist for the currency, it actually may be a good thing for bitcoin users. “Coinflip and its chief executive officer Francisco Riordan for conducting activity related to commodity options transactions without complying with the Commodity Exchange Act (CEA) and CFTC Regulations”.
The website derivabit.com hasn’t been active since mid-2014.
“Bitcoin has many uses – sometimes it’s used, traded as a commodity but it’s also used as a currency and a technology”.
“Beginning in March 2014, Coinflip advertised Derivabit as a risk management platform…that connects buyers and sellers of standardized bitcoin options and futures contracts”. Moreover, CFTC reports that the company has been cooperating with the CFTC’s Division of Enforcement’s investigation.
Coinflip, the company involved in the CFTC decision, said the cease and desist order issued by the regulator was a fair settlement.
“There are so many regulators within the U.S. , they usually all need extra jurisdiction, which results in a continuing stream of weird 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”, Mike Hearn, a software developer specializing in Bitcoin said.
“I’m not terribly surprised and not terribly anxious . 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. It also gives established traders, who have CFTC regulations tattooed on the inside of their eyelids, a bit of an advantage as the market for virtual currencies mature. So its 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. To bank regulators, it’s a bank.