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Author Topic: What is the legal definition of Bitcoin?  (Read 4882 times)
Elwar
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October 01, 2014, 09:02:56 AM
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Let us assume that a country wants to make Bitcoin it's legal currency. Or it wants to pass a law specifically about Bitcoin.

How could it legally be defined?

Could they just say "Our country recognizes the following currencies to be legal forms of exchange <current currency>, bitcoin, ..."

With its decentralized nature and evolving blockchain, would there not be a requirement to have some sort of central authority which would continue to update the definition of Bitcoin? What if there is a branch off due to a code change, something is added and some miners accept it and some do not. What source of the code would be considered the "official" source? etc..


So far countries have been able to just group "cryptocurrencies or digital currencies" into one group which covers many things. But at some point it will probably be necessary to legally define Bitcoin. Not just as a country's currency but via contract disputes, payment agreements, property laws, etc...

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October 01, 2014, 09:12:01 AM
 #2

Laws are meant to control behavior, not math. There are already laws that cover how Bitcoin is used, they just have to figure out which ones they are. Their choice of regulation will determine their involvement in the new economy.

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October 01, 2014, 10:08:26 AM
 #3

It depends on the country but they've already given it a definition as shares or assets but I would define it as 'Money' it's not really a currency yet because there hasn't been enough adoption but it is being used as one, the problem is with Bitcoin that there are too many conflicts of interests to have a reliable law definition from an actual government, so I just ignore them. At the learning rate of our current bureaucratic and democratic system it will probably be several years before we finally see them actually make any kind of definite verdict on Bitcoin, but by then I suspect their organisations would have all collapsed anyway.
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October 17, 2014, 05:48:21 PM
 #4

Let us assume that a country wants to make Bitcoin it's legal currency. Or it wants to pass a law specifically about Bitcoin.

How could it legally be defined?

Could they just say "Our country recognizes the following currencies to be legal forms of exchange <current currency>, bitcoin, ..."

With its decentralized nature and evolving blockchain, would there not be a requirement to have some sort of central authority which would continue to update the definition of Bitcoin? What if there is a branch off due to a code change, something is added and some miners accept it and some do not. What source of the code would be considered the "official" source? etc..


So far countries have been able to just group "cryptocurrencies or digital currencies" into one group which covers many things. But at some point it will probably be necessary to legally define Bitcoin. Not just as a country's currency but via contract disputes, payment agreements, property laws, etc...

There are many legal definitions that may be used.  Here are a few of the more common, there are many others.  I may do a paper on this at some point.
Legal Tender
Legal Tender laws tend to require that they be accepted in payment of debt.  This creates a burden on the entire population governed by such law.  (I do not favor ANY legal tender law, as they are non-voluntary and tend to cause at least as much problems as they address.)  Payment by agreement and negotiation ought be sufficient.  Those that take recourse in courts of law may be subjected to that court'w ruling with or without a Legal Tender law.
Lawful Money
In the USA, the state of California has adopted Bitcoin as Lawful Money.  This means that it can be used as money.  It does not require someone to accept it, but there is no restriction on doing so.  California needed to do this because of some of their other weird laws.
Asset
Like any real asset, subject to capital gains with each transaction.
Contraband
Ecuador appears to be moving this route, where any possession of bitcoin may be cause for seizure of it.

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October 17, 2014, 06:27:40 PM
 #5

My idea...

http://coinlexit.wordpress.com/2014/08/28/legal-definition-of-bitcoin-a-primer/


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October 17, 2014, 06:58:56 PM
 #6

I am not asking what should we legally define Bitcoin as (money, commodity, etc).

I am asking...what is Bitcoin? Legally speaking.

The definition usually has to do with saying it is a decentralized p2p currency.

Any definition of Bitcoin would need to include the Blockchain. But the Blockchain is constantly changing. The only way to define how it can change is through the code. But the code can change. It is open source and changeable. The only way to define how that can change is by defining who can change it and how.

If I were to put in my will "I leave my son one bitcoin" how can that legally be executed? If I advertise my house for 1000 bitcoins, if someone gives me 1000 bitcoins from when it forked 2 years ago, how would that legally be settled?

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October 17, 2014, 07:07:37 PM
 #7

The only way to define how it can change is through the code. But the code can change. It is open source and changeable. The only way to define how that can change is by defining who can change it and how.

