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Federal Judge Declares Bitcoin a Currency

Soulskill posted 1 year,24 days | from the i-bet-the-IRS-just-got-excited dept.

Bitcoin 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."

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Obligitory Reagan quote... (5, Funny)

xxxJonBoyxxx (565205) | 1 year,24 days | (#44503113)

“Government'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.”
  Ronald Reagan

Re:Obligitory Reagan quote... (5, Insightful)

Kwyj1b0 (2757125) | 1 year,24 days | (#44503175)

Of course, much better to live and die by the sword... err... Caveat emptor principles?

While there are areas where regulations are silly, this (atleast on the face of it) doesn't seem to be one of those. The accused was running a ponzi scheme. The fact that the currency could be exchanged for real cash puts it in the SEC's realm.

Re:Obligitory Reagan quote... (-1, Troll)

Anonymous Coward | 1 year,24 days | (#44503335)

You're taking advice from someone who stared in a movie called "Bed time for Bonzo" where he literally got out-acted by a monkey. A man who's administration set in motion all of the major changes that lead to the last big financial collapse.

It's also worth noting that in Bitcoin's short life it's been party to all of the major scams and fraud schemes that always crop up when regulation is lax. Every one.

Re:Obligitory Reagan quote... (5, Informative)

ZipK (1051658) | 1 year,24 days | (#44503787)

A man who's administration set in motion all of the major changes that lead to the last big financial collapse.

Certainly not all of the major changes. Clinton signed the Gramm-Leach-Bliley Act, repealing key elements of Glass-Steagall. Clinton also made the mistake of listening to Robert Rubin and Larry Summers' belief that derivatives didn't need the transparency of regulated exchanges.

Re:Obligitory Reagan quote... (3, Insightful)

Anonymous Coward | 1 year,24 days | (#44503371)

Which incidentally is the proper method of operation. Government exists to maintain homeostasis of the population. Safety nets prevent complete failures and taxes limit hoarding of success. That's why we only tax a businesses profits, to encourage them to spend more of their revenues and push cash into the economy. No business is overtaxed, because a business that pays any taxes at all is doing it wrong. If your business is going to owe money on April 15th then you need to lower your profits to the ideal 0-point.

In business, all money earned should be spent by the end of the year. If you need long term cash to buy an asset, then get a loan and repay it next year with money that would otherwise be profits. It's like everyone forgot how fast-money capitalism works, Jesus I miss the 80's.

Re:Obligitory Reagan quote... (0, Interesting)

Anonymous Coward | 1 year,24 days | (#44503445)

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.

Re:Obligitory Reagan quote... (4, Informative)

Score Whore (32328) | 1 year,24 days | (#44503861)

The purpose of the AMT is to make "rich" people pay more not less. And "rich" in this case is merely middle class because the criteria for the AMT don't change automatically with inflation. The last few years a lot of people have found themselves liable for paying it.

Re:Obligitory Reagan quote... (0)

Anonymous Coward | 1 year,24 days | (#44503453)

Thanks Mr. Bezos.

Re:Obligitory Reagan quote... (4, Interesting)

girlintraining (1395911) | 1 year,24 days | (#44503595)

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:Obligitory Reagan quote... (1, Funny)

slick7 (1703596) | 1 year,24 days | (#44503697)

Ronnie the Raygun, a "B" movie actor and a "B" movie president, once declared that ketchup was a vegetable and then he became one himself. His trickle down theory did just that, trickle down. It's great to see the banksters now have competition. The question is whether they will buy BTCST outright or have them eliminated?

Re:Obligitory Reagan quote... (-1)

Anonymous Coward | 1 year,24 days | (#44503773)

Ronnie the Raygun, a "B" movie actor and a "B" movie president, once declared that ketchup was a vegetable

No, he didn't. Please do not spread myths.

Re:Obligitory Reagan quote... (0)

letherial (1302031) | 1 year,24 days | (#44503707)

Unless of course your a multi billion dollar corporation, then laws, regulation and taxes dont apply.

And Regan was a idiot who led our country in a age where poverty is increased (and still is) at a astronomical rate, ironically the rich got richer at a equal rate.

Currency? (0)

Anonymous Coward | 1 year,24 days | (#44503149)

Wrong answer. All sorts of things can be exchanged for goods or cash. Currencies are issued and backed by governments. This is bad law.

Re:Currency? (0)

Anonymous Coward | 1 year,24 days | (#44503179)

Currencies are issued and backed by governments.

No they're not. Most currency is actually in the form of bank notes. There isn't even enough currency 'backed by government' to supply the economy.

Re:Currency? (1)

Anonymous Coward | 1 year,24 days | (#44503249)

You have a fundamental lack of understanding what a currency is. A currency does NOT have to backed by a government.

Re:Currency? (1)

similar_name (1164087) | 1 year,24 days | (#44503267)

Currencies are issued and backed by governments.

