While Bitcoin has slowed down and stabilized since its 2013 surge, the question is still asked by some commentators whether it is a true currency or closer to a commodity. The idea of Bitcoin as a commodity should come as no surprise, with regular comparisons to gold – at one point a single Bitcoin surpassed the value of an ounce of gold, leading to headlines and easy comparisons.
Further supporting the idea of Bitcoin as a commodity is the way in which Bitcoin is created. While paper currencies are created and distributed by individual governments or centralized authorities – such as the EU – Bitcoin is ‘mined’. While data mining obviously isn’t quite the same as physical mining, the word is shared for a reason. Bitcoins they aren’t created out of thin air, instead dedicated CPUs solve complex mathematical problems to create them.
Perhaps looking at how different governments classify Bitcoin can help us untangle the question? In the USA Bitcoin is defined as a commodity thanks to a ruling from the Commodity Futures Trading Commission. This means that it is subject to rulings and restrictions that apply to all commodities, to stop unlicensed companies from trading in Bitcoin-derivative technologies. In the EU on the other hand, Bitcoin was ruled in 2015 as a currency for tax purposes – meaning individual transfers of Bitcoin are not subject to taxation.
When it comes to Canada’s stance, things get interesting. The Bank of Canada recently completed a study into Bitcoin-related technologies including the Blockchain – the secure ledger that tracks and monitors Bitcoin transactions. Speaking prior to the release of the findings of the study, the Bank’s senior deputy governor Carolyn Wilkins said: "What we saw with Bitcoin and others is really it turned out to be still more of a commodity rather than a money itself." In Canada, Bitcoin is classified as ‘intangible’ under current legislation, meaning it’s seen as a non-physical asset – similar to something like software.
One industry that has proven itself forward thinking with regards to Bitcoin is the online gambling industry. To this industry, whether or not it’s a currency or a commodity is in some ways irrelevant – whatever the classification, Bitcoin is valuable. Companies like Vegas Casino offer a host of games that can be paid for with Bitcoin and have their own ‘faucet’ website, where users can mine Bitcoin by performing simple actions and then play Bitcoin roulette. Toronto’s own hub for technical innovation – Decentral – has a host of Blockchain and fintech firms, as well as a two-way Bitcoin ATM on the street outside. The difference between a currency, a commodity and an intangible asset is very much up in the air and dependent on who you ask.