Bitcoin to face same regulations as other commodities

Bitcoin to face same regulations as other commodities

From being a highly desired asset relegated to the dark recesses of the finance industry, it’s now Bitcoin’s time to shine. Cryptocurrencies, in general, are becoming more and more popular, with their combined market cap recently reaching $600 billion.

Bitcoin, in particular, has been having a stellar time on the crypto charts, breaking the $20k barrier, and growing by well over 1,700% in 2017, with December seeing it’s price increase by over 80%.

Another step into its mainstream adoption is futures trading. CBOE has already released their product, with CME following suit and Nasdaq launching their futures trading during the first half of 2018.

This exponential increase in Bitcoin’s popularity has prompted the US commodity futures trading commission (CFTC) to propose certain regulations, one of which is that penalties could be applied to these investors if there is no evidence that buyers can take physical control of the digital currency that they’ve bought. They have 28 days to do this in.

Thereafter, the purchase will be seen as a futures contract. Harsh fines will be applied to companies who have failed to register these contracts.

Even though this rule already applies to wheat, oil and gold, it’s quite tricky to apply it to something in the online sphere. Another complication is that most investors are augmenting their bets with borrowed money.

The public has 90 days to consider this proposal, which will essentially affect US exchanges, or transactions made by US citizens abroad.

The CTFC’s proposal went on to state:

“The commission regulates retail commodity transactions, with the exception of contracts of sale that result in actual delivery within 28 days. The commission considers virtual currency to be a commodity.”

Bitfinex, which is one of the largest crypto exchanges, was sanctioned by the commission last year. The CTFC explained that the exchange did not adhere to regulations and did not supply the purchased digital currencies to buyers within the stipulated time period.

According to CTFC, Bitfinex:

“held the purchased Bitcoins in Bitcoin deposit wallets that it owned and controlled.”

Without confirming or denying the charges, the exchange paid a settlement amount of R75k.

Also Read: How Bitcoin Price Could Reach $60,000 in the Mid-Term – Analysts

Soaring prices, increasing popularity and mainstream integration through futures trading has resulted in regulators scrambling to implement some sort of framework and policy to deal with these digital currencies.

However, these regulatory commissions know that its best to hop on the Bitcoin bandwagon, as its popularity will continue to increase. This is why they have agreed to futures trading, as long as firms follow set-out regulations.