feedback on preliminary draft of legal paper

[gareth69]

Reub,

I'm with Moab on this. From my recollection of economcs, the term that people should be using is a *Fiduciary* issue currency. This is a currency that is not backed by any commodity, but is also not necessarily by government decree or fiat.

Moreover, bear this in mind, most government "fiat" currencies are "legal for all debts both public and private". Can you pay your taxes with bitcoin?

Although you could argue that bitcoin is a de-facto currency, you could just as easily describe bitcoin as a "digital good". I could barter my not-valid for tax, not backed by anything digital "good" for another digitial good, service or real world good.

You may also want to look into the BIS (bank of international Settlements). They decide if a currency is "recognised" by the various central banks for trading around the world. Banks are unlikely to accepted it since it is an anethema to them; banks make their money by having the *monopoly on the creation of currency and the interest derived thereof*.

I'm nore sure if you are aware but the nascent stages of bitcoin came out of the anarchist community, here is the original article by Wei Dai.

http://weidai.com/bmoney.txt

Also the author of bitcoin in his paper who acknowledges Wei Dai,

http://www.bitcoin.org/sites/default/files/bitcoin.pdf

posits one of the uses of bitcoin is to *avoid going through a financial institutions*.

In other words bitcoin is *political*. In a sense bitcoin is the "garlic" to the blood sucking vampire banks/big government. As a lawyer though I expect that financially (at least in dollars:P) it would be best for you to side with the banks to see how you can either tax or regulate away innovations such as bitcoin.

Despite being bitcoin being international, the banks exert significant influence on governments world wide though their existing debt based ponzi currency which they loan to governments, and harvest the interest back via tax. Being able to *avoid* the banks currency, and governments unfair taxes by using a third party currency will not be exactly popular with the ruling olligarchies. Note people are not doing anything *illegal* ....YET. By using bitcoin they are simply voting with their feet for a better system.

Maybe after you graduate you can help stop this by drafting laws to make up new crimes; if you represent the "right" interests this could be very profitable. Since you are in the US, I'd not be suprised to see the "Patriot Act" expanded to brand more harmless people as "terrorists".

In a nutshell, bitcoin is not a "toy", some people see it as a *political tool* to reduce the power of overbearing, bloated central governments and the associated banking olligopolies.

[1714999797]

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[1714999797]

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[marcus_of_augustus]

Fiduciary.

That's the word I was looking for, had forgotten that one.

That's what bitcoin is, it is a fiduciary currency. Thanks gareth69, nice post, good clarity of thought on the political situation surrounding bitcoin. Time for ethical lawyers and law-makers to stand up and not get co-opted by the oligarchs. The technologists have supplied bitcoin, look after it.

[spenvo]

Heya Reuben, here's my feedback on the paper as a layperson.
  
First, digging a bit deeper into the consequences of securities regulations being imposed upon the Bitcoin economy would be relevant.  It would also be helpful if you could give the layperson (the BTC "businessman") a starting point for self-education on what you feel is relevant case law.

Now, I just have questions:

Is exchanging basic goods or services for a "security" or "investment contract" a foreign idea to the local grocery store or web service provider?  How often does someone go into a store and get a cup of coffee in return for giving a "security?" (As opposed to a unit legally defined as a "currency.")  

Perhaps I'm just overlooking an obvious (everyday) security-for-goods analogy that exists on a micro-level in the US economy.  For example, as far as I know, buying something on a credit card could be analogous to buying something with a BTC-security--(maybe credit is considered a security or investment contract).

If the US economy is structured around laws that make it easy to get 'x' with USD, what funky repercussions would come out of getting 'x' with BTC?  Would I collect sales tax in the same manner?  Would the big differences come out in the wash on tax day--or--would doing business in accordance with the law be so dragged down by securities regulations that it would prohibit the purchase of a stick of gum with BTC in the first place?  

My point is that as a very simple-minded person, when I hear the words "securities law" -- I immediately think of the SEC -- and I don't typically think of the SEC as an institution worrying about the kinds of everyday transactions that Bitcoin might ultimately end up facilitating.

Sorry if you were expecting an analysis of your legal opinion--that effort fell flat on its face.  But addressing the above points might be useful to the Bitcoin community.

[robm]

Fortunately, MAX_MONEY is a really huge number. According to Wikipedia the US "base" currency supply (notes and coins) is approximately a trillion dollars. A trillion is 1*10^12. The maximum amount of coins is 2.1 quadrillion BTC. So representing all the printed/minted dollars in the world would be no issue.