Really? [wikipedia.org]

Distinct from centrally controlled government-issued currencies, private decentralized trust networks support alternative currencies such as Bitcoin, as well as branded currencies that are based on reputation of commercial products.[9]

Re:Currency? (5, Insightful)

bobbied (2522392) | 1 year,24 days | (#44503513)

Shesh.. Not even close on this..

In this case the judge is saying that even though the investors used BitCoin, the activities of the investment where essentially the same as investing dollars so the argument that BitCoin isn't a currency didn't apply. If it walks like a duck, quacks like a duck, acts like a duck and looks like a duck, it's a DUCK.

So.. Even if you make somebody trade in some kind of voucher to invest in your scheme, if you live in the US and are operating in a way that looks the same as something the SEC regulates, you are subject to the regulations.

So the judge is NOT saying BitCoin is a currency, but that the guy was operating an investment scheme that was illegal and is not shielded from the SEC because he used BitCoins.

Is everything currency, then? (2)

hermitdev (2792385) | 1 year,24 days | (#44503155)

I can barter my services for goods or other services. Trade one item for another. So, effectively, then this ruling would seem to imply everything is currency, and thus subject to SEC regulation in the States.

Re:Is everything currency, then? (2, Insightful)

Anonymous Coward | 1 year,24 days | (#44503195)

The government gets to make more subtle judgements than you claim to recognize. Usually we discover this as we grow up. Sometimes not, however.

Re:Is everything currency, then? (0)

Anonymous Coward | 1 year,24 days | (#44503247)

i don't think the ad hom answers the question, and at least the
summary begs the question: why is a bitcoin not a commodity.

Re:Is everything currency, then? (0, Insightful)

Anonymous Coward | 1 year,24 days | (#44503283)

While the grandparent post does contain an insult (and a rather childish one at that), it is not an ad hominem, because the insult is an aside to the argument, not the argument itself.

"Ad hominem" is not Latin for "hey, that's mean!"

Re:Is everything currency, then? (1)

fnj (64210) | 1 year,24 days | (#44503401)

Jesus. Anybody who thought that was an insult has a skin thickness measured in nanometers and could never cope with the conversation of English gentlemen.. It was a simple observation.

Spectacular case of "if the shoe fits" though.

Re:Is everything currency, then? (0)

Anonymous Coward | 1 year,24 days | (#44503439)

It was an insult. That's an objective fact, and pointing out that fact does not suggest offense being taken, nor anything about anyone's state of mind. Your reaction to my statement says more about your "skin thickness" than you claim said statement does about mine.

Re:Is everything currency, then? (0)

Anonymous Coward | 1 year,24 days | (#44503435)

The above poster implies that the government somehow makes subtler judgements relative to the poster's mental capacity as the only metric to judge by, which is definitely ad hominem to me. Not the above AC.

Re:Is everything currency, then? (0)

Anonymous Coward | 1 year,24 days | (#44503791)

why is a bitcoin not a commodity.

Because it has essentially zero value apart from being traded?

Re:Is everything currency, then? (4, Informative)

segin (883667) | 1 year,24 days | (#44503243)

A currency is any intermediary storage of value between two exchanges, that serves as a "means" but not an "end".

Re:Is everything currency, then? (3, Interesting)

Rockoon (1252108) | 1 year,24 days | (#44503397)

So energy is currency?

Re:Is everything currency, then? (-1, Flamebait)

Anonymous Coward | 1 year,24 days | (#44503483)

uhh yeah, dumbass. Coal, oil and natural gas have been for a long time, and charcoal and wood for millenia before that. Speculators aren't betting on the value of oil; they're betting against the value of the dollar.

Re:Is everything currency, then? (0)

Anonymous Coward | 1 year,24 days | (#44503487)

Actually.... it most certainly can be. It can be stored and a value is attached to it. It can be traded / exchanged. It can fulfil the definitions of a currency perfectly well. And so can anything else.

Look in your wallet. Paper and plastic currency / methods of payment. Is it really such a huge leap to mark a joule or watt as a form of currency?

Re:Is everything currency, then? (1)

thomasw_lrd (1203850) | 1 year,24 days | (#44503347)

Now you're getting it.

Re:Is everything currency, then? (1)

Anonymous Coward | 1 year,24 days | (#44503411)

Well, not everything! The honorable Judge, for instance, is one of the exceptions. He is worth nothing and not fit for conversion into anything else. There are others of his ilk who have no exchange/return value for normal people.

Re:Is everything currency, then? (5, Insightful)

tnk1 (899206) | 1 year,24 days | (#44503433)

You barter with the intrinsic value of the items. If you need boots and can offer a hat or dinners for them, you do that because you need boots to walk in, and the guy with the boots needs to eat or needs to cover his head.

Currency is a representation of value as an abstract. It's useful because it lets us set prices without having to negotiate barter, or more importantly, to have to produce and carry around things that we believe we could barter.

