If you never thought the day would come when you could invest in Monopoly money then you may be in for a big surprise -- sort of. In what is a huge symbolic shift, the Federal Government held hearings this week on Bitcoin, and so far, the DOJ has described Bitcoin as a "legal means of exchange," reports Bloomberg.
What is a Bitcoin Really?
Ok, so what is it really? This is what we know: Bitcoins "exist as software and aren't regulated by any country or banking authority," according to Bloomberg. Everyone from brick-and-mortar retail operations, to online illegal drug dealers, use virtual Bitcoins to transact business. Because it is "designed to be untraceable, it's an attractive tender for those seeking to transact anonymously via the Web, reports Bloomberg.
Testimony Before the Committee
In her testimony before the Senate Homeland Security and Government Affairs Committee, acting Assistant Attorney General for the DOJ's criminal division, Mythili Raman, stated: "The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce," reports The Wall Street Journal.
However, Ben Bernanke also weighed in, in a letter to the committee, stating: "Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market," says Bloomberg.
Bitcoin Legal Issues
Bernanke's statement brings to light the legal issues surrounding Bitcoins. Should they be classified as currency? Or, as commodities or securities? How Bitcoin is classified will determine what agency oversees it, and what taxes will be imposed. Not to be outdone, Ms. Shasky Calvery, director of the Treasury Department's Financial Crimes Enforcement Network noted that the IRS is "'actively working' on its own rules for bitcoin," reports The New York Times.
There are also issues of consumer protection as Bitcoin is seen as a very volatile, risky investment. Just this year, the value of Bitcoin has grown over 45-fold. After the hearing on Monday, Bitcoin's value jumped to $700, according to The Wall Street Journal, but at the time of this writing, the value was listed at $560 on Bitstamp.net. That's not all, Bitcoin has no intrinsic value and is susceptible to hackers. If Bitcoin is going to gain mainstream acceptance, these are all issues that will need to be resolved.
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- Should You Accept Bitcoin for Your Services? (FindLaw's Technologist Blog)
- Risky Business: More Law Firms Taking Bitcoin (FindLaw's Strategist Blog)
- What is a Bitcoin? Drug Dealers Taking Advantage of 'Legal Gray Area' (FindLaw's Technologist Blog)
- FindLaw's Legal Technology Center (FindLaw)