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Federal Judge Declares Bitcoin a Currency
tlhIngan writes "An East Texas federal judge has concluded that Bitcoin is a currency that can be regulated under American Law. The conclusion came during the trial of Trendon Shavers, who is accused of running the Bitcoin Savings and Trust (BTCST) as a Ponzi scheme. Shavers had argued that since the transactions were all done in Bitcoins, no money changed hands and thus the SEC has no jurisdiction. The judge found that since Bitcoins may be used to purchase goods and services, and more importantly, can be converted to conventional currencies, it is a form of currency (PDF) and investors wishing to invest in the BTCST provided an investment of money, and thus the SEC may regulate such business."
“Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Ronald Reagan
Wrong answer. All sorts of things can be exchanged for goods or cash. Currencies are issued and backed by governments. This is bad law.
I can barter my services for goods or other services. Trade one item for another. So, effectively, then this ruling would seem to imply everything is currency, and thus subject to SEC regulation in the States.
Bitcoin is a currency that can be regulated under American Law
Well, yes. When has the government ever ruled that it lacks the power to regulate something?
The motivation behind Bitcoin wasn't to create a currency that government would choose not to regulate; it was to create one that government could not regulate.
Substitute "Sex" for "Bitcoin" and see if this holds true.
Sex may be used to purchase goods and services, and more importantly, can be converted to conventional currencies, it is a form of currency
Yup, it fits. Sex is now under regulation of the SEC.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
Holly crap!
Can't almost anything that can be bought/sold technically be converted to conventional currency...
Personally, I think the definition of currency is unclear. If its not "legal tender", or in other words not officially declared as money accepted for paying taxes (by fiat) , then shouldn't it NOT be considered a currency, in the same way that Gold is not considered a currency (unless it is officially stamped as such by fiat). To be a currency, some official government must declare it as official for paying taxes IMHO. So, for a judge to declare Bitcoin as a currency is ridiculous because, for it to be so, he himself would have to be willing to accept it , and then turn around and pay taxes with it.
-- Betting on the survival of the media industry is a serious risk. I advise investing elsewhere.
The assertion is obviously that it should be subject to SEC regulation and oversight to prevent such ponzi-schemes and scummy behavior. The same SEC that has spent much of the last fifteen or twenty years with their heads in their asses? This is a lot more like stating that a call-girl is the same as a street-walker and, therefore, must fall under the same street-pimp purview.
To sum up, he took Bitcoins for trading into and out of dollars and returned a huge profit (in dollars). But when measured in Bitcoins he returned a loss, investors could have gotten more by sticking to pure Bitcoins, than any dollar trading minus his commissions. So they complained. Not really a Ponzi scheme, but SEC thinks they can use that law.
This really says more about the dollar than anything else. There are 3 times as many dollars now as in 2000 and at no time has there been any export surplus in any of those years, all of that money has been created against nothing.
SEC's desire to regulate means they're forced to pretend Bitcoin is a currency which really adds legitimacy to Bitcoin as a currency. It's a sort of Streisand effect. They want to discredit it by trying to associate it with 'ponzi' and in the process end up legitimizing it.
A couple thousand alternative currencies such as Bitcoin started surfacing? What would happen when the economy is completely watered down with different types of currencies just because people started using them as heavily as Bitcoin?
The IRS can "legally" tax barter agreements for their monetary value, just to tax trade.
I'm getting an image of an arrogant, bratty red faced child with their hands out, waiting for their piece of cake.
If Bitcoin can't exist outside of the economic iron fist, then what possibility do normal people have with turning it around?
It is pitch black. You are likely to be eaten by a grue.
Bitcoin Shavings and Trust? The guy's name is even 'Shavers'. He's supposed to embezzle, not run a Ponzi scheme.
From the tippy-top of the bitcoin.org website:
Bitcoin is an innovative payment network and a new kind of money.
Now, IANAL, but I suspect walking into court with an argument that bitcoin isn't a new kind of money when its creators clearly and demonstrably assert that it is a new kind of money is likely to fail pretty hard.
And yes, I'm well aware of the of the distinction between money and currency. Gold bugs, sufferers of Fed derangement syndrome and others spend a lot of time proselytizing about this stuff. The thing is that the SEC and the courts don't, which is why no one has ever succeeded in evading financial laws by attacking the legitimacy of fiat money.
At least not without an army.
Maw! Fire up the karma burner!
Was there really anyone who believed that bitcoin was somehow going to exist outside of the ability of any government to regulate it?
That belief reminds me of the "sovereign citizens" who believe that some obscure 19th century district judge's decision puts them outside of the federal and state government's ability to prosecute them for any crimes.
You are welcome on my lawn.
The Judge didnt rule that bitcoin is a Currency, from the PDF:
"Therefore, the Court finds that the BTCST investments meet the definition of investment
contract, and as such, are securities.2
For these reasons, the Court finds that it has subject matter "
It clearly says that it find that BTCST is subject to law. no ruling related to Bitcoins. move along nothing to see here
The government hates competition.
Prove anything by multiplying Huge Number times Tiny Number
If Bitcoin are a currency because of its attributes (convertibility, common use), what does that mean for "Virtual Currencies" that can be converted back to monetary value?
EVE online? Second Life? Does this ruling apply to them? (I do not play either, I just recall stories...)
Is the SEC going to send virtual regulators into Second Life?
No, this ruling has nothing to do with the people who run a business selling stuff in second life to make money, because that stuff is already taxable, and has been since day one.
The tax laws do not say "Income in the form of US Dollars shall be taxed". If they did, I'd ask my boss to pay me in Euros, and save a lot of taxes. They say that your INCOME is taxed, and it is well established that this applies to any form of income, in any currency, including barter. If you are making a non-trivial income, you are required to make a good-faith estimate of the value of that income in dollars and declare it on your 1040 -- if it's cousin ed giving you a chicken in exchange for your doing stuff, then you damn well declare the value of a chicken on the form. If it's people giving you lindens for art in second life, you declare the value of those too. Yes, there are accounting rules for how you can make a reasonable estimate of the value of the chicken, or the linden-bucks, or the one-of-a-kind-painting you got as barter income. For bitcoins, it's even easier because there are exchanges, you can just look up on the exchange what the dollar value is of your bitcoin earnings, and declare that.
(Note: there are special exceptions for certain things offered in payment that aren't taxed. One of these is certain fringe benefits including health care -- if your boss gives you part of your pay in the form of a health insurance policy, that is explicitly exempt, which is why we developed the system where almost everyone does it, because companies wanted to pay their employees more without having someone pay more in taxes...)
Is it really such a huge leap to mark a joule or watt as a form of currency?
Well given the way bitcoins are generated and the whole network is working (Hashcash), bitcoins are in a way backed by the electrical power that went into minting them (computing the necessary hashcash powering the transaction).
It's not exactly the same as a real gold standard: in a currency backed by gold, somewhere in some bank's vault there should be piles of gold ingots corresponding to the value of the circulating money. With bitcoins, you don't have actual piles of batteries containing the kWh corresponding to the circulating bitcoins, but for each bitcoin in circulation and bitcoin transaction, there are corresponding hascash which got computed (and is stored in the bitcoin's equivalent of a bank, i.e.: distributed across all nodes of the network). And you can map Joules or kWh to them.
And the current price of bitcoins tends to oscillate around the price of the energy which went into minting them.
You can see bitcoins as a way to convert electricty into another virtual currency. And given the crazy minting rigs that some bitcoin-nerds are building, this relationships become quite obvious.
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
And here I was thinking the Bitcoin fanbois would be falling over themselves declaring how it is a milestone that Bitcoin is officially recognized as a legitimate currency. Instead, they seem to be falling over themselves expressing how scandalous it is that the government dares meddle with their freedom or whatever. Some people seem to be impossible to please. To those people: you cannot have it both ways, guys. Either your currency is an illegitimate shadow currency, and assuming it will keep on gaining in popularity, it will only be a matter of time before it gets outlawed, or your currency is legitimate which means that transactions made with it are subject to the law.
