Bitcoin is often touted as the first cryptocurrency – most enthusiasts can tell you what this means, but what does it actually mean in a legal sense? The question has popped to mind after a judge in the United States has ruled for a bankruptcy case in California that bitcoins are in fact a kind of intangible property.
The case revolves around the bankruptcy of a bitcoin mining company called HashFast that collapsed in 2014. The bankruptcy trustee is suing former promoter Mark Lowe for the return of 3,000 bitcoins which were alleged to have been fraudulently transferred to him prior to the bankruptcy.
The significance of the ruling means that the judge sees bitcoins as a commodity and not a currency. This basically means that 3,000 bitcoins, is always 3,000 bitcoins, and not the actual currency value at the time they were transferred.
If the ruling had deemed bitcoin a currency, then the equivalent dollar value of the 3,000 bitcoins at the time Lowe received them would have to be returned, which was approximately $360,000 in 2014. This is a lot less than the $1.3 million that the 3,000 bitcoins are worth today, which is what Lowe will have to repay if the ruling is ordered.
The real issue here of course, is not whether bitcoin is a currency or commodity, but rather if bitcoin is US currency or not. Clearly a matter for the US courts to decide. The currency vs. commodity debate is another matter, and it is a debate that could drag on for years regardless of the outcome of this particular case.
So, fun times for Lowe, but it does highlight just one of the issues facing jurisdictions all over the world regarding our beloved cryptocurrency. Only time will tell, but this ruling suggests, in the United States at least, that bitcoin could end up with multiples definitions under US law.