Bank of England declares virtual currencies to be commodities

As governments across the globe race to develop laws and policies for handling virtual currencies like bitcoin, one of the biggest problems they face is simply knowing what general category cryptocurrency falls under. They’re clearly not legal tender, or even currency, even though in practice virtual currencies act like money. In a new report from the Bank of England, the U.K.’s central bank claims that virtual currencies are essentially a form of asset, and share “conceptual similarities to commodities, such as gold.”

The overall aim of the report is largely to define what actually constitutes money, which it defines strictly as a widely accepted, government-backed IOU. Bitcoin isn’t widely accepted, isn’t backed by any government, and isn’t an IOU. As such, bitcoin and other virtual currencies and related “e-money” aren’t considered currency by the Bank of England.

In effect, the Bank of England is declaring that virtual currencies aren’t within their domain to regulate.

In a sense, this is a variation on the position taken by Federal reserve chairwoman Janet Yellen. Not fitting the legal definition of currency, Yellen told the Senate Banking Committe last month, the U.S. central bank has absolutely no authority over virtual currency.

This is not the first time the Bank of England has claimed that bitcoin regulation is not its job. Last year, Bank of England chief cashier Chris Salmon noted that while bitcoin was “genuinely innovative,” the technology was not something likely to be adopted by central banks, and extremely unlikely to replace traditional currency.