However, because currency does not have an intrinsic value by itself, it can be manipulated and used in certain ways that are not naturally regulated. In that sense, currency needs some sort of regulation. I don't know how much, and I think it should be as little as required, but I can accept that it may need a lot.

Bitcoin may be backed by some sort of store of abstract value, but it has no intrinsic value on its own. There is nothing you can do with a Bitcoin other than use it to buy something else. In that sense, it is a currency and is nothing like barter.

Re:Is everything currency, then? (1)

Nutria (679911) | 1 year,24 days | (#44503585)

currency does not have an intrinsic value

Unless the currency is backed by something tangible and rare (typically gold and/or silver).

Re:Is everything currency, then? (3, Insightful)

Agent ME (1411269) | 1 year,24 days | (#44503655)

The value of gold and silver isn't because of any intrinsic values they have besides rarity. (Yes, I know there are industrial uses of them, but that's not the driving force behind their price.) Good currency similarly also has a limited supply.

Re:Is everything currency, then? (1)

pipatron (966506) | 1 year,24 days | (#44503731)

Actually also because they are noble metals, and won't randomly corrode and spoil after long storage.

Re:Is everything currency, then? (1)

Nutria (679911) | 1 year,24 days | (#44503759)

isn't because of any intrinsic values

That's why I wrote tangible instead of intrinsic.

Re:Is everything currency, then? (2)

TsuruchiBrian (2731979) | 1 year,24 days | (#44503767)

Bitcoin is backed by something rare (even if not tangible). It is backed by the solutions to hard math problems, which are just as hard to acquire in terms of expended resources as precious metals are. This is why there is an exchange rate from gold to bitcoins, even if it fluctuates.

Re:Is everything currency, then? (1, Insightful)

Laxori666 (748529) | 1 year,24 days | (#44503683)

However, because currency does not have an intrinsic value by itself, it can be manipulated and used in certain ways that are not naturally regulated. In that sense, currency needs some sort of regulation. I don't know how much, and I think it should be as little as required, but I can accept that it may need a lot.

Oh, so woefully backwards. Nutria who said "Unless the currency is backed by something tangible and rare" also has it quite backwards.

Money naturally evolved as a good, just like any other. It has the same price mechanism as any other good, that is - whatever somebody is willing to pay for it. Money is just a good which a lot of people happen to want because a lot of other people also want it. So you get gold, silver, salt, etc., naturally used as money. You know if you take a bit of gold for your hat, you can give that bit of gold to someone else for a dinner. That is literally all there is to it..... until the government steps in, of course.

All government serves to do is usurp the currency. They notice that everybody uses gold coins as currency. So they start making diluted gold coins and trying to pass them off as worth as much as the original. People aren't stupid so they stop accepting government-minted coins, or treat them at their lower value, as appropriate - same as anyone would do with privately-minted coins of a lower quality. However, the government has the advantage of being able to make the laws. So they make it illegal to mint coins, and also make it illegal not to treat any government coin as having the value it says it does. This is an early form of inflation. What ends up happening is that 'bad money drives out the good' - people hoard the high-quality coins and just use the lower-quality ones, which makes sense... but anyway, all this serves to do is to funnel money in a gradual fashion towards those people closest to the government - the ones who get to use the lower-value as if it has higher-value, first.

What makes this all a lot easier and less obvious is if you can just use pieces of paper to represent the gold coins, and then just print more pieces of paper. Then it's really not that obvious what's going on. Note there's nothing inherently wrong with using pieces of paper instead of gold. That can happen without inflation. The theft of the wealth of the country occurs when paper is printed that has no backing & is then forced to be taken as having value.

Of *course* at *that* point you need to regulate the "currency", because it's only propped up artificially by the force of the government anyway.

The more I learn about this stuff the sadder I get.

Re:Is everything currency, then? (1)

Sponge Bath (413667) | 1 year,24 days | (#44503477)

...this ruling would seem to imply everything is currency, and thus subject to SEC regulation in the States.

Thank you for your cooperation citizen. Extra soylent rations for you.

Re:Is everything currency, then? (1, Insightful)

Jane Q. Public (1010737) | 1 year,24 days | (#44503495)

"I can barter my services for goods or other services. Trade one item for another. So, effectively, then this ruling would seem to imply everything is currency, and thus subject to SEC regulation in the States."

United States Constitution, Article 1, Section 10:

"No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; ..."

While the Federal government has the Constitutional power to coin money, it does not have the power to declare anything it wants to be money. Everything has value. That doesn't mean everything can be regulated as money.

People have argued that Article 1, Section 10 applies only to States. And that may be true, but it doesn't matter. If a State may not accept (or force anyone to accept) anything but gold and silver as payment, then gold and silver are in practice the only Constitutional form of money.

A logical corollary to that, then, is that paper dollars are not a Constitutional form of money.

Re:Is everything currency, then? (5, Insightful)

DaHat (247651) | 1 year,24 days | (#44503675)

*facepalm*

People have argued that Article 1, Section 10 applies only to States

Given Article 1 Section 10 starts with "No state" and follows with a list of prohibited items... there isn't much of an argument.

