Federal Judge Declares Bitcoin a Currency 425
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."
Not legal tender. Therefore, not a currency. (Score:5, Interesting)
SEC has lost (Score:2, Interesting)
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.
Re:Is everything currency, then? (Score:4, Interesting)
Re:Obligitory Reagan quote... (Score:0, Interesting)
Quite the opposite now.
The rich hardly pay antthing with Alternative minimum taxes and mountains of deductions like investing in real estate for larger tax write offs.
Our tax system encourages businesses to give to the CEO and wall street investors where it is taxed less causing more harm than good.
The Tittle is Missleading (Score:5, Interesting)
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
Re:Obligitory Reagan quote... (Score:5, Interesting)
âoeGovernment'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.â -- Ronald Reagan
All of this depends on the government's ability to find the bitcoins, and then provide some kind of evidence that it was exchanged for something. If I transfer funds from my checking to savings accounts, that isn't taxed because no goods or services were exchanged.
The government can try to regulate it, but it'll be as successful as the IRS demanding people pay taxes on their purchases of marijuana. Now yes, they'll pass a law anyway, and yes they'll spend an exorbinant amount of money to prove they can enforce it and then make an example out of a few people in highly-publicized cases, but they won't change things substantially.
This will rapidly evolve into another "war on _________", with innocent people being caught in dragnets while the guilty ones rapidly develop the skills to evade it. It's like big banks -- they were too big to fail, and so they were also too big to jail. The government doesn't take down large organizations, criminal or legal... it goes after the people who are isolated. It goes after the low hanging fruit... and it hopes that scares enough people off to keep them in line.
But business will go on as well as ever... already, people using the Silk Road website within Tor have started switching over to virtual machines that do not store any persistent state information... in the next few weeks, I expect many, if not most, will be. Criminals adapt in a matter of hours or days... law enforcement adapts in a matter of months or years. It's not hard to see who has the upper hand here.
Re:Is everything currency, then? (Score:2, Interesting)
I don't know the SEC, but the IRS has had rules on this forever.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Bartering-Tax-Center
I don't know why more people don't know about this... this was covered in elementary school for me. All part of some unit on early American life and how some places still barter instead of using money -- but they still are supposed to pay taxes. (Kinda hard to enforce, but they try.)
Joules / kWh: bitcoins (Score:4, Interesting)
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 [wikipedia.org]), 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.
Comment removed (Score:3, Interesting)
Re:Obligitory Reagan quote... (Score:4, Interesting)
http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act [wikipedia.org]
The bill then moved to a joint conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act and address certain privacy concerns; the conference committee then finished its work by the beginning of November. On November 4, the final bill resolving the differences was passed by the Senate 90–8, and by the House 362–57. The legislation was signed into law by President Bill Clinton on November 12, 1999.
90-8 in the Senate, and 362-57 in the House are, indeed, veto-proof.
But here's something more telling: Republicans under Newt were doing anything and everything they could to torpedo ANYTHING Clinton wanted to do (It seems to be their only tactic for governing since 1994). You have a bill named: Gramm-Leach-Bliley Act; Phil Gramm (Republican-Texas) Jim Leach (Republican-Iowa), and Thomas J. Bliley, Jr. (Republican-Virginia). Does ANYONE actually living during that time think that these three republicans would have given their name to a bill Clinton wanted, then the entire republican delegation vote overwhelmingly for it? Seriously? If you do.. you need to put down the crack pipe.
As for the poster below saying it didn't cause any problems:
During debate in the House of Representatives, Rep. John Dingell (Democrat of Michigan) argued that the bill would result in banks becoming "too big to fail." Dingell further argued that this would necessarily result in a bailout by the Federal Government.
Geez... doesn't that sound familiar....