Is Bitcoin Money or Not?

By Ian Jackson Aug 20, 2014 5:54 PM EDT

LONDON (InsideBitcoins) — In legal and political circles the definition of a word can carry an awful lot of weight and in a week where the Australian Tax Authority ruled that bitcoin was not money and hence subject to capital gains tax,over in the USA, a Federal judge has arrived at the opposite conclusion. And as the fallout from the shutting down of Silk Road earlier last year continues apace, for Robert Faiella, a Florida man who attempted to have at least one of the charges levied against him dropped, a precise definition of Bitcoin’s status as money or not is all important.

Faiella, 54, who stands accused of attempting to sell $1 million in bitcoins to users of Silk Road, was arrested at his Florida home in January of this year and charged with conspiracy to commit money laundering and operating an unlicensed money transmitting business; it was this latter charge that Faiella contested, on the grounds that bitcoin was not money.

But hopes of having the charge dropped on a technicality were dashed earlier today when, as Reuters reported, U.S. Federal Judge Jed Rakoff rejected the entire notion, issuing a statement that “Bitcoin clearly qualifies as money or funds” and that  “Bitcoin can be easily purchased in exchange for ordinary currency, acts as a denominator of value, and is used to conduct financial transactions.”

The statement comes as the future of bitcoin hangs in question all over the world with a looming ban in Russia, a potentially fatal implementation of VAT in Europe and overt hostility in China. Both the IRS and ATO have insisted that Bitcoin should not be treated as currency; confusion over what Bitcoin’s exact legal definition remains pervasive.

Nor is this the first time that a Federal Judge has concluded that bitcoin is money.

As reported last year, Trendon Shaver stood accused of running a Ponzi scheme with the virtual currency through his investment company BTCSC. Shaver had in a bid reminiscent of Faiella’s, attempted to challenge a charge of fraud on the grounds that bitcoin was not money. East Texas District Judge Amos Maazant demurred issuing a statement that left no doubt as to the court’s position on the matter, with bitcoin being defined as  “A currency or form of money, and investors wishing to invest in BTCST provided an investment of money.”

Whilst both cases represent important precedents, no case has to date gone before the Supreme Court. Nor does a legal definition of money as of yet hold any real weight in political circles. As the ruling in Australia shows, what may or may not constitute money for the purposes of taxation are a long way from what might be used as a legal defence.

Ian Jackson is an Inside Bitcoins correspondent based in the U.K.

Source: U.S. v. Faiella, U.S. District Court, Southern District of New York, No. 14-cr-00243

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