U.S. Judge Rules Bitcoin Is Currency (Aug. 8, 2013)
Aug. 8, 2013
A federal judge ruled that Bitcoin, a decentralized virtual currency, is a form of money. U.S. Magistrate Judge Amos L. Mazzant’s decision this week is part of a charge levied by the U.S. Securities and Exchange Commission against Trendon Shavers for allegedly defrauding investors of approximately $150,000 worth of bitcoins in a Ponzi scheme.
The SEC’s complaint contends that Shavers raised more than 700,000 bitcoins from more than 65 investors through Bitcoin Savings and Trust (BTCST), of which Shaver is operator and founder. He promised investors weekly returns of up to 7 percent, but instead of investing the money, he used it to return interest to earlier investors, to pay personal expenses and to day-trade on Bitcoin exchanges.
Shavers argued that the BTCST investments are not securities because Bitcoin is not money, nor is it part of anything regulated by the U.S. Furthermore, Shaver argued, the transactions in question were done using bitcoins and that no money ever exchanged hands.
“It is clear that Bitcoin can be used as money,” Mazzant wrote in his ruling on Tuesday. “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. Therefore, the Court finds that the BTCST investments meet the definition of investment contract, and as such, are securities.”
The ruling follows guidance issued in March by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on virtual currency, categorizing administrators and exchangers of virtual currencies as money services businesses and thus subject to certain registration, reporting and recordkeeping regulations.