From: Justia/Verdict
The Merits of Legalization
Bitcoin, a so-called virtual peer-to-peer currency, is in the headlines around the globe. Russia is attempting to ban its use. China claims it has banned Bitcoin. Germany has declared that Bitcoin is not legal tender. Even Apple has removed the Bitcoin wallet app Blockchain from its App Store and done so without warning. Blockchain was the last remaining Bitcoin wallet available for iOS devices, causing some disgruntled iPhone users to smash their iPhones on video.
In the U.S., the federal and state governments have not tried to ban Bitcoin. The U.S. Treasury Department has, however, informed parties that issue or exchange Bitcoins that they are subject to federal laws dealing with money laundering, and may need to register as money transmitters and comply with reporting requirements regarding suspicious financial transactions.
Why is there so much fuss about Bitcoin? For two reasons. The first reason is that it is a substitute for official government currency. People are willing to trade in their government-issued money to obtain Bitcoins—hence posing some challenges to the global banking system. The second reason is perhaps the major one: Bitcoins, because they are not widely regulated or under government scrutiny, are used for illegal purposes. In January 2014, U.S. government agents arrested Charlie Shrem, the CEO of Bitcoin exchange BitInstant, charging him with laundering money for customers of the online drug bazaar Silk Road, which has been shut down. Law enforcement is trying to stop the use of Bitcoin on such sites—where people can buy drugs, guns, and illegal pornography.
In this column, I will look at recent attempts to extend legal recognition to Bitcoin, and explain why I believe this is a good thing. While it may be good to clarify that legitimate businesses and consumers may use Bitcoin, it may be too early to determine, what, if any further measures are needed to provide consumers with safety with respect to their Bitcoins. The US Treasury Rules, and other attempts, at the state level, to clarify that Bitcoin may be used for lawful purchases, and that it is subject to regular money-laundering laws, taken together, are likely a prudent approach to the Bitcoin problem at present.
Bitcoin 101—It’s Currency, but Not Government Currency
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