​Bitcoin is a currency, says federal judge

TradingPub Admin | August 8, 2013

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If you want some free trading education on an alternative investment, you may benefit from knowing that a federal judge recently ruled that Bitcoin is indeed a form of currency.

A recent federal court ruling that Bitcoin can be used as money could have significant implications. This form of currency is created digitally and has generated significant visibility recently as a result of the wild price fluctuations it has experienced, according to MarketWatch.

Another aspect of this digital currency that has helped it to draw attention is that it is not issued by any government. The ruling could help reduce uncertainty by at least shedding some light on who has jurisdiction over Bitcoin.

The legitimacy of Bitcoin as a currency was recently challenged in a federal lawsuit that was brought forth by the U.S. Securities and Exchange Commission in United States District Court, Eastern District of Texas. The case names Trendon Shavers, as well as Bitcoin Savings and Trust, a company that he founded and runs.

Bitcoin lawsuit details
According to the SEC, Shavers allegedly operated an investment scheme, ABC News reports. By doing so, he managed to defraud investors out of millions in Bitcoin investments.

The lawsuit claims that Shavers began soliciting investors in November of 2011. The founder of Bitcoin Savings and Trust told potential investors that he had established a business that involved distributing these units of digital currency to local individuals.

Shavers also told these potential investors that if they gave him funds, he could provide them with as much as 1 percent interest every day "until either you withdraw the funds or my local dealings dry up and I can no longer be profitable."

Shavers argues against Bitcoin definition
After being named in a federal lawsuit, Shavers asserted that the existing definition of securities provided by the federal government in both the Securities Act of 1933 and the Exchange Act of 1934 does not include Bitcoin investments, according to MarketWatch.

"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 ruling states. "Shavers also contends that his transactions were all Bitcoin transactions and that no money ever exchanged hands. The SEC argues that the BTCST investments are both investment contracts and notes, and, thus, are securities."

However, the arguments made by the defendant were not approved by Judge Amos Mazzant of the U.S. District Court in the Eastern Division of Texas, ABC News reports.

"It is clear that Bitcoin can be used as money," he wrote in the ruling. "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."

The judge went on to say that while the currency cannot be used everywhere, people can purchase fiat currencies by using Bitcoin, according to ABC News.

In the end, the judge established that the BTCST investments meet the requirements of an investment contract. The court ruled that since these investments are defined in this way, they are securities. Since the investments sold by the trust are indeed securities, the lawsuit filed against Shavers and his company will proceed.

Mazzant also ruled that since the BTCST investments are securities, the federal court has jurisdiction over them.

ABC News reached out to Shavers for comment, but they were unable to contact him.

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