Federal judge: Bitcoin ‘can be used as money,’ subject to SEC
A federal judge ruled that Bitcoin, the fledgling online currency that has exploded in value since its initial introduction in 2009, is in fact real money.
The decision bodes poorly for Trendon Shavers, a Bitcoin banker accused by the Securities and Exchange Commission (SEC) of running a Ponzi scheme costing unwitting investors over 260,000 Bitcoin, at the time nearly $3 million in old-fashioned American dollars.
Forbes reports that Shavers defended himself by arguing that Bitcoin was not real currency, and therefore the SEC had no jurisdiction over any transactions in the virtual currency.
Texas Magistrate Judge Amos Mazzant rejected that argument on Tuesday. “It’s clear that Bitcoin can be used as money,” he wrote. “It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses.”
Bitcoin is a virtual online currency whose framework rests on a system of peer-to-peer computers mathematically generating individual Bitcoins, though the number of total creatable Bitcoins is limited.
The network monitors the transfer of Bitcoins among users and updates the value of the currency according to the frequency of its use and the value of purchases made.
The “off-the-grid” nature of the currency makes international transactions a breeze, allowing individuals to trade goods and services over borders without bank charges or exchange rates.
It also makes it easier for those with less upstanding intentions, like drug dealers and money launderers, to evade detection.
Tuesday’s ruling may prove bad news for Bitcoin’s extended future. Federal law prohibits the creation of a new currency not backed by the full faith and credit of the United States government.
Those laws have largely been ignored because, until relatively recently, Bitcoin was effectively pocket change. Two years ago, a single Bitcoin was worth $30. Now, that same Bitcoin is worth $106 (though that’s a decline from the all-time high of $230 reached in April of this year). Despite its volatility, more and more people are using Bitcoin to meet basic human needs, from buying food to paying rent.
Overall, the total value of the Bitcoin market is valued at over $1.1 billion.
Bitcoin’s new official status worries some proponents of a deregulated financial system. “Bitcoin was born on the idea that nobody could regulate it,” Romain Dillet wrote on Techcrunch. “The only real value of a Bitcoin comes from its users. That’s what makes it beautiful and scary at the same time.”
But for more traditional players the ruling be a godsend. Forbes reports that venture capitalists like the Winklevoss twins are trying to get the SEC to greenlight a Bitcoin exchange fund, which would allow institutionally-backed investors to buy and sell Bitcoin in enormous quantities.
by The Daily Caller News