Bitcoin is a currency, rules US judge
Ruling means suspected fraudster dealing in virtual currency can be charged
Friday 16 August 2013
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."
Life & Style blogs
10 ways we damage our teeth – without realising
'Cheeky' Nando's under fire for apparently coming onto a customer on Twitter
Facebook Messenger sends 'creepily' precise location data, as revealed by Marauders Map Chrome extension
What do the emoji on Snapchat mean?
iPhone 'effective power' text: how to be safe from iOS bug that lets people crash your phone
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
- 1 'Cheeky' Nando's under fire for apparently coming onto a customer on Twitter
- 2 Saudi Arabia mosque bombing: Two volunteer security guards hailed as heroes for stopping Isis suicide bomber reaching worshippers
- 3 Playboy model April Summers speaks out about being a victim of revenge porn
- 4 There is something wrong but very right about this Bible illustration
- 5 iPhone 'effective power' text: how to be safe from iOS bug that lets people crash your phone
iJobs Gadgets & Tech
£27500 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...
£35000 - £45000 per annum: Recruitment Genius: They are the go-to company for ...
£20 - 28k + Benefits: Guru Careers: We are seeking a Graduate Software Develop...
Negotiable: Recruitment Genius: A Digital Web Designer is required to join a f...