You are also ignoring Article 1 Section 8 which says (regarding the powers of congress):

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

So no, gold and silver aren't the only constitutional forms of currency, congress alone has the authority to print (fiat) money as they see fit. If states wish to create their own, then it must have an actual recognized value (ie precious metal) rather than be fiat currency.

Re:Is everything currency, then? (2)

hedwards (940851) | 1 year,24 days | (#44503497)

The SEC regulates this because the BTC is being treated like a commodity. People are buying the BTC with the hopes of selling it later on. Making it similar to people who buy barrels of oil to sell at a future date. And like those oil barrels, there's people buying and selling purely as a way of profiting on movements in the price of the commodity.

Bartering is normally just trading one item for another item. Now, you might then take that item you got and trade it to somebody else, but you're not usually trying to turn a profit on that extra trade, you're trying to get something you need in exchange for something you don't.

In terms of bartering, the transactions there are more or less the same as with cash, but the process is complicated by the logistical aspect of needing to take delivery immediately of the good or service you're accepting in exchange.

Re:Is everything currency, then? (1)

Maxo-Texas (864189) | 1 year,24 days | (#44503621)

Barter networks are kinda halfway between.

I do something for you and get credit in the system.

I use those credit to get something from a person besides you.

Re:Is everything currency, then? (0)

TsuruchiBrian (2731979) | 1 year,24 days | (#44503819)

Yes there are bitcoin speculators. But there are also Euro and Yen speculators. The difference between these and oil speculators is that the price of oil actually affects people who choose not to deal in oil speculation. If you decide to have no part in bitcoin, then the price of bitcoin, however inflated or deflated from speculation, has no effect on you.

When people speculate on oil, the price of gasoline goes up in every currency (and then down when the bubble bursts). That is because oil is also a commodity and things like gold silver and bitcoins are not.

Re:Is everything currency, then? (1)

jxander (2605655) | 1 year,24 days | (#44503511)

Quoth the Joker : That's the point.

Re:Is everything currency, then? (2, Interesting)

Anonymous Coward | 1 year,24 days | (#44503607)

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.)

Re:Is everything currency, then? (0)

Anonymous Coward | 1 year,24 days | (#44503669)

In fact, yes. The law in question says that if you are _using_ something as a currency, it will be taxed and regulated as one.

So if you are using monopoly money to play a game with your 5 year old kid, it's monopoly money, and the IRS and SEC don't care. If there is a digital "currency" that's used to buy cute little dingbats in an online game but you can't meaningfully extract the money back out of the game [1], then they don't care. But the moment bitcoin crosses the line and starts being Used Like It Is Money, then it gets taxed and regulated like it's money.

If people are investing it with this guy expecting to get meaningful returns that they will convert back into dollars... they're using it as an investment, no different than if you were to convert your dollars into euros to invest in a euro-denominated stock or bond or ponzi scheme. Ergo, for this purpose, it's money, so it gets taxed and regulated.

Similarly, when I buy a potato at the store and eat it for dinner, it is not money. But it is, in fact, well established that if you are making a non-trivial amount of barter income in the form of potatoes, you have to declare them on your 1040 at the end of the year, estimate their value in dollars, and pay taxes on them, because the tax laws don't tax "income that comes in the form of dollars", they tax "income", so if you happen to be taking your income in the form of root vegetables, you're still on the hook.

If you set up a ponzi scheme where people can bring you one postage stamp now and you will give them ten postage stamps next year, that is subject to SEC regulation (and yes, postage-investment-scams have, in fact, happened in the past, when postage stamps were more of a big deal). If you set up an investment scheme where people hand you drugs and you give them the profits in the form of more drugs later, the SEC can nail you for that too, if it's worth the time to pile that on top of the drug bust charges (the probably won't bother, but they could).

[1] This is part of why you aren't supposed to ebay your WoW character or gold. In addition to blizzard thinking goldspammers detract from the fun of the game, their lawyers don't want there to appear to be a reasonable channel for turning WoW gold into us-dollars for players, because if there was, there would be a potential legal mess for the company, and they Don't Want To Go There, because the first company to get into that mess is going to have a lot of legal fees sorting out exactly how the law should treat this. Easier to just say "nope, we prohibit turning it into cash, so it clearly isn't money!"

Not quite the right conclusion... (5, Insightful)

Entropius (188861) | 1 year,24 days | (#44503177)

Bitcoin is a currency that can be regulated under American Law

Well, yes. When has the government ever ruled that it lacks the power to regulate something?

The motivation behind Bitcoin wasn't to create a currency that government would choose not to regulate; it was to create one that government could not regulate.

Re:Not quite the right conclusion... (2)

Ralph Wiggam (22354) | 1 year,24 days | (#44503219)

The US government can't regulation bitcoins. But it can regulate businesses based in the US.

Re:Not quite the right conclusion... (2)

tnk1 (899206) | 1 year,24 days | (#44503503)

The US government *CAN* regulate bitcoins, it's just not going to be able to enforce it where it does not have jurisdiction.

The Legislature can make any law that is not unconstitutional, and it can affect non-citizens. The only issue becomes one of practicality and foreign relations. Don't confuse legality of the law with its enforcement. There are a number of laws out there that provide for universal jurisdiction, even though the laws cannot be enforced realistically outside of the place that made the law.

In short, no, bitcoin cannot probably be regulated by any one country successfully, but a country can always try to. For a country like the USA, that is much closer to a reality than any other country would be able to manage. And if the USA found some way to enforce that law, through use of diplomacy, or economic, or military power, that regulation would be real.

Re:Not quite the right conclusion... (1)

hedwards (940851) | 1 year,24 days | (#44503553)

Sure they can. They can arguably prosecute the individuals that are creating these BTC on US soil. Under http://www.law.cornell.edu/uscode/text/18/486 [cornell.edu]

It's something that would have to be tested in the courts as the statute literally only applies to physical currency, however, with so much "money" these days being digital only, it would seem that the USC would have to be interpreted to include those digital dollars as well.

Ultimately, if not, then the code will likely need to be updated to deal with that change.

Re:Not quite the right conclusion... (1)

OneAhead (1495535) | 1 year,24 days | (#44503813)

Oh, wouldn't it be a funny twist if BC mining suddenly turns out to be illegal. Not that I'd expect any federal/state justice system to be that retarded. Then again, after Citizens United (or, at the state level, the stand-your-ground laws), pretty much anything is possible.

One could say: "doesn't matter, most BC have been mined already", but I'm not sure how long the statute of limitations on "counterfeiting" is...

Re:Not quite the right conclusion... (1)

TsuruchiBrian (2731979) | 1 year,24 days | (#44503863)

The United States can pass a regulation that all aliens in the universe must use US dollars as their currency, but they will not be able to enforce it.

The US may one day, if extremely lucky, be able to imprison or kill a few aliens for violating US law, just like how the US may imprison a few people for using bitcoin, but that is not really "enforcement" in any meaningful sense.

Re:Not quite the right conclusion... (2)

maccodemonkey (1438585) | 1 year,24 days | (#44503295)

The motivation behind Bitcoin wasn't to create a currency that government would choose not to regulate; it was to create one that government could not regulate.

In theory the government can't regulate cash changing hands either. That won't stop them from bringing you up on charges of tax fraud if you're found out and you didn't file that income on your taxes.

If that was the thinking behind Bitcoin maybe that should have been thought over a little better.

Re:Not quite the right conclusion... (1)

Entropius (188861) | 1 year,24 days | (#44503733)

Sure. The whole point of Bitcoin is to establish something that makes it harder for them to "find out".

Re:Not quite the right conclusion... (2)

TheCarp (96830) | 1 year,24 days | (#44503343)

> When has the government ever ruled that it lacks the power to regulate something?

When it relates to shooting children in a school zone. There was, briefly, a federal law punishing use of firearms in a school zone under the idea that since they could regulate commerce, and guns and ammo are sold on the market, it was all good. The Supreme Court, rightfully if you ask me (if the your state can't pass a law against shooting kids, is that really a federal problem?), decided that this did not hold muster.

What pisses me off, of course, is not this ruling, as I said, its a local/state problem at best, and already taken care of by the majority of states, but that it was held up as the first time in 40 years that the commerce clause had struck ANYTHING down.

I mean seriously, this clause has been extended to apply to a farmer who would rather grow his own feed (apparently "not participating in the market" is a market activity and still subject to regulation) than buy it.... using it at all to strike down anything at this point is the height of ridiculousness.

> The motivation behind Bitcoin wasn't to create a currency that government would choose not to
> regulate; it was to create one that government could not regulate.

Exactly. Sure you can effectively regulate many transactions, you can banish it from the legal market. However, the only way bitcoin itself shuts down, is if people stop running the software. In theory (yes its a laughable scenario in any real way) as long as one system exists holding the last good block chain....it can come back.

Bitcoin can only be shut down by voluntary consensus of the community of people running it. It can be relegated to the black market, it can be pushed to obscurity, people caught running it can be railroaded, but, as long as it runs, it runs.

Its a nice hack really. That was what attracted me to it from day one, I read the white paper and a light went off, this is just the next evolution of p2p services,.... they learned from napster and all the others that got shut down and avoided the structural weakness inherent in a single authority.

Re:Not quite the right conclusion... (0)

Anonymous Coward | 1 year,24 days | (#44503599)

It can also be crushed in a few minutes if the NSA turned their computing power against it. The premise that it's based on scarcity of computing power when the opponents (US and Chinese governments) hold a virtual monopoly on that power, makes it ludicrous.

