Bitcoin and The First Amendment

[ALPHA.]

In the United States, is Bitcoin constitutionally protected from the federal government by The First Amendment? Couldn't the transfer of information through the blockchain be considered speech?

Does the federal government even have the constitutional authority to regulate something such as Bitcoin?

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[SaintFlow]

While I welcome that we can proclaim its protection under First Amendment wouldn't we need a preceedens?

Knowing what you know about your federal government:
Do you think that not having constitutional authority really stop "them" from
making up a new "law" that allows them to do what they want, when they
want?

I am not American - I remember vaguely there was such a thing as the initiative process which allowed the people
to make their own laws. I think it got abolished.....

[Explodicle]

The only nationwide initiative in American history that has actually passed was the constitution when it was originally ratified. There's an ongoing effort to expand this system. http://ni4d.us/

But yeah, I agree with SaintFlow. They declared copyright infringement to be non-free speech already, and arbitrary illegal content can be inserted into the block chain by mischievous miners. The Man will find a way.

[adamstgBit]

In the United States, is Bitcoin constitutionally protected from the federal government by The First Amendment? Couldn't the transfer of information through the blockchain be considered speech?

Does the federal government even have the constitutional authority to regulate something such as Bitcoin?

All they have to say is "national security" and they can do anything

[Gavin Andresen]

If I recall correctly, the courts have ruled that "commercial speech" is not as protected-- so laws that restrict (for example) cigarette ads on television are OK.

Bitcoin transactions would, I think, be very likely to be classified by the courts as non-protected speech, if they were classified as 'speech' at all.

[cbeast]

In Buckley v. Valeo SCOTUS ruled that spending money is speech. I'm just not sure they would consider Bitcoin as money.

[Matthew N. Wright]

In the United States, is Bitcoin constitutionally protected from the federal government by The First Amendment? Couldn't the transfer of information through the blockchain be considered speech?

Does the federal government even have the constitutional authority to regulate something such as Bitcoin?

Hey. Not a bad argument. So I guess child pornography is free speech too. Go get 'em, tiger!

[repentance]

In Buckley v. Valeo SCOTUS ruled that spending money is speech. I'm just not sure they would consider Bitcoin as money.

Buckley v Valeo was specifically about whether laws regulating campaign contributions abridged the right of political free speech (which is most definitely protected in the US).  The decision in fact did maintain some limits on campaign contributions and has been criticised by free speech advocates on that basis.

You'd have to argue that regulating Bitcoin restricts political free speech in order for Buckley to be considered a relevant precedent.  Case law has to be on point to even be considered in adjudication.  There may well be case law in the US which supports the viewpoint that spending money is always constitutionally protected free speech, but I doubt it - if that were the case then the various laws which regulate how money can be spent/transmitted/acquired/etc would have been struck down long ago.

[coretechs]

Any type of ruling against bitcoin would certainly be very problematic it terms of setting a precedent.  If you look at bitcoin as what it actually is - a shared transaction log - and the possession of "coins" as nothing more than a key or "password" that gives you access to data contained in that log, it's easy to see how slippery the slope would be.  There is no owner or backer of this data other than the network itself.  IMHO any legislation or ruling that would attempt to make bitcoin illegal would seemingly amount to a ruling that attempts to make one's personal acceptance of bitcoin as a token of value illegal.  That's pretty intangible, and if it happens, the thought police will have arrived 27 years late.

[repentance]

Any type of ruling against bitcoin would certainly be very problematic it terms of setting a precedent.  If you look at bitcoin as what it actually is - a shared transaction log - and the possession of "coins" as nothing more than a key or "password" that gives you access to data contained in that log, it's easy to see how slippery the slope would be.  There is no owner or backer of this data other than the network itself.  IMHO any legislation or ruling that would attempt to make bitcoin illegal would seemingly amount to a ruling that attempts to make one's personal acceptance of bitcoin as a token of value illegal.  That's pretty intangible, and if it happens, the thought police will have arrived 27 years late.