Total global private financial wealth was recently estimated at about $100 trillion by Credit Suisse. (Another $100 trillion for non-financial wealth, mainly real estate).

Is the max 2.1 quadrillion BTC, or 2.1 quadrillion sub units of BTC? I'd understood there were max 21 million BTC.

One issue is that you could end up with very clunky transaction amounts to handle.

Paying 0.00000000002 BTC is as impossible to read as paying 500000000000 Zimbabwe dollars.

So here's a business idea. Someone would create a new bitcoin backed currency with fewer zeros. Most likely a bank that would charge a fee!

[BitterTea]

It's not really necessary, if those small amounts become the most commonly used, client software could just shift the decimal place over. So 0.00000002 BTC becomes 2 Satoshi.

[robm]

It's not really necessary, if those small amounts become the most commonly used, client software could just shift the decimal place over. So 0.00000002 BTC becomes 2 Satoshi.

ah ha!

or maybe 2 splitcoins

[reubgr]

Spenvo and I had some back and forth on the issues he brought up and settled, I think on the following:

First, it's difficult to understand the claim that bitcoin is a security without knowing what impact that will have. Will it affect miners, software developers, exchangers, speculators, businesses accepting bitcoins, and consumers using bitcoin to make purchases all in the same ways or in different ways? These are important questions that I will try to get to in my next draft, although I can't promise anything.

Second, the tax implications of bitcoin are important, and I hope to get to them.

(Spenvo - I hope I haven't misconstrued our conversations).

@moa and @gareth69: the fiduciary suggestion is an interesting one that I will consider in more detail although the word "fiduciary" carries a lot of legal baggage with it that I think will probably make it inappropriate. For example, a "fiduciary" usually has a number of fiduciary responsibilities to the beneficiaries of the thing in question, and must act solely in their best interest -- and can be sued for failing to do that in court. Do you guys believe that, e.g., Gavin should be treated like the director of a corporation (who, in general, have fiduciary obligations to shareholders), sueable whenever he does something that some bitcoin holders believe is not in the best interests of bitcoin holders? Anyway, I'm not dismissing this idea out of hand, but I just want to point out that it is fairly complex and would have many consequences, some perhaps unintended.

[reubgr]

I would also like to thank the several individuals who acknowledged my paper by donating a total of about 7 BTC - enough for dinner and a drink under current exchange rates!

[mcdett]

I would also like to thank the several individuals who acknowledged my paper by donating a total of about 7 BTC - enough for dinner and a drink under current exchange rates!

Give me a tip jar and I'll put something in it.

Check out http://bitcointalk.org/index.php?topic=7373.0 and give some feedback.  Are you graduating this year?  If so maybe when you have your juris doctorate you could look me up, and maybe we could round up some btc for a solid legal briefing.  Maybe FTC laws and monetary policy is an aspect of law that you have an interest in now.  One thing for sure is that if this goes someplace you have a big leg up in a marketability standpoint to the financial law firms of nyc.

Good job!

[marcus_of_augustus]

Yes, use your knowldege wisely ... don't go over to the dark side.

[Steve]

Reuben,

Did you consider the first amendement implications should the government try to restrict bitcoin?  When you spend bitcoins, you are quite literally doing nothing more than announcing your intention to do such to the world.  It is really quite a beutiful thing when you think about it.

- Stephen

[unfinishe]

It's not really necessary, if those small amounts become the most commonly used, client software could just shift the decimal place over. So 0.00000002 BTC becomes 2 Satoshi.

As a physics nerd, I'd be partial to calling them nano-Bitcoins. So, 0.00000002 BTC would be 20 nBTC. 

[ribuck]

As a physics nerd, I'd be partial to calling them nano-Bitcoins.

I think the term nanobitcoins is a good one, but it should not be used unless/until the base unit of Bitcoin is made smaller. Otherwise, there will be a regular new FAQ: "I want to send someone a nanobitcoin but the system won't let me".

[stillfire]

I think the term nanobitcoins is a good one, but it should not be used unless/until the base unit of Bitcoin is made smaller. Otherwise, there will be a regular new FAQ: "I want to send someone a nanobitcoin but the system won't let me".

Still, even today it's hard to send 0.001 coins ("the system won't let me", sort of) and it's okay. So perhaps an inability to send a nanobitcoin will just as easily be accepted.