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Bitcoin recognised as a regulatable currency by Texas federal judge

updated 03:10 pm EDT, Thu August 8, 2013

SEC suit against Bitcoin hedge fund forced district court ruling

Bitcoin is a recognized currency that is subject to the laws of the United States, according to a federal judge ruling over a lawsuit by the Securities and Exchange Commission (SEC) against a Bitcoin hedge fund owner. Judge Amos Mazzant in Texas declared Bitcoin as "a currency or form of money," paving the way for government regulation in the virtual currency.

The lawsuit by the SEC claims that Bitcoin Savings and Trust (BTCST), closed since August 2012) being operated in some form of Ponzi scheme, with the Commission formally charging fund founder Trendon Shavers last month, reports Ars Technica. Shavers believed that the court did not have the jurisdiction over Bitcoin crimes under current securities-related laws, as "Bitcoin is not money, and is not part of anything regulated by the United States." and that since all transactions were based in Bitcoins, "no money ever changed hands."

The court filing states that it had determined that since Bitcoin could be used as money, despite a limited number of places to use it, and that it could be exchanged into other real-world currencies, it was in fact a currency, and that the 700,467 Bitcoins valued at over $4.5 million at the time paid by investors into BTCST was classed as an investment. It also ruled that the hedge fund was covered as a "common enterprise," and that since Shavers allegedly offered interest rates between 1 percent and 3.9 percent per day, investors expected a profit. After covering all the main criteria, the court found that investments in BTCST counted as securities, and so has jurisdiction.

The ruling, while helpful to those seeking retribution for the loss of their funds, is yet another setback to the virtual currency. While it was originally created to be a currency that is decentralized and therefore unregulated, the ruling effectively states that it should be.

Earlier this year, the California Department of Financial Institutions attacked organizations linked to the currency for allegedly performing monetary transmissions without proper licensing, and the largest Bitcoin exchange, Mt. Gox, had one of its payment systems shut down by the Department of Homeland Security under a seizure warrant. Other governmental organizations are also investigating the currency and it's legalities.

The Bitcoin currency is volatile when compared to others, having been valued as highly as $266 before crashing to $76 in April, before becoming stable at $160. Mt. Gox currently lists the cost of one Bitcoin to be just over $100.

by MacNN Staff





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