Judge rules: Bitcoin is real currency

A case over a fraudster clears way for the online currency to be treated as commodity money

Topics: Bitcoin, Currency, commodity money, Fraud, online currency, , ,

Bitcoin — the volatile online currency — has been ruled “real” by a federal judge, as a part of a case against an online fraudster.

The ruling puts Bitcoin in the category of commodity money, like, say, gold and silver (they need no national function or third-party institution or treasury).

As the U.K.’s Independent noted:

A document signed by U.S. magistrate judge Amos L. Mazzant on 6 August details a U.S. 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.

…”It is looking like Bitcoin will soon be [considered the same way as other commodity money], which will become more important as global foreign exchange dealers adopt Bitcoin as a trading unit on their existing electronic platforms,” [said Jon Matonis, Executive Director of the Bitcoin Foundation.]

Natasha Lennard

Natasha Lennard is an assistant news editor at Salon, covering non-electoral politics, general news and rabble-rousing. Follow her on Twitter @natashalennard, email nlennard@salon.com.

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