Wikipedia calls Bitcoin a cryptocurrency (a currency that relies on cryptography), but now it’s official. A federal judge in Texas has declared that Bitcoin is a currency and should therefore be regulated just like U.S. dollars or gold. The ruling represents yet another attempt to regulate Bitcoin transactions, threatening the original purpose of the currency.
While it looks like a recognition that Bitcoins are worth something, the decision threatens once again Bitcoin’s utopian concept. As a reminder, the Department of Homeland Security recently issued a seizure warrant on Bitcoin exchange service Mt. Gox because it didn’t comply to money transfer regulations.
Today’s decision goes in the same direction. BTCST, a Bitcoin-based hedge fund, claimed that “the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States,” wrote Judge Amos Mazzant. She then stated the exact opposite of BTCST’s defense:
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.
Bitcoin was born on the idea that nobody could regulate it. Instead of having a central bank, Bitcoins are just a chain of characters defined by algorithmic rules. Anybody can try to find new Bitcoins and anybody can verify if it is indeed a real Bitcoin or not. All of this is handled by opensource Bitcoin applications and a few proprietary variants.
The Bitcoin network is a peer-to-peer payment network, and nobody can intefere with it. The only real value of a Bitcoin comes from its users. Because Bitcoin owners are treating it as a currency, it becomes one. That’s what makes it beautiful and scary at the same time. Yet, 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.