I doubt there'll be any serious attempt to make Bitcoin illegal per se any time soon.  What is much more likely is that various laws which already regulate money itself and services related to money will be expanded to encompass Bitcoin - ie, to the extent that it functions like money, a commodity, or some other financial instrument it will be regulated as such. 

[Matthew N. Wright]

Any type of ruling against bitcoin would certainly be very problematic it terms of setting a precedent.  If you look at bitcoin as what it actually is - a shared transaction log - and the possession of "coins" as nothing more than a key or "password" that gives you access to data contained in that log, it's easy to see how slippery the slope would be.  There is no owner or backer of this data other than the network itself.  IMHO any legislation or ruling that would attempt to make bitcoin illegal would seemingly amount to a ruling that attempts to make one's personal acceptance of bitcoin as a token of value illegal.  That's pretty intangible, and if it happens, the thought police will have arrived 27 years late.

I doubt there'll be any serious attempt to make Bitcoin illegal per se any time soon.  What is much more likely is that various laws which already regulate money itself and services related to money will be expanded to encompass Bitcoin - ie, to the extent that it functions like money, a commodity, or some other financial instrument it will be regulated as such. 

Pretty much already there for anyone who uses exchanges.

I forge my bitcoins out of rocks of moldor like a man.

[repentance]

Pretty much already there for anyone who uses exchanges.

I forge my bitcoins out of rocks of moldor like a man.

At the moment the exchanges have alternate markets so there are workarounds if regulatory issues make it difficult for them to operate in a particular jurisdiction.  The cost of regulatory compliance is going to make some markets economically non-viable for the exchanges. It's doubtful that any of the exchanges have the financial reserves to become licensed in every location in which they currently operate.  When it comes to seeking legitimisation, who knows whether they'll all seek to become licensed in the one market or whether they'll each seek licensing in totally different markets?

I also doubt that any of them have the resources to fight protracted legal battles in courts of ultimate jurisdiction - that may well prove more expensive than the cost of obtaining appropriate financial services licences.  From a purely commercial viewpoint, economic reality is likely to trump political idealism.

[Matthew N. Wright]

Pretty much already there for anyone who uses exchanges.

I forge my bitcoins out of rocks of moldor like a man.

At the moment the exchanges have alternate markets so there are workarounds if regulatory issues make it difficult for them to operate in a particular jurisdiction.  The cost of regulatory compliance is going to make some markets economically non-viable for the exchanges. It's doubtful that any of the exchanges have the financial reserves to become licensed in every location in which they currently operate.  When it comes to seeking legitimisation, who knows whether they'll all seek to become licensed in the one market or whether they'll each seek licensing in totally different markets?

I also doubt that any of them have the resources to fight protracted legal battles in courts of ultimate jurisdiction - that may well prove more expensive than the cost of obtaining appropriate financial services licences.  From a purely commercial viewpoint, economic reality is likely to trump political idealism.

I think you're overlooking companies like mine or even larger ones like OKPAY that work in digital currencies. Since they all fall under the same laws, you would fight for all of them. Bitcoin would then need to be singled out as being illegal, which although possible with current AML legislations, keeping records as an exchange would once again equalize and legalize it.

Seems like the only future that exists in a world where Wow gold and facebook credits are legal and bitcoin is used is if bitcoin exchanges are required to register as such.

[ALPHA.]

Let's say I base my exchange in the West Indies.

The need for licensing avoided?

[Matthew N. Wright]

Let's say I base my exchange in the West Indies.

The need for licensing avoided?

That's like saying "so I base my meth lab in west indies. Is it legal now?"

Where you are is indeed a big issue, but the bottom line is where the product goes and who is accessing it.

[ALPHA.]

Let's say I base my exchange in the West Indies.

The need for licensing avoided?

That's like saying "so I base my meth lab in west indies. Is it legal now?"

Where you are is indeed a big issue, but the bottom line is where the product goes and who is accessing it.

Who says you have to track who is using your exchange? Is it any skin off your bones if people are using your service in places where it is illegal?

[repentance]

Let's say I base my exchange in the West Indies.

The need for licensing avoided?

