Did a U.S. Court just say Bitcoin was Legal Tender?
Towards the end of 2018 we are beginning to see a trend were most courts and legislators in the U.S. are beginning to take a more favorable approach to cryptocurrency. While we are still a ways off from having a codified standard for regulation and enforcement, different states are becoming more active in the manner in which they handle the buying and trading of cryptocurrency.
Enter the Defendant…
Bradley A. Stetkiw, a Michigan resident, allegedly ran a Bitcoin brokering operation in the Blooming Hills area from July 2015 to October 2017. During that time, it is alleged that he bought, sold, traded, and brokered deals for over one hundred thousand dollars in Bitcoin while failing to comply with money transmitting business registration requirements set forth in Title 31, United States Code, Section 5330. According to the criminal complaint, Stetkiw used the website Local Bitcoins in order to generate business and meet with potential clients.
Special Agent with Homeland Security Investigations (“HSI”), Bryan V. Randall, stated in the complaint that HSI undercover agents conducted 26 different Bitcoin transactions with Stetkiw which totaled $56,700 (USD).
What is Stetkiw Accused of?
Based on Stetkiw’s actions, HSI Agent Randall has stated that Stetkiw has failed to register as a Money Services Business under the Department of Treasury’s Financial Crimes Enforcement Network. In addition, Stetkiw has failed to maintain an effective Anti-Money Laundering program. Because of the resulting actions and the amount of activity Stetkiw has engaged in over the last two years, he is being charged with the crime of operating an unlicensed money transmitting business (18 USC § 1960).
What is Stetkiw’s Defense?
Based on the charges above, Stetkiw’s attorney submitted a motion to supress that attest to the following:
Bitcoin does not constitute “Money or Funds” under § 1960
Stetkiw relied on United States v. Petix, to demonstrate that Bitcoin does not constitute money or funds under § 1960. In this case, which has not been adopted by the court, the magistrate judge stated that Bitcoin is not “money” in the ordinary sense. This case likened Bitcoin to fads such as beanie babies , marbles, and Pokemon trading cards in the sense that their value is derived from what people privately assign to it at any given time.
The court found these actions to be unpersuasive and relied on Federal cases which have established that Bitcoin is money in terms of compliance with 18 USC § 1960 (see United States v. Murgio). The court relied on these cases and stated that Bitcoin is money because it can easily be purchased in exchange for ordinary currency, act as a denominator of value, and can be used to conduct financial transactions.
“Even if I Did It…show leniency”
Stetkiw also argued that even if his actions resulted in a violation of § 1960, the Rule of Lenity, requires dismissal because the law is ambiguous as to the buying and selling of Bitcoin.
The court determined that the rule of lenity is “reserved for those situations in which a reasonable doubt persists about a statute’s intended scope even after resort to the language, structure, legislative history, and motivating policies behind the statute. The court relied on FinCEN guidance and determined there can be no ambiguity here and thus, the rule of lenity does not apply.
So is Bitcoin Legal Tender?
After news spread about the court’s decision, many articles were spread online stating that there had been a ruling where Bitcoin was said to be “legal tender”, however, is that the case?
I believe that many of these articles have confused “money” with “legal tender.” Money can be legal tender, but not all money is legal tender. To explain, legal tender is defined as any currency declared legal by a government. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for repaying debt. Whereas money is any item or verifiable record that is generally accepted as payment of goods and services and repayment of debts, such as taxes. However, just because Bitcoin is not legal tender, does not mean it is not legal to use Bitcoin as a method of payment. This of legal tender as a designation. So until the U.S. passes legislation designating Bitcoin as a legal tender we can expect it to be defined as money, in the traditional sense. (see Japan, for Bitcoin as legal tender)
