A U.S. Federal Court has ruled that Bitcoins can be considered an actual currency, and as such falls under government regulation. The ruling was part of a case where a man was charged with using Bitcoins in a ponzi scheme that defrauded investors out of over US$1 million.
U.S. Court says Bitcoin can be regulated just like other currencies and securities
In his ruling, Judge Amos Mazzant said that Bitcoin is a security because people exchange it for real goods and services. He stated,
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.
Bitcoin is a virtual currency that doesn't have any type of physical asset or government to back it up. The value of an individual Bitcoin can rise and fall, just like other financial investments, and a Bitcoin can be traded for traditional forms of money.
The ruling came in a case where Trendon Shavers was accused of fraud for when he raised over 700,000 Bitcoins from investors in his Bitcoin Savings and Trust company in 2011 and 2012. While he made plenty of money off the scheme, most of his investors did not.
Mr. Shavers had hoped to convince the court it, and the Securities and Exchange Commission, didn't have jurisdiction over his Bitcoin venture because the currency was virtual and didn't qualify as actual money. With Judge Mazzant's ruling it's clear Mr. Shavers didn't succeed in swaying the court.
The ruling has implications that go beyond Mr. Shaver's case because it establishes government jurisdiction over Bitcoin as a currency, and that means it can be regulated just like any other security.
One of the draws Bitcoin has is that it is grew outside of government control and regulation, and is a system for anonymous transactions. Bitcoin units aren't directly tied to a person's name or government system, like a Social Security Number, making them extremely difficult to track. They also included the allure of being, from a legal stand point, not real money and safe from government control.
It's clear governments see Bitcoin as a currency they need to control, and Judge Mazzant's concise ruling is a great framework for establishing that regulation. Mr. Shavers may appeal the ruling, but he may have a hard time getting that overturned because the Judge's arguments for government regulation were clear and compelling.
[Thanks to Ars Technica for the heads up]