Bitcoin is now a declared currency in Texas.(techcrunch.com)
techcrunch.com
Bitcoin is now a declared currency in Texas.
http://techcrunch.com/2013/08/07/bitcoin-clampdown-continues-as-federal-judge-says-its-a-currency/
8 comments
declaring Bitcoin as currency is too narrow. FYI there's dozens of other digital currencies, collectively termed altcoins, such as litecoin and ripplecoin. See http://www.cryptocoincharts.info. Anyone is also able to create their own blockchain.
> declaring Bitcoin as currency is too narrow.
Courts deal with the issues in the cases before them. The relevant issue in this case was whether an investment sold for bitcoin involved a transaction of "money" for purposes of the Exchange Act of 1934, making it subject to various securities-related rules.
The status of other altcoins (or even bitcoin's status as "currency" in any sense other than the specific context of the Exchange Act) was not an issue before the court.
Courts deal with the issues in the cases before them. The relevant issue in this case was whether an investment sold for bitcoin involved a transaction of "money" for purposes of the Exchange Act of 1934, making it subject to various securities-related rules.
The status of other altcoins (or even bitcoin's status as "currency" in any sense other than the specific context of the Exchange Act) was not an issue before the court.
What does this mean in practicality?
It means that the particular defendant in this particular case can't get out of a securities fraud case because the investment contracts were sold for (and the interest offered in) bitcoins. (As a trial court decision, it has no binding in effect on any other case, and, in any case, the ruling is narrowly written to be specific to the context of the specific law at issue, not the definition of "money" more generally.)
That you have to declare bitcoins received as income to the IRS?
You have to declare anything of value received as income. E.g. if you get paid in shoes, it's still income.
Hypothetically if you were payed in shoes, how would you pay the IRS? Sell the shoes for enough money to pay taxes?
This is actually a problem for some people. E.g. they receive some property (usually a family farm) but can't pay taxes on the value received. There are various complicates and work-arounds in the tax code to deal with this situation, but sometimes they just end up selling the farm.
There was a bit on NPR a few months ago about someone who inherited some artwork from a parent who died. There was an extremely valuable piece of art which was made from some something like elephant tusk or something that is banned now, but wasn't when the art was created, and so now it is illegal to sell the piece.
The IRS wanted to be paid for the value of the piece, but the people who inherited it were trying to argue that since they're not allowed to sell it it has no value. And I don't think they could just afford out of pocket whatever the IRS was claiming was owed.
The IRS wanted to be paid for the value of the piece, but the people who inherited it were trying to argue that since they're not allowed to sell it it has no value. And I don't think they could just afford out of pocket whatever the IRS was claiming was owed.
I was interested in learning more about this but my googling couldn't turn up anything from NPR.
The piece couldn't be sold because it features a stuffed bald eagle (of which sale and even ownership of is prohibited by the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty Act).
I did dig up these:
http://www.nytimes.com/2012/07/22/arts/design/a-catch-22-of-...
http://www.forbes.com/sites/janetnovack/2012/07/22/the-irs-a...
http://dontmesswithtaxes.typepad.com/dont_mess_with_taxes/20...
The outcome was that they donated to the MoMa, but weren't allowed to claim a tax deduction for the donation. So yeah... kind of screwed.
The piece couldn't be sold because it features a stuffed bald eagle (of which sale and even ownership of is prohibited by the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty Act).
I did dig up these:
http://www.nytimes.com/2012/07/22/arts/design/a-catch-22-of-...
http://www.forbes.com/sites/janetnovack/2012/07/22/the-irs-a...
http://dontmesswithtaxes.typepad.com/dont_mess_with_taxes/20...
The outcome was that they donated to the MoMa, but weren't allowed to claim a tax deduction for the donation. So yeah... kind of screwed.
Or they win a bunch of stuff on a gameshow, but can't pay for the taxes on the "income".
You pay taxes in dollar, or whatever your local currency happens to be. If your income is not in the same currency, then it is your problem to exchange it.
This was an insightful comment. I will be declaring it as income in April.
That was true long before this ruling.
this would be a crushing blow for anyone just playing around with btc. innovation and creativity halted
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"Bitcoin creator Satoshi Nakamoto probably didn’t think that even the U.S. government would treat it as a currency and try to regulate it."
Citation needed.
From the opinion: "The question currently before the Court is whether the BTCST investments in this case are securities as defined by Federal Securities Laws."
This case was about whether a dude who was accepting deposits of Bitcoins and paying interest on them was in the securities business. Of course he was.
Citation needed.
From the opinion: "The question currently before the Court is whether the BTCST investments in this case are securities as defined by Federal Securities Laws."
This case was about whether a dude who was accepting deposits of Bitcoins and paying interest on them was in the securities business. Of course he was.
Declaring Bitcoins as currency is one thing. The other thing is how do people prove to the court that they don't own Bitcoins anymore because they've sent them to BTCST (the famous pirateat40 hedge fund), and even if judge accepts a blockchain transaction as actual evidence - that the receiving address actually belonged to BTCST. That will be fun to watch.
Does that mean that playing Satoshi dice if you're a US citizen under 21 is illegal?
This article is so confused, I don't even...
> The ruling represents yet another attempt to regulate Bitcoin transactions
Frickin' awesome. Finally they're going to get acceptance from the mainstream, and my investments will be worth something...
> Bitcoin was born on the idea that nobody could regulate it.
Really? I always thought it was born on the idea of making its creator rich. Either way, its value comes from the inability for players to unilaterally (and meaningfully) increase the money supply.
> The only real value of a Bitcoin comes from its users
Kinda like every other currency, then?
