Wednesday, 14 August 2013

The Bitcoin Crackdown: "Bitcoin is a Currency or form of Money"

Governments are working hard to retain their monopoly on issuing currency. According to a United States District Court (my bold),
First, the Court must determine whether the BTCST investments constitute an investment of money. It is clear that Bitcoin can be used as money. It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, 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.
Concluding that Bitcoin is money is of course not that straight forward (e.g., see here). Reaching the conclusion that Bitcoin is indeed a form of money makes it possible for the court to conclude that they have "subject matter jurisdiction" in the SEC VS. TRENDON T. SHAVERS and BITCOIN SAVERS AND TRUST (BTCSF) case. The Court explains:
However, the question currently before the Court is whether the BTCST investments in this case are securities as defined by Federal Securities Laws. Shavers argues that the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States.
The Department of Financial Services (DFS) have already launched an "inquiry" on virtual currency firms, blaming it on a  "cloak of anonymity provided by virtual currencies has helped support dangerous criminal activity, such as drug smuggling, money laundering, gun running, and child pornography". The DFS explains further in their "Notice of Inquiry on Virtual Currencies" published on Monday,
If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise.
Indeed, it is in the common interest of both the public and the virtual currency industry to bring virtual currencies out of the darkness and into the light of day through enhanced transparency. It is vital to put in place appropriate safeguards for consumers and law-abiding citizens.
As such, the Department of Financial Services (DFS) has launched an inquiry into the appropriate regulatory guidelines that it should put in place for virtual currencies. DFS has already conducted significant preliminary work regarding this inquiry, including making requests for information from virtual currency firms. Based on that initial work, we are concerned that – at a minimum – virtual currency exchangers may be engaging in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS.
This is of course nothing short of a further crackdown on Bitcoin and other virtual currencies to reduce (future) potential competitors to the U.S. dollar and other fiat currencies. Governments do like their monopolies. And they love regulating! Hayek argued for free choice in currency. Arthur Seldon explains,
He [Hayek] argues that people should be free to refuse money they distrust in  favour of money in which they have confidence. It is this new power of the people to refuse the national money that would  induce national governments to ensure that their money was stable  in value.
Choice in currency would effectively contribute to put an end to inflationary policies - and is a main reason governments want to protect the monopoly on their fiat currencies and legal tender laws.

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