Regardless, I would say that seeing this as a sign of legitimacy would be over-interpreting the verdict. For the purpose of cracking down on ponzi schemes, it doesn't matter whether the currency is USD or beanie babies, as long as harm is done to someone's posessions by deliberately misleading them. Or does "freedom" mean that you're free to blatantly rip off your fellow citizens? If so, how about just giving people the freedom to shoot each other? Oh wait, stand-your-ground.
And yes, tough luck for people who thought they could make an end-run around regulations and taxation by coming up with an "unofficial" new currency.
As long as bitcoin was a fringe phenomenon it could be ignored, but now it's time for it to grow up apparently.
Making Bitcoin subject to SEC regulations is a whole other issue, with additional requirements. The SEC regulates (most*) securities and imposes requirements such as registration and transaction reporting. This is far beyond the sort of regulation applied to money. When was the last time you had to report the serial numbers on all the currency you held?
So, which is it? A currency, subject to income reporting rules? Or a security, under the SEC's authority? IANAL, so I'd really like some enlightened input on what is being decided here.
*Derivatives and commodity contracts are subject to CFTC regulation.
Have gnu, will travel.
Do you have to declare the value of the chicken with or without sales tax? The "value" of a loaf of bread on the store shelves may be $3, but the value of a loaf of bread on my shelf is $3.24, since that's what it cost me.
If you've solved a hard math problem, and you tell me the solution, now we both have the solution. There is no scarcity of solutions if you ever give them to other people. Information is NOT LIKE physical goods, and analogies to physical goods are likely to fail for that reason.
Also, limited-supply material goods (such as food) have value because they are useful or even essential to our daily lives. The solutions to hard math problems have no intrinsic value as a tradeable resource, becuase nobody cares about them except mathematicians or criminals trying to hack your bitcoins.
The only reason bitcoins have any value whatsoever is because you can use them to acquire other things. You can only do that as long as people accept that bitcoins have value. They are not "backed by" anything except the faith of the people who are willing to use them as a currency. Unless we regulate them and get banks and insurance companies and such involved, then it could be said to be "backed by" those institutions. Right now its backed by nothing but blind faith, mathematically-imposed scarcity notwithstanding.
Bitcoin is a currency, but it's not a US currency.
while
Comment removed based on user account deletion
" The judge found that since Bitcoins may be used to purchase goods and services, and more importantly, can be converted to conventional currencies, it is a form of currency"
And while many places do not re-convert into traditional currencies, there are some that do very similar things (such as getting more tokens from a chance machine at an arcade, which is a payout of a good and service.)
So what the fuck makes this any different than those? They function pretty much 100% identically.
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
Someone should go to east Texas, get a speeding ticket, and attempt to pay with bitcoin.
If all the dumb-asses would actually stop trading it for FIAT currency and simply used it to sell/but services and goods, then this mess wouldn't be how it is now.
If the US declares it money and regulates it, then well, it is going to be like online gaming. Everyone does it mostly everywhere legally, except the US.
The question is: how far will they go to regulate it? They cannot control it, you can "hide" the protocol into anything and everything, you can carry the wallet on any memory device, hell, even the whole blockchain, even if it tripples or quadruples ...
So what is the plan, they kick the door on you and search your machine for a bitcoin wallet? Or they close all US exchanges? What about the local swaps and businesses already accepting bitcoin?
I am actually really interested in it as I am actively developing a payment gateway (not in the US) and some other interesting projects...
Your thoughts ?
I would LOVE to see Miss Leading's tittles!!!!
Cost =/= Value!
And don't forget the role of the Community Reinvestment Act: http://news.investors.com/ibd-editorials/071213-663606-proposed-new-bank-law-would-solve-problems-that-dont-exist.htm
That that is is that that that that is not is not.
A quick look here and one will notice that you just can't shut the hell up about guns. What is your deal? It doesn't matter what the post or thread you are responding to is about, you have to throw the word "gun" or phrase "stand your ground" into every single one of them. None of these have dick to do with guns. You are an idiot! SYG has nothing to do with Trayvon. The defense didn't even use it. Not only that but in no way does SYG give you the authority to willy nilly shoot someone. You already know all of this though and just wanna piss in everyone's Cheerios. Well fuck off!