> The ruling represents yet another attempt to regulate Bitcoin transactions
Frickin' awesome. Finally they're going to get acceptance from the mainstream, and my investments will be worth something...
> Bitcoin was born on the idea that nobody could regulate it.
Really? I always thought it was born on the idea of making its creator rich. Either way, its value comes from the inability for players to unilaterally (and meaningfully) increase the money supply.
> The only real value of a Bitcoin comes from its users
Kinda like every other currency, then?
The security of currencies come from their underlying demand. Gold is used as a currency, first and foremost, because it has strong intrinsic value, and second because it has physical properties that make it convenient to divide and store. If gold had no independent demand it wouldn't be considered for a currency.
The US dollar has even more demand. All Americans are required by law to purchase it and own it for the purpose of paying their taxes. If they do not, the most powerful police and military will lock them in prison. This is the base upon which the rest of the system is built.
Bitcoin, to its good fortune, is also backed by independent demand: crime. Because of crime, and its adeptness at enforcing agreements, BitCoin has a strong tangible base upon which it can grow its ecosystem. The biggest threat to BitCoin is not a sudden loss of interest by the masses, but a competing currency that better serves crime and takes BitCoin's market share.
The US dollar has even more demand. All Americans are required by law to purchase it and own it for the purpose of paying their taxes. If they do not, the most powerful police and military will lock them in prison. This is the base upon which the rest of the system is built.
Bitcoin, to its good fortune, is also backed by independent demand: crime. Because of crime, and its adeptness at enforcing agreements, BitCoin has a strong tangible base upon which it can grow its ecosystem. The biggest threat to BitCoin is not a sudden loss of interest by the masses, but a competing currency that better serves crime and takes BitCoin's market share.
Government-issed currencies offer far, far more utility for criminals than Bitcoin does.
Every Bitcoin transaction is a matter of public record. There's no anonymity - everything you do with Bitcoin leaves a paper trail. Criminals using Bitcoin expose themselves to a much greater risk of detection than they'd face by using a briefcase full of dollars. There are ways to mitigate the traceability of Bitcoin transactions, but these typically involve trusting middlemen, and so come with their own set of risks.
The value of Bitcoin originates in the inability of the government to manipulate the money supply, but I suspect that criminals are probably less impacted by inflation than the typical non-criminal is.
It's honest businesspeople and not criminals who stand to benefit from Bitcoin.
Every Bitcoin transaction is a matter of public record. There's no anonymity - everything you do with Bitcoin leaves a paper trail. Criminals using Bitcoin expose themselves to a much greater risk of detection than they'd face by using a briefcase full of dollars. There are ways to mitigate the traceability of Bitcoin transactions, but these typically involve trusting middlemen, and so come with their own set of risks.
The value of Bitcoin originates in the inability of the government to manipulate the money supply, but I suspect that criminals are probably less impacted by inflation than the typical non-criminal is.
It's honest businesspeople and not criminals who stand to benefit from Bitcoin.
BitCoin signatures are traceable, but the link between signatures and human beings is only traceable from outside the BitCoin system. If you are already dealing with briefcases of cash, it is a simple matter to buy BitCoin using one of those briefcases anonymously. Throw Tor in the mix, and you'd have to be the next Bin Laden for the world to dedicate the resources necessary to uncover your dealings. These are people who built 200meter+ tunnels underground to transport drugs between the US and Mexico: http://www.huffingtonpost.com/2012/07/14/drug-tunnels_n_1673...
Cash is a terrible currency for big time crime. It is very difficult to store, being susceptible to mites and fungus. It is very difficult to exchange large quantities, think pallets instead of briefcases for millions/billions of dollars (which is the primary reason they don't make a $1000 bill). It is nearly impossible to exchange any meaningful amount cross-border. It is difficult to count and keep track of. It is easier to counterfeit and get bad cash. Cash has serial numbers, fingerprints, and DNA all over them (I'm surprised we don't hear more about cash forensics, or bugged cash with tracking chips in them).
Cash will still be used for the last mile, for the street-level "retail" transactions. But when those get gathered up and need to be sent back to headquarters, or between organizations, or to other nations, the backhaul, by necessity, needs to run on something more sophisticated. Today, that seems to be Bitcoin, even though I agree with you that it is far from perfect. Its first-mover advantage is allowing it to build a robust ecosystem of services that is making it that much harder for an incumbent to take its place. But when that super currency does come, and crime shifts to using it, I predict a relatively straight decline in BitCoin value.
Cash is a terrible currency for big time crime. It is very difficult to store, being susceptible to mites and fungus. It is very difficult to exchange large quantities, think pallets instead of briefcases for millions/billions of dollars (which is the primary reason they don't make a $1000 bill). It is nearly impossible to exchange any meaningful amount cross-border. It is difficult to count and keep track of. It is easier to counterfeit and get bad cash. Cash has serial numbers, fingerprints, and DNA all over them (I'm surprised we don't hear more about cash forensics, or bugged cash with tracking chips in them).
Cash will still be used for the last mile, for the street-level "retail" transactions. But when those get gathered up and need to be sent back to headquarters, or between organizations, or to other nations, the backhaul, by necessity, needs to run on something more sophisticated. Today, that seems to be Bitcoin, even though I agree with you that it is far from perfect. Its first-mover advantage is allowing it to build a robust ecosystem of services that is making it that much harder for an incumbent to take its place. But when that super currency does come, and crime shifts to using it, I predict a relatively straight decline in BitCoin value.
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Federal judges have acknowledged that Bitcoin has the underpinnings that constitutes it as a currency. This is HUGELY exciting.
Disclosure: I work in financial regulatory reporting and am bullish on bitcoin.