You could almost certainly operate legally from somewhere like Nevis but that's not the end of the story.  The whole online poker shit-storm involved companies which were fully licensed to offer gambling services in the jurisdictions from which they operated but that didn't stop the US Department of Justice from being able to use other laws (laws related to the purposes for which money can be accepted from those located in the US) to effectively prohibit them offering services to people in the US.  Also, operating a business offshore doesn't mean that you'll get a free pass in respect of any US laws regarding income earned from that business.

If people need to interact with financial services located in the US in any way in order to use your exchange, then you really can't guarantee that US  law won't be used to disrupt that process in some way.  In the case of the online poker debacle, the DoJ went after the payment processors through whom funds were being routed to and from the gambling service providers.

There's also the issue of how you're going to be able to access and spend your profits if they're sitting in some Panamanian bank account.  You need to be able to repatriate those funds to where you want to spend them and that raises its own set of problems.

Who says you have to track who is using your exchange? Is it any skin off your bones if people are using your service in places where it is illegal?

You have to track them in some way in order to manage their trading accounts and pay their withdrawals.

Places like Nevis are a double-edged sword because they do offer some protection from the reach of US authorities but the degree of shielding they offer to businesses incorporated there (there's no legal requirement that the true owner of a company incorporated there is disclosed - they literally have corporation mills there which exist to set up companies whose owners can't be identified and traced) means that a lot of people won't do business with companies located there.  The Bitcoin community is probably especially sensitive about that because of the whole Mybitcoin fiasco.

From a purely pragmatic viewpoint, the US isn't in the business of using precedents established under other legal systems, which means that it could very well take a different legal approach to Bitcoin and its related services than other nations.  Of course there's no guarantee that a "different" approach would be a more lenient one.

[pointbiz]

The source code should be free speech, there was a ruling on that...

[RodeoX]

I have no legal expertise, but it sure seems to me that there are a lot of ways to argue for the legality of bitcoin.  Even if it were to be outlawed, what would that do? Downloading music is illegal, look how swimmingly that has worked out.

[repentance]

I have no legal expertise, but it sure seems to me that there are a lot of ways to argue for the legality of bitcoin.  Even if it were to be outlawed, what would that do? Downloading music is illegal, look how swimmingly that has worked out.

Nobody's actually argued that Bitcoin per se is illegal.  The grey areas it falls into at the moment are the ways in which it's used - buying/selling drugs or gambling online with Bitcoin isn't going to make those activities more legal - and the services which have grown up around it (the exchanges and payment processors currently being unlicensed and unregulated).

In the short-term, there probably don't need to be any special Bitcoin specific laws to address those issues.  In a lot of jurisdictions, supply and possession of certain drugs are illegal whether or not money changes hands so whether Bitcoin is "money" would only be relevant in terms of trying to seize "proceeds of crime" from dealers (and a lot of places don't require that proceeds of crime be only money, either - pretty much any "asset" can be seized). 

Likewise, trying to avoid the laws regarding accepting funds from those in the US for online gambling is an offence in itself according to the US DoJ - that's what the whole shit-storm targeting payment processors and seizing the domains of offshore gambling operators earlier this year was about.  Once again, it's not necessary to define Bitcoin as "money" in order to crack down on it being used for online gambling - although it may be considerably more difficult for the DoJ to force operators to return player balances if there's no record of the true owners of those balances.

The continuing e-gold drama suggests that even if Bitcoin became a preferred method of money laundering, it's more likely that the exchanges would be restrained from allowing users to trade and that the government would seek forfeiture of the Bitcoins and funds they hold on behalf of users than that there'd be a need to specifically outlaw Bitcoin.

Maybe, just maybe, if Bitcoin became a conduit for financing terrorism the government might go after Bitcoin itself.  Once again, though, financing terrorism is illegal in and of itself in most Western countries.  The Bitcoin economy might also be too small at the moment for it to be useful  for moving large amounts of money undetected - significant deviations from established patterns would probably be noticed fairly quickly if counter-terrorism analysts had reason to suspect that Bitcoins were making their way to groups high on the government's watch-list.