Judge rules Bitcoin a legal currency
A federal judge in Texas has called Bitcoin “a currency or form of money” and is thus subject to U.S laws.
To the likely chagrin of its libertarian supporters, a federal judge presiding over a fraud case in Texas has ruled that Bitcoin is a legitimate currency and is subject to U.S currency laws.
The case in question regards allegations brought forward by the Securities and Exchange Commission that Trendon Shavers, the owner and operator of Bitcoin Savings and Trust, was effectively running a Ponzi scheme, covering interest payments and withdrawals on outstanding investments with money from new investors. Shavers is said to have promised weekly interest of 7 percent in 2011-2011, and apparently raised 700,000 Bitcoin with this investment vehicle.
The SEC alleges that he defrauded investors close to $60 million.
For his part, Shavers says that he is not subject to the SEC’s regulations because bitcoin investments are not securities as per the Securities Act of 1933. Shavers also argued that Bitcoins are not currency thus do not fall subject to currency control laws.
The court rejected Shavers two arguments:
“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 term “security” is defined as “any note, stock, treasury stock, security future, security-based swap, bond…[or] investment contract…”… An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party.”
To summarize: the courts have found that Bitcoin is considered a currency and investment contracts denominated in Bitcoin are legal and binding. Good news for the Winklevoss twins, who are looking to create an exchange listed Bitcoin fund, but bad news for those who like Bitcoin for its, more, discrete characteristics.
Read more: Bitcoin’s coming of age party
Source: US District Court Records