Re:Not quite the right conclusion... (2)

Agent ME (1411269) | 1 year,24 days | (#44503739)

The Bitcoin network's computational power "far exceeds the combined processing strength of the top 500 most powerful supercomputers" [cnn.com] . Plenty of nodes have specialized hardware developed specifically for Bitcoin mining; the only way any actor could take over the network would be to invest shit tons of money in specialized hardware they can't use for anything else. This isn't a situation where they can just repurpose their existing supercomputers for a day.

Sure it's within the realm of physical possibilities, but what gains would there be besides pissing a lot of people off by spending huge sums of money? The ratio of people pissed off to money spent is very small, so practically any other method of pissing people off would be much more cost effective.

Re:Not quite the right conclusion... (4, Insightful)

Zordak (123132) | 1 year,24 days | (#44503867)

What pisses me off, of course, is not this ruling, as I said, its a local/state problem at best, and already taken care of by the majority of states, but that it was held up as the first time in 40 years that the commerce clause had struck ANYTHING down.

I mean seriously, this clause has been extended to apply to a farmer who would rather grow his own feed (apparently "not participating in the market" is a market activity and still subject to regulation) than buy it.... using it at all to strike down anything at this point is the height of ridiculousness.

This case is Wickard v. Filburn, 317 U.S. 111 (1942) for those who are interested. Old farmer Filburn was charged with growing too much wheat. He argued that the federal government had no jurisdiction to regulate wheat he grew on his own farm for his own consumption. The Supreme Court held that by growing and eating his own wheat, he was failing to buy wheat in interstate commerce like a good little subject. The next time the Supreme Court struck down a federal statute under the Commerce Clause was United States v. Lopez, 514 U.S. 549 (1995), where the Court struck down the Federal Gun-Free School Zones Act. This was a big victory for Justice Rhenquist, who was on a quest to reign in the Commerce Clause. However, his successor, Justice Roberts, although considered a pariah and arch-conservative by the Left, has shown less will to do so. Notably, in his Obamacare decision, he gave a nod to the commerce clause, but then blasted a big old hole in the Constitution by saying basically that Congress could do anything they wanted to as long as they pretended it was a tax.

SEC has lost (2, Interesting)

Anonymous Coward | 1 year,24 days | (#44503369)

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:SEC has lost (4, Insightful)

fastest fascist (1086001) | 1 year,24 days | (#44503417)

I don't know where you get your information from. Shavers took deposits in bitcoins, promising to pay out again in bitcoins, with 7% or so weekly interest. The payouts went out for quite some time, presumably funded by new deposits, and then Shavers simply did a runner with the bitcoins he had accumulated. So it was very much a classic Ponzi scam.

Re:Not quite the right conclusion... (2)

petermgreen (876956) | 1 year,24 days | (#44503457)

The motivation behind Bitcoin wasn't to create a currency that government would choose not to regulate; it was to create one that government could not regulate.

Unfortunately while bitcoins design makes it difficult to regulate there are still a few options governments have.

One option is the ."51% attack". If a party has control of more hashing power than the rest of the network put together then they can arbitrarily block transactions they don't like from properly confirming. I'm quite sure if the US goverment chose to do so they could do this, it's a question of whether they would consider it worth committing those resources.

Another option is to go after the exchanges and/or regard handling large ammounts of bitcoin or large transfers to/from foreign bitcoin exchanges as being suspicious behaviour just as they regard handling large amounts of cash as being suspicious behaviour.

Yet another option would be to simply pass a law making bitcoin illegal to posess.

Re:Not quite the right conclusion... (2)

pipatron (966506) | 1 year,24 days | (#44503579)

One option is the ."51% attack". If a party has control of more hashing power than the rest of the network put together then they can arbitrarily block transactions they don't like from properly confirming. I'm quite sure if the US goverment chose to do so they could do this, it's a question of whether they would consider it worth committing those resources.

The computing power in the bitcoin pool today is 8 times [qz.com] the computing power of the top 500 fastest super computers in the world combined.

Even if NSA, Russia and China have more powerful setups than what's on the official Top 500 list (and I'm sure they do), it would take an immense effort to create something matching.

Re:Not quite the right conclusion... (2)

QuasiSteve (2042606) | 1 year,24 days | (#44503659)

The computing power in the bitcoin pool today is 8 times the computing power of the top 500 fastest super computers in the world combined.

Keep in mind that a lot of that computing power in the pool currently comes from ASICs, some FPGAs, a bunch of GPUs, and oodles of CPUs from users who forgot to disable CPU mining/giving up entirely.

Basically, a few ASICs will easily outclass a supercomputer for the specific task of Bitcoin mining.

So while all the supercomputers combined would bring nothing beefy to the table, governments could, in theory if nothing else, buy all the ASIC chips (or make their own), drop 'm onto boards, and outclass the pool.. and it wouldn't be an immense effort (though certainly out of my reach).