FAIL TROLL IS FAIL
Go look at this guys posting history. One will notice that you just can't shut the hell up about guns. What is your deal? It doesn't matter what the post or thread you are responding to is about, you have to throw the word "gun" or phrase "stand your ground" into every single one of them. None of these have dick to do with guns. You are an idiot! SYG has nothing to do with Trayvon. The defense didn't even use it. You already know all of this though and just wanna piss in everyone's Cheerios. Well fuck off!
FAIL TROLL IS FAIL!
It looks like the above poster didn't mean the terrorist group known as the "Irish Republican Army", who were up to a lot of bombing in the UK at the time when Reagan was US President. WTF is the IRA referred to above?
First Day on the Internet Kid: Yesss! Bitcoin is a Currency! I'm going to make tens of dollars from the $500 video card my mom just bought me. :(
Sophisticated Cat: I should invest in bitcoin futures.
Business Cat: We're not using bitcoins anymore. I accidentally pushed the wireless mouse and keyboard under the the supply closet door.
Boromir: One does not simply "avoid" the SEC.
Annoyed Picard: Why the fuck would a normal person want to use bitcoin?
This is Dog: Bitcoin? I thought you said bacon.
... he should be on trial for that name, before anything else!
just look at how crooked american banks are. the SEC knows this, and pretty much ignored it while they fucked our country pretty hard. is Bitcoin really a threat to the banks and the stock market? hard to tell.
Remember kids, if you're not paying for the service, YOU ARE THE PRODUCT THAT IS BEING SOLD.
So does this mean that anything that can be converted into real currency or be used to buy goods and services is subject to SEC oversight? What about in-game currencies that can be converted to real money like Guild Wars 2 crystals, EVE Plex, or the Diablo 3 Auction House? When you use these in-game currencies, which are theoretically just as good as real money according to this judge, are you not buying a good/service? Technically, when you execute a courier contract in EVE, you are paying ISK for a service by another person...and that ISK can then be used to buy PLEX which can be traded for real money. This opens a whole can of worms I think and just another avenue for government to seize as much control as it can.
"Let us control the money of a nation, and we care not who makes its laws"
So banking regulation will apply to bitcoin wallets.... hehe.
i don't like the connotations of "bitcoin is a currency"
as much as the next guy. afterall for some (moneky) people this
implies it's theirs to "regulate".
of course it is not. people running the software on their computer
are regulating it.
the words "the SEC may REGULATE SUCH BUSINESS" on the other hand
means that the government is willing to hand you your ass if you do something
wrong with a registered business: that is lie and cheat. doesn't matter what your business is
involved in.
in the end it is sad that people invested in this and got cheated.
seems using bitcoins doesn't make one free from greed.
-
i think the case is just this
"i'll mow you law if you paint my house."
"done!"
one hour later:"i'm done painting the door."
"sorry, i'm busy."
but hey, head-lines need to be made!
yellow green blue
Then, obviously so are gift cards.
JJ
to the Federal Reserve.
Next, the SEC moves in on oxycontin, xanax, adderall, prozac, diazepam, morphine, and hydrocodone as other furtive, underground currencies.
Indeed. What they need is to strengthen laws against fraud/abuse regardless of the monetary medium. This doesn't seem to be an attempt at controlling fraud so much as controlling the medium itself.
While they're add it, perhaps they can improve the regulation of pseudo-currency providers like paypal, etc as well.
Dogshit can be converted to conventional currencies, so is the SEC going to by a funnel on dogs and collect their shit?
We have rulled that the courts have no authority whatsoever, since they only want to rule in favor of big corporations and government, on anything.
The SEC has no authority, no power over bitcoins, and neither does that or any other court. It exist completely in cyberspace and under no specific authority.
i downloaded QT client. i already gave out my address to someone for testing. my friend sent me around 0.01coins for a test last night. still haven't received the test bitcoin yet. qt client has already downloaded like 50,000 blocks. hard drive light keeps flashing. guess i'll just keep waiting.
To see how MS peacefully tolerates and humbly accepts total fail of the Surface. Peacefully & humbly. Any cash!
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