Laws have to evolve - to reflect the change.

But in terms of initial definition/a starting point, how about Satoshi's whitepaper ?
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October 18, 2014, 12:09:24 AM
 #8

I am not asking what should we legally define Bitcoin as (money, commodity, etc).

I am asking...what is Bitcoin? Legally speaking.

The definition usually has to do with saying it is a decentralized p2p currency.

Any definition of Bitcoin would need to include the Blockchain. But the Blockchain is constantly changing. The only way to define how it can change is through the code. But the code can change. It is open source and changeable. The only way to define how that can change is by defining who can change it and how.

If I were to put in my will "I leave my son one bitcoin" how can that legally be executed? If I advertise my house for 1000 bitcoins, if someone gives me 1000 bitcoins from when it forked 2 years ago, how would that legally be settled?

Law is a matter of geography (jurisdiction).
The answer will depend entirely on where you are standing at the time.

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October 22, 2014, 01:43:15 PM
 #9

There is still confusion in Bitcoin's classification as a commodity, an asset and as currency. I agree.
Elwar
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October 22, 2014, 02:16:24 PM
 #10

But in terms of initial definition/a starting point, how about Satoshi's whitepaper ?

The whitepaper could certainly be used as a starting point with a definition of the blockchain as referenced by the blockchain which started on X date with initial block Y.

For any forks the legal framework could be set up to allow for an update saying "On W date, the official Bitcoin blockchain took the path of block Z".

This would allow the blockchain to be legally defined, while the governing body would have the flexibility to adapt to changes.

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October 22, 2014, 02:21:57 PM
 #11

In the future I would hope that the *only laws* that matter are those governed by the *laws of mathematics*.

All other laws are really not something very useful (just look at the "great job" that governments all over the whole world are doing with monetary laws).

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October 23, 2014, 01:16:13 AM
 #12

As to Elwar's leaving his/her son one Bitcoin, perhaps it could be as simple as bequeathing the digital asset that is the wallet software file that stores Elwar's private key, sufficiently specified, to ensure access after Elwar has lived long and prospered?

A related question in the estate & trust arena is the scope of a fiduciary's control over "digital assets" under the Uniform Fiduciary Access to Digital Assets Act (finalized in July; just adopted by Delaware effective 1/1/15). 

Do you want a conservator, trustee, or agent with a power of attorney to have access to your "digital assets" (defined as "A record that is electronic. The term does not include an underlying asset or liability unless the asset or liability is itself a record that is electronic.")Huh

Although Bitcoin was specifically identified as a digital asset in an earlier draft, the final version seems to include a catchall category of "any other digital assets in which the decedent at death has a right or interest."

So, if it matters, consider specifying your own "law" in advance  Wink
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October 23, 2014, 07:38:31 AM
 #13

If the Isle of Man, or some other small country (Anguilla only has $18 million for their M1), wanted to officially recognize bitcoin as their national currency*, they would need to define it legally. You can't just have someone with BBQcoin coming in trying to pay their taxes with it. They would likely need a way to legally define it.

Most likely they would have their central "Bitcoin Finance Agency" hold the "official" blockchain that they go by with the ability to make updates as needed. From there they can have rules in place for having the ability to fork with the right authority from multiple people's votes or authorization. The legal definition would include wording from the white paper and then references to the beginning block and any amendments for any forks.

*(this is not a thread for debating whether or not a country should adopt Bitcoin as the national currency)

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October 23, 2014, 10:03:50 AM
 #14

I don't think a country would make BTC its own currency.
But they might recognize it as a foreign currency or even recognize every Cryptocurrency as just another foreign currency.
They wouldn't need to define how it works in a law, since they also don't define how another country is printing its money.
I don't think, there are any laws, that define how a technology has(!) to work. They define the bureaucracy around a technology, but not the technology itself.

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October 23, 2014, 10:18:18 AM
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I don't think a country would make BTC its own currency.
But they might recognize it as a foreign currency or even recognize every Cryptocurrency as just another foreign currency.
They wouldn't need to define how it works in a law, since they also don't define how another country is printing its money.

Yes, but the foreign country defines how it works in their own law, so it is legally defined somewhere.