Re:Not quite the right conclusion... (2)

jxander (2605655) | 1 year,24 days | (#44503521)

It happened once. [wikipedia.org]

Sex (1, Offtopic)

Archangel Michael (180766) | 1 year,24 days | (#44503205)

Substitute "Sex" for "Bitcoin" and see if this holds true.

Sex may be used to purchase goods and services, and more importantly, can be converted to conventional currencies, it is a form of currency

Yup, it fits. Sex is now under regulation of the SEC.

Re:Sex (2)

Anonymous Coward | 1 year,24 days | (#44503251)

This is BS. You can't convert sex to money after you received it - that's the difference between a service and a currency.

Re:Sex (0)

Anonymous Coward | 1 year,24 days | (#44503313)

This is BS. You can't convert sex to money after you received it - that's the difference between a service and a currency.

If you "received it" into a plastic container and took it to a donor facility you might be able to exchange it for money.

Re:Sex (1)

Anonymous Coward | 1 year,24 days | (#44503359)

You're saying there's never been, is or never will be, a way to sell bodily fluids obtained during sex for existing currencies?

Re:Sex (1)

Freddybear (1805256) | 1 year,24 days | (#44503689)

"Bodily fluids obtained during sex" =/= "sex".

Re:Sex (1)

c0lo (1497653) | 1 year,24 days | (#44503695)

This is BS.

(Ummm... let's try)
"BS is a currency and can be regulated under American Law"...
Hey, wad'da ya know? Great insight, buddy, it fits!

Re:Sex (0)

Anonymous Coward | 1 year,24 days | (#44503279)

I look forward to seeing sex-based Ponzi schemes.

Re:Sex (1)

houstonbofh (602064) | 1 year,24 days | (#44503373)

You give me a blow job. And 10 levels later you get 10000000000 blowjobs! Sign up now!

Re:Sex (1)

killkillkill (884238) | 1 year,24 days | (#44503449)

Pyramid schemes are not Ponzi schemes.

Re:Sex (4, Insightful)

arth1 (260657) | 1 year,24 days | (#44503363)

Yup, it fits. Sex is now under regulation of the SEC.

I'm sorry, but no. Any person receiving bitcoins can sell them for dollars. That does not hold true for sex.

Re:Sex (3, Funny)

tnk1 (899206) | 1 year,24 days | (#44503533)

Paid for sex is a service, not a currency. You can't return or convert the sex as an abstract unit of value. It is not a currency.

Re:Sex (1)

jxander (2605655) | 1 year,24 days | (#44503551)

Beer may be used to purchased goods and services, and may be converted to conventional currencies. Beer is a form of currency.

Re:Sex (1)

Agent ME (1411269) | 1 year,24 days | (#44503785)

Beer isn't very fungible. There's many different types of it, there's varying qualities, and age can affect it. Any dollar is as valuable as any other dollar.

Re:Sex (1)

Greyfox (87712) | 1 year,24 days | (#44503701)

Well... That's going to make the jobs in accounting MUCH more interesting!

Holly crap! (0)

Anonymous Coward | 1 year,24 days | (#44503211)

Holly crap!

Can be converted to conventional currencies (1)

phorm (591458) | 1 year,24 days | (#44503297)

Can't almost anything that can be bought/sold technically be converted to conventional currency...

Re:Can be converted to conventional currencies (1)

Jane Q. Public (1010737) | 1 year,24 days | (#44503537)

"Can't almost anything that can be bought/sold technically be converted to conventional currency..."

Yes! And that is why the Judge's ruling is hopelessly flawed.

You can trade wheat or rice for any currency on the planet. You can "convert" it to gold (in some places). You can buy it with Yen and sell it for Rubles. You can trade it around the world.

I hereby declare wheat and rice to be money.

Not legal tender. Therefore, not a currency. (5, Interesting)

mozkill (58658) | 1 year,24 days | (#44503307)

Personally, I think the definition of currency is unclear. If its not "legal tender", or in other words not officially declared as money accepted for paying taxes (by fiat) , then shouldn't it NOT be considered a currency, in the same way that Gold is not considered a currency (unless it is officially stamped as such by fiat). To be a currency, some official government must declare it as official for paying taxes IMHO. So, for a judge to declare Bitcoin as a currency is ridiculous because, for it to be so, he himself would have to be willing to accept it , and then turn around and pay taxes with it.

Re:Not legal tender. Therefore, not a currency. (2, Insightful)

Anonymous Coward | 1 year,24 days | (#44503419)

Euros are not legal tender in the USA; but they are currency. If I have Euros and want to buy something in the USA, the merchant will usually refuse them.

Gold and silver are listed on the currency exchanges even though they are not issued by a government. They are both commodities *and* currencies.

BTC is arguably more of a currency than gold or silver. Unlike metal, it's useful only as a medium of exchange.

Re:Not legal tender. Therefore, not a currency. (0)

Anonymous Coward | 1 year,24 days | (#44503561)

He paid no taxes never! He wants for know why he should pay anything to this person called tax.

