Is the "online crypto-currency" Bitcoin money like dollars or is it no more the business of government regulators than virtual gold pieces in an online game? A federal judge may have ended the controversy with an opinion issued in a Bitcoin-related fraud case — and the verdict is: It's money.
The defendant, Texan Trendon Shavers, is accused by the SEC of committing fraud in the form of a Bitcoin-based Ponzi scheme worth millions of dollars in today's Bitcoin market. But Shavers challenged the authority of the U.S. District Court where he was being tried, on the grounds that Bitcoins do not actually meet the definition of money, and therefore could not be the basis for a fraud charge.
In response, Magistrate Judge Amos Maazant of the Eastern District of Texas federal court examined the evidence and concluded otherwise. He explains his sources and reasoning in a remarkably concise and readable memorandum (PDF). Here are the most important bits:
Shavers argues that the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States. Shavers also contends that his transactions were all Bitcoin transactions and that no money ever exchanged hands. The SEC argues that the BTCST investments are both investment contracts and notes, and, thus, are securities. It is clear that Bitcoin can be used as money. It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.
The way Judge Maazant characterizes Bitcoin, notably, is not akin to a dollar or ruble, but rather like a precious metal or some other valuable resource. Jon Matonis, executive director of the Bitcoin Foundation, an advocacy organization, suggests this is an important and logical step.
"The ruling is interesting," he wrote in an email to NBC News, "because it highlights the fact that Bitcoin is becoming recognized as commodity money in the same way that gold and silver are recognized as money."
This may lead to it being recognized more widely — Matonis speculates that it could even get a nod from the International Standards Organization under ISO 4217, a classification for "non-national" commodities that don't need to be issued or backed by any government.
Indeed, Bitcoin seems to be traveling on the road towards legitimacy, though that legitimacy may bring as many challenges as it does benefits, as recent struggles by Bitcoin exchanges and businesses show.
Shavers' day in court is not over yet, so this opinion may yet be nullified — or overturned in an appeal or new case. This legal determination may seem a mere nicety considering Bitcoin's already-significant user base, but if it is to be adopted as a real international online currency, such measures are necessary and desirable.
— via Ars Technica
Devin Coldewey is a contributing writer for NBC News Digital. His personal website is coldewey.cc.