(Again, not looking to debate if a country would make BTC its own currency, purely an example)

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October 23, 2014, 10:38:40 AM
 #16

I don't think a country would make BTC its own currency.
But they might recognize it as a foreign currency or even recognize every Cryptocurrency as just another foreign currency.
They wouldn't need to define how it works in a law, since they also don't define how another country is printing its money.

Yes, but the foreign country defines how it works in their own law, so it is legally defined somewhere.

(Again, not looking to debate if a country would make BTC its own currency, purely an example)
I don't know, if countries really have a list of "approved" foreign currencies, I guess they don't.
But assume they have: Do they kick out a currency, if a foreign country chances their laws?
So, if we speak of the code of a cryptocurrency as the law of that currency, a country wouldn't care if that code changes. (wasn't that one of your initial questions?)
They would have to define things like, what exchange rate is used, how you have to tax gains(income), what records you have to keep and have to give to authorities.
I don't see, how they would have to legally define anything regarding the code(and its changes) and I don't know of any familiar examples in already existing laws.

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October 23, 2014, 05:59:47 PM
 #17

I don't think a country would make BTC its own currency.
But they might recognize it as a foreign currency or even recognize every Cryptocurrency as just another foreign currency.
They wouldn't need to define how it works in a law, since they also don't define how another country is printing its money.

Yes, but the foreign country defines how it works in their own law, so it is legally defined somewhere.

(Again, not looking to debate if a country would make BTC its own currency, purely an example)

Law is a matter of geography, and who has the uncontested right of enforcement in that geography.
Your question makes very little sense with that in mind.

There are many hypothetical definitions of bitcoin and there are many existing ones in different bodies of law.  These are not consistent even in overlapping jurisdictions (city county state and federal in USA).  They are also not consistent between differing branches of the same government.  

You should think of "legal definitions" as local variables, if that helps.

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October 23, 2014, 06:06:31 PM
 #18

I don't think a country would make BTC its own currency.
But they might recognize it as a foreign currency or even recognize every Cryptocurrency as just another foreign currency.
They wouldn't need to define how it works in a law, since they also don't define how another country is printing its money.

Yes, but the foreign country defines how it works in their own law, so it is legally defined somewhere.

(Again, not looking to debate if a country would make BTC its own currency, purely an example)
I don't know, if countries really have a list of "approved" foreign currencies, I guess they don't.
But assume they have: Do they kick out a currency, if a foreign country chances their laws?
So, if we speak of the code of a cryptocurrency as the law of that currency, a country wouldn't care if that code changes. (wasn't that one of your initial questions?)
They would have to define things like, what exchange rate is used, how you have to tax gains(income), what records you have to keep and have to give to authorities.
I don't see, how they would have to legally define anything regarding the code(and its changes) and I don't know of any familiar examples in already existing laws.

Countries do have such lists.  They serve different purposes and are approved by different ways by different groups. 
Again it is a local variable.

Some #import the BIS lists for purposes of Foreign Exchange.
http://en.wikipedia.org/wiki/Bank_for_International_Settlements

In the USA, I can take Rubles, Euros and Yen to my bank, hand them to a teller, and they will credit my account for Dollars.
I can also make any exchange with any of these with a willing recipient.

In California, Bitcoin is considered "Lawful Money" by the state, but an Asset, by the Fed.  So these are taxed differently, even though it is just one tax form that goes to state and fed.  It gets complicated to follow all the rules.

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October 23, 2014, 06:10:02 PM
 #19

Let us assume that a country wants to make Bitcoin it's legal currency. Or it wants to pass a law specifically about Bitcoin.

How could it legally be defined?

Could they just say "Our country recognizes the following currencies to be legal forms of exchange <current currency>, bitcoin, ..."

With its decentralized nature and evolving blockchain, would there not be a requirement to have some sort of central authority which would continue to update the definition of Bitcoin? What if there is a branch off due to a code change, something is added and some miners accept it and some do not. What source of the code would be considered the "official" source? etc..


So far countries have been able to just group "cryptocurrencies or digital currencies" into one group which covers many things. But at some point it will probably be necessary to legally define Bitcoin. Not just as a country's currency but via contract disputes, payment agreements, property laws, etc...

Simply practicing salutary neglect would be the easiest and best course.

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October 24, 2014, 02:52:30 PM
 #20

 Tongue I think this one the defination  of bitcoin is
"a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank."

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