If I had the power, I would release all people he imprisoned and imprison all people he acquitted (basically, reverse all his judgements) and send him to jail for 136 Neptune years.

Re:Not legal tender. Therefore, not a currency. (2)

QuasiSteve (2042606) | 1 year,24 days | (#44503709)

I think the definition tends to be unclear when people want it to be unclear. Not saying that it isn't unclear, but from the Bitcoin reddits, bitcointalk, etc. it becomes pretty clear that a lot of Bitcoin users want Bitcoin to be a currency one way (use it to pay everywhere, getting everybody and their dog to accept it, create physical tokens embodying a particular Bitcoin value, etc.), but abhor the idea of it being a currency in other ways (regulation, taxation, etc.)

Can't really have it both ways.

So nothing changes? (1)

Seumas (6865) | 1 year,24 days | (#44503321)

The assertion is obviously that it should be subject to SEC regulation and oversight to prevent such ponzi-schemes and scummy behavior. The same SEC that has spent much of the last fifteen or twenty years with their heads in their asses? This is a lot more like stating that a call-girl is the same as a street-walker and, therefore, must fall under the same street-pimp purview.

Re:So nothing changes? (1)

Kwyj1b0 (2757125) | 1 year,24 days | (#44503365)

This is a lot more like stating that a call-girl is the same as a street-walker and, therefore, must fall under the same street-pimp purview.

This is slashdot. Can you do a car analogy?

What would happen if... (1)

TheDarkener (198348) | 1 year,24 days | (#44503387)

A couple thousand alternative currencies such as Bitcoin started surfacing? What would happen when the economy is completely watered down with different types of currencies just because people started using them as heavily as Bitcoin?

The IRS can "legally" tax barter agreements for their monetary value, just to tax trade.

I'm getting an image of an arrogant, bratty red faced child with their hands out, waiting for their piece of cake.

If Bitcoin can't exist outside of the economic iron fist, then what possibility do normal people have with turning it around?

Am i the only one who read that as (1)

Anonymous Coward | 1 year,24 days | (#44503393)

Bitcoin Shavings and Trust? The guy's name is even 'Shavers'. He's supposed to embezzle, not run a Ponzi scheme.

How to fail in court (5, Insightful)

Tailhook (98486) | 1 year,24 days | (#44503413)

From the tippy-top of the bitcoin.org [bitcoin.org] website:

Bitcoin is an innovative payment network and a new kind of money.

Now, IANAL, but I suspect walking into court with an argument that bitcoin isn't a new kind of money when its creators clearly and demonstrably assert that it is a new kind of money is likely to fail pretty hard.

And yes, I'm well aware of the of the distinction between money and currency. Gold bugs, sufferers [ronpaul.com] of Fed derangement syndrome and others spend a lot of time proselytizing about this stuff. The thing is that the SEC and the courts don't, which is why no one has ever succeeded in evading financial laws by attacking the legitimacy of fiat money.

At least not without an army.

Re:How to fail in court (0)

Anonymous Coward | 1 year,24 days | (#44503649)

With an army, you don't attack the legitimacy of fiat money either. You create that of your own.

Re:How to fail in court (1)

Tokolosh (1256448) | 1 year,24 days | (#44503747)

Good point. But I think the operative words are "kind of". Just like cigarettes were a kind of money after WW2 in Germany.

Euros are money. Does that mean the SEC can regulate them?

Re:How to fail in court (1)

EvanED (569694) | 1 year,24 days | (#44503845)

Euros are money. Does that mean the SEC can regulate them?

IANAL, but I suspect if you tried running a ponzi scheme while in the US but only took Euros, the latter fact wouldn't help you much against the SEC. That'd be a pretty huge loophole (admittedly diminished by the fact that "you must give me Euros to participate" would be a bit of a tell -- but I bet you could disguise that fact reasonably well).

fantasy (3, Insightful)

PopeRatzo (965947) | 1 year,24 days | (#44503557)

Was there really anyone who believed that bitcoin was somehow going to exist outside of the ability of any government to regulate it?

That belief reminds me of the "sovereign citizens" who believe that some obscure 19th century district judge's decision puts them outside of the federal and state government's ability to prosecute them for any crimes.

Re:fantasy (1)

Anonymous Coward | 1 year,24 days | (#44503725)

To be fair this says nothing of the governments ability to regulate it, merely its intention to.

The Tittle is Missleading (5, Interesting)

Anonymous Coward | 1 year,24 days | (#44503593)

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

Don't Steal (1)

Tokolosh (1256448) | 1 year,24 days | (#44503757)

The government hates competition.

Oh, my ISK! Oh, my lawsuits! (1)

sabt-pestnu (967671) | 1 year,24 days | (#44503827)

If Bitcoin are a currency because of its attributes (convertibility, common use), what does that mean for "Virtual Currencies" that can be converted back to monetary value?

EVE online? Second Life? Does this ruling apply to them? (I do not play either, I just recall stories...)

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