Bitcoin is a currency, rules US judge

Ruling means suspected fraudster dealing in virtual currency can be charged

A judge in the United States has ruled that Bitcoin, a decentralised virtual currency, should be officially recognised as a form of money.

The landmark ruling opens the way for US regulators to sue a suspected fraudster, who is accused of misleading investors in a Bitcoin-based product he was selling.

It also mean transactions using the controversial online currency are now to be considered in the same way as other "real-world" currencies bought and sold in the US.

A document signed by US magistrate judge Amos L.Mazzant on 6 August details a US regulator's case against Trendon Shavers, the operator of a suspected "ponzi" or pyramid scheme. Mr Shavers sold Bitcoin investments online, offering artificially high interest rates. 

The Securities and Exchange Commission (SEC), the body that polices securities markets, has charged Shavers, founder and operator of Bitcoin Savings and Trust (BTCST), with defrauding investors after it emerged that the Texan was offering returns of 7 per cent interest per week. In reality BTCST used money from new investors to pay the 'interest payments' of earlier backers.

According to the judge's letter, Shavers obtained 700,467 Bitcoins in principal investments from BTCST investors, worth approximately $4.6m at the time the investments were made.

Mr Shavers tried to claim that Bitcoins are not money and therefore not anything regulated by the US government, with no money changing hands. He contended that BTCST investments were therefore not real investments.

The SEC responded that these were indeed investments of money and therefore liable to US regulations, a decision with which the judge agreed. The ruling now makes Shavers's argument void and clears the way for a prosecution.  

"Ponzi scheme operators often claim to have a tie to a new and emerging technology as a lure to potential victims," said Lori Schock, director of the SEC's Office of Investor Education and Advocacy, speaking to CoinDesk, a news website covering digital currencies.

Bitcoins can be bought and sold using an online exchange. The currency was created as a peer-to-peer online currency which people could exchange to pay for products and services. Bitcoins can also be changed for conventional currency, without the need for regulation from a central bank or government.

Speaking to the Independent, Jon Matonis, Executive Director of the Bitcoin Foundation, a body which promotes the use of such cryptographic money, said, "The ruling is interesting because it highlights the fact that Bitcoin is becoming recognised as commodity money in the same way that gold and silver are currently recognized as money.

"This commodity money classification is appropriate because the International Organization for Standardization recognizes gold, silver, platinum, and palladium as non-national units that do not require the backing of any third-party institution.

"It is looking like Bitcoin will soon be [considered the same way], which will become more important as global foreign exchange dealers adopt bitcoin as a trading unit on their existing electronic platforms."

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Sport
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
PROMOTED VIDEO
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Sport
Fans hold up a scarf at West Ham vs Liverpool
footballAfter Arsenal's clear victory, focus turns to West Ham vs Liverpool
New Articles
i100... she's just started school
News
news
New Articles
i100
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Sport
football
New Articles
i100... despite rising prices
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Graduate BI Consultant (Business Intelligence) - London

    £24000 - £30000 per annum + benefits: Ashdown Group: Graduate BI Consultant (B...

    Service Delivery Manager (Product Manager, Test and Deployment)

    £40000 - £55000 per annum: Ashdown Group: Service Delivery Manager (Product Ma...

    Technical Product Marketing Specialist - London - £70,000

    £50000 - £70000 per annum: Ashdown Group: Cloud Product and Solutions Marketin...

    Trainee Helpdesk Analyst / 1st Line Application Support Analyst

    £18000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam