Is Bitcoin a Commodity?

The CFTC’s designation came as a response to a Bitcoin exchange that was offering derivative contracts or options on the value of the cryptocurrency. However, Bitcoin is one of those assets that does not quite fit well into any definition and a historical understanding of what is a currency and what is a commodity sheds light on the argument.

Throughout the course of history, many commodities and even some manufactured products have served as currency. Probably the best examples are gold and silver. Gold and silver were not only used as a medium of exchange, or currencies for thousands of years, they were backing for many paper currencies around the world until only recently. Central banks and monetary authorities around the world continue to hold vast gold reserves and categorize their holdings as “foreign exchange reserves.” Therefore, both gold and silver can be thought of in the same class as Bitcoin.

Moreover, over the course of history salt served as a medium of exchange in ancient times. More recently, cigarettes or blue jeans have been employed as currency in certain areas of the world over recent decades. As you can see, the classification of Bitcoin as a commodity is both dubious and understandable, at the same time. It is hard categorized Bitcoin because it is so new and different from other assets available to market participants. One thing seems certain, the growth of interest in the cryptocurrency over recent years means that it is an asset that deserves our attention.