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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
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.
A currency is any intermediary storage of value between two exchanges, that serves as a "means" but not an "end".
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.
Yup, it fits. Sex is now under regulation of the SEC.
I'm sorry, but no. Any person receiving bitcoins can sell them for dollars. That does not hold true for sex.
So energy is currency?
"His name was James Damore."
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!
I don't know where you get your information from. Shavers took deposits in bitcoins, promising to pay out again in bitcoins, with 7% or so weekly interest. The payouts went out for quite some time, presumably funded by new deposits, and then Shavers simply did a runner with the bitcoins he had accumulated. So it was very much a classic Ponzi scam.
You barter with the intrinsic value of the items. If you need boots and can offer a hat or dinners for them, you do that because you need boots to walk in, and the guy with the boots needs to eat or needs to cover his head.
Currency is a representation of value as an abstract. It's useful because it lets us set prices without having to negotiate barter, or more importantly, to have to produce and carry around things that we believe we could barter.
However, because currency does not have an intrinsic value by itself, it can be manipulated and used in certain ways that are not naturally regulated. In that sense, currency needs some sort of regulation. I don't know how much, and I think it should be as little as required, but I can accept that it may need a lot.
Bitcoin may be backed by some sort of store of abstract value, but it has no intrinsic value on its own. There is nothing you can do with a Bitcoin other than use it to buy something else. In that sense, it is a currency and is nothing like barter.
Shesh.. Not even close on this..
In this case the judge is saying that even though the investors used BitCoin, the activities of the investment where essentially the same as investing dollars so the argument that BitCoin isn't a currency didn't apply. If it walks like a duck, quacks like a duck, acts like a duck and looks like a duck, it's a DUCK.
So.. Even if you make somebody trade in some kind of voucher to invest in your scheme, if you live in the US and are operating in a way that looks the same as something the SEC regulates, you are subject to the regulations.
So the judge is NOT saying BitCoin is a currency, but that the guy was operating an investment scheme that was illegal and is not shielded from the SEC because he used BitCoins.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
Paid for sex is a service, not a currency. You can't return or convert the sex as an abstract unit of value. It is not a currency.
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 value of gold and silver isn't because of any intrinsic values they have besides rarity. (Yes, I know there are industrial uses of them, but that's not the driving force behind their price.) Good currency similarly also has a limited supply.
*facepalm*
Given Article 1 Section 10 starts with "No state" and follows with a list of prohibited items... there isn't much of an argument.
You are also ignoring Article 1 Section 8 which says (regarding the powers of congress):
So no, gold and silver aren't the only constitutional forms of currency, congress alone has the authority to print (fiat) money as they see fit. If states wish to create their own, then it must have an actual recognized value (ie precious metal) rather than be fiat currency.
Help Brendan pay off his student loans
The memorandum at http://www.archive.org/download/gov.uscourts.txed.146063/gov.uscourts.txed.146063.23.0.pdf which was signed by the judge, says "Therefore, Bitcoin is a currency or form of money..." ...did we read the same article?
~Knowledge is knowing that a tomato is a fruit, but Wisdom is knowing not to put it in a fruit salad.
The fact that gold and can be traded for goods and services has nothing to do with it's intrinsic value, it's intrinsic value is virtually zero to everyone outside the electronics industry. Intrinsic value is a measure of usefulness, eg: Compared to gold, trees are abundant, they provide wood, food, and suck up CO2, thus they have a much higher intrinsic value than gold.
A one to one exchange of goods/services with intrinsic value is called bartering. Currency is anything used as a token to simplify trading where more than one exchange would be required to get the goods what you want. Something durable and hard to obtain such as gold is ideal for those tokens. Problem with that scheme is the economy now has an artificial growth boundary defined by the supply of gold. Of course when politicians start firing missiles at each other people will be drawn to the "safe haven" of gold, but the fact is currently "the market" sees US treasury bonds as "safer than gold".
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
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 ]
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.
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You are not reading the same court opinion that we are.
The court (correctly) ruled that because BTC can be freely exchanged to other currencies, it is currency. (Well, duh.)
The judge also ruled that because the "investment" that was offered involved money, it is a securities note - hence the SEC has jurisdiction.
Future Bernie Madoffs should take notice: BitCoins are not a "get out of jail, free" card.
I would LOVE to see Miss Leading's tittles!!!!