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."

Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
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

    Ashdown Group: Senior VMware Platform Engineer - VMware / SAN / Tier3 DC

    £45000 - £55000 per annum + benefits: Ashdown Group: Senior VMware Platform En...

    Ashdown Group: Automated Tester / Test Analyst - .Net / SQL - Cheshire

    £32000 per annum + pension, healthcare & 23 days holiday: Ashdown Group: A gro...

    Ashdown Group: Application Developer - C#.Net, ASP.Net - Cambridgeshire

    Negotiable: Ashdown Group: Software Application Developer (C# & ASP.Net, SQL S...

    Ashdown Group: Front-End Developer / Front-End Designer - City of London

    £27000 - £33000 per annum + Excellent benefits: Ashdown Group: Front-End Devel...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

    Paul Scholes column

    I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable