A court ruling by a Texas judge has acknowledged Bitcoin as a form of currency. The court ruling gives the Securities and Exchange Commission (SEC) the green light to sue con artist Trendon Shavers.
A huge pyramid
According to official reports, Shavers established and operated Bitcoin Savings and Trust (BTCST). BTCST was formerly referred to as the First Pirate Savings & Trust. Trendon lured people into investing in the trust by promising a 1 percent commission on a daily basis.
The SEC revealed that Shavers used the monikers “Pirate” and “pirateat40”. He used those monikers to solicit Bitcoin from investors with offers to trade crypto online for their benefit. At the prime of his scheme, Shavers succeeded to amass a reported 700,000 Bitcoin – the equivalent of $64 million according to current rates.
It later turned out that BTCST was nothing but a pyramid scheme. Trendon used new investor funds to pay the purported interest payments to earlier investors. Investigators alleged that the Ponzi scheme artist converted investors crypto to U.S. dollars for his personal use.
In the end, a host of investors lost their funds. As per estimates, about $25 million worth of Bitcoin was lost to the scheme.
The SEC maintained that Shavers had obtained the funds through illegal means. They also claimed that the trust’s investments fall in the category of securities that are explicated by the Federal Securities Laws.
In his defense, Shavers asserted that BTCST investments did not fall in the classification of securities. Shavers claimed that Bitcoin is not legal tender in the United States. He also argued that Bitcoin exists beyond government regulation as far as financial assets are concerned.
However, the court has challenged Shavers’ arguments by ruling that Bitcoin qualifies as a form of money. Therefore, solicitations that were done in BTCST’s favor occurred in the context of people giving actual investments of money.
Implications of the Ruling
This ruling was made in the middle of wild speculations about the place of cryptocurrencies. It is very uncertain where crypto stands in the context of financial laws and regulations.
Upon conducting an analysis of the Shavers’ case, the general counsel at Payward Inc. Constance Choi told Coindesk that the latest ruling signals a very important event. State courts and regulatory bodies have seemingly started to acknowledge the existence of crypto. States are finally starting to make stances on where Bitcoin stands in the financial world.
The fact that one court in Texas has chosen to classify Bitcoin as a form of money is interesting. This ruling labels crypto as a “currency”. This enforces guidelines provided by the Financial Crimes Enforcement Network (FinCEN) on crypto.
FinCEN provides a clear definition of “real currency”. Crypto is now tangible money (in coin or paper form) that is considered as legal tender that circulates in an economy as a medium of exchange.
The above definition is followed by the contrast of cryptocurrency. FinCEN asserts that it does not bear real attributes of real money and that it lacks legal tender status in the U.S. or any other country.
Crypto user cannot be termed as a money services business (MSB) under the agency’s regulations. Because of this users are not subject to MSB registration, reporting and auditing regulations.
Choi stated that the latest ruling does not conclude the age-old argument concerning crypto regulation. A higher court may choose to overturn the decision in case the Texas court’s power of enforcement are limited.
Nonetheless, the ruling reflects the definition of bitcoin as seen by the court and answers many questions for now. A clear definition of crypto is not yet provided by the government but this is a step towards the right direction. Bitcoin is not considered a legal currency, at-least for now.