Although I am not claiming that the information contained here within would be applied to Bitcoin, it contains definitions and scopes which could, in at least some aspects, be applied to Bitcoins. The information also shows that Bitcoins is not operating in as much “uncharted waters” as at least I was under the impression. Of course Mtgox is not operating from the U.S. or the E.U. but other exchanges do. Other laws may apply in Japan, as the laws in the U.S. and E.U. differentiate very substantially regarding their applicability to Bitcoins.
A; A code generated created through computational power.
B; A code traded against real dollars; it could thus be described as a form of electronic currency.
C; A code traded for services/goods; it thus performs functions of an electronic currency.
When lawmakers and/or the judicial branch enact laws/pass judgments they consider, amongst other things, the functions of the subject. It is thus likely that Bitcoins will be viewed as something capable of possessing value in an electronic form and something capable of being exchanged for services and goods.
In U.S. law the UNIFORM MONEY SERVICES ACT pertains to money transmissions, and although it puts in place statutory regulations against money laundering during the course of transmissions, money exchanges and check cashing, it contains some definitions that might be applied towards Bitcoins.
Electronic money is usually redeemable in cash, as with Dwolla for example. However this act includes a form of electronic money that is not redeemable in cash:
Stored value cards, token or notational systems as well as account-based systems may all involve exchange of value that is not redeemable in money. The term “scrip” has been used to refer to value that may be exchanged over the Internet but which may not be redeemable for money. Scrip is more analogous to coupons or bonus points that can be exchanged by a consumer for goods or services but have no cash redemption value. Scrip can be used by merchants to sell access to value-added web pages on a per-access basis or a subscription basis. They can also use scrip to provide promotional incentives to users. Scrip can represent any form of currency, points in a frequent user program, access rights, etc.”
The definition of “money” has been expanded to reflect the fact that certain payment service providers employ a form of value that is not directly redeemable in money, but nevertheless (1) serves as a medium of exchange and (2) places the customer at risk of the provider’s insolvency while the medium is outstanding
. The same safety and soundness issues pertinent to redeemable forms of value apply to these irredeemable forms of value. Consequently, a new definition of “monetary value” has been included in this Act.”
Money transmission is defined as following:
“Money transmission subsumes several activities or functions: the transmission of funds as well as the sale or issuance of payment instruments and the sale or issuance of stored value. Stored value, as defined in this Act, is treated similarly to payment instruments, although some kinds of stored value are irredeemable in money. The grouping of funds transmission and the sale or issuance of payment instruments and stored value is consistent with existing state practice.”
Even the concept of mining could, hypothetically speaking, be addressed within the scope of the act:
Stored-value products are a recent innovation in payment systems technology. Stored-value products possess certain basic characteristics. According to the Federal Reserve, stored-value products share three attributes: “(1) [a] card or other device electronically stores or provides access to a specified amount of funds selected by the holder of the device and available for making payments to others; (2) the device is the only means of routine access to the funds; and (3) the issuer does not record the funds associated with the device as an account in the name of (or credited to) the holder.”
However, to comply with UNIFORM MONEY SERVICES ACT one must be licensed to transmit and issue “money”; Dwolla holds a license in Iowa, for example.
In the E.U. the definition of electronic money does not contain provisions where the electronic money is not redeemable by the issuer. The relevant E.U. Directive (Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending) states:
“The definition of electronic money should cover electronic money whether it is held on a payment device in the electronic money holder’s possession or stored remotely at a server and managed by the electronic money holder through a specific account for electronic money. That definition should be wide enough to avoid hampering technological innovation and to cover not only all the electronic money products available today in the market but also those products which could be developed in the future
“Issuance and redeemability
1. Member States shall ensure that electronic money issuers issue electronic money at par value on the receipt of funds.
2. Member States shall ensure that, upon request by the electronic money holder, electronic money issuers redeem, at any moment and at par value, the monetary value of the electronic money held.”
Thus, despite attempting not to hamper technological innovation, by setting the requirement of redemption of electronic money, at least Bitcoins is not considered electronic money in the E.U.
Regardless of whether or not above laws are applicable to Bitcoins or not, I am absolutely positive that Bitcoins will be deemed as an electronic currency, and if Bitcoins are successful and become more widely accepted and utilized as a payment in trade, the authorities in respective countries will either apply existing laws, or enact new laws.
UNIFORM MONEY SERVICES ACT http://www.law.upenn.edu/bll/archives/ulc/moneyserv/umsa2004final.htm
Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amendinghttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32009L0110:EN:NOT