This wasn't particularly surprising, either in putting it out there or shooting it down. Every trial starts with a whole bunch of motions which the judge evaluates. If your lawyer isn't throwing up every possible angle they aren't earning their pay.
-Bad: Do nothing
-Better: Object to everything and you might win the lottery
-Best: Object reasonably that they may be taken seriously
-Beyond amazing: Admit everything in such a sympathetic way to minimize guilt*
*Gerry Spence
This was always an idiotic premise. The Federal money laundering statute refers to 'monetary instruments' which it then defines:
(i) coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks, and money orders,
or
(ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery;
If you could convince a judge that Bitcoin wasn't currency, it would still qualify as an investment security / negotiable instrument by just about any definition.
Bitcoin is a "negotiable instrument[]...in such form that title thereto passes upon delivery."
A negotiable instrument can be but is not limited to debt instruments; the counterparty is simply whoever you transact with. Private municipal currency, for example, is not currency under the statute but is a monetary instrument because it is a negotiable instrument.
It doesn't matter. If I give you a piece of paper with a picture of a spider on it in exchange for something, as far as the court is concerned the piece of paper with the picture of the spider on it is money. (The underlying reason is that barter transactions are as taxable as cash transactions. Doesn't matter what you're bartering for what.)
I agree that it's money. I agree that Silk Road facilitated money laundering. The plain text of the law in question doesn't cover Bitcoin, though. That doesn't mean the ruling was wrong.
The other thing to keep in mind, especially for programmer types, is that the law is not a computer program. There is certainly argument around wording in law, no doubt, but the courts do try to consider the intent when making a ruling. ("Well, this is currency, but not the currency of Another Country, so... case dismissed." That might happen, but it also might not, because it's pretty clear that the author of the law wasn't imagining cryptocurrency when drafting it.)
I'm pretty confused over that even an idiot would try to argue this case. It's something that has "coins" in it's name, and is touted as "the internet money of the future" and that is being used in substitute for regular money when buying wares all over the world.
If that isn't money, is ANYTHING money? Could one not just as well argue that dollars are just ink on paper, and therefore not money?
Money is a loosely-defined word that ends up being a huge sticking point in economic conversations because people end up using different definitions.
One thing Bitcoin is not is a unit of account; it is nobodies liability the way that dollars, treasuries or reserves are a liability of the issuer. When I think money, I think balance sheet; and by that criterion, Bitcoin is not money. It's a currency and an asset.
A unit of account is not a measure of liabilities; it is simply a measure of the relative value of different goods or properties, which usually include liabilities. By that definition, Bitcoin certainly is a unit of account. Though it is not the unit of account for any government, nothing prevents private companies from keeping their financial records in bitcoins (so long as they also prepare copies in the appropriate legal currency for tax or regulatory filing purposes as necessary).
Edit: Wikipedia gives the following requirements for "unit of account":
To function as a 'unit of account', whatever is being used as money must be:
Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again.
Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money.
A specific weight, or measure, or size to be verifiably countable. For instance, coins are often milled with a reeded edge, so that any removal of material from the coin (lowering its commodity value) will be easy to detect.
Except for having a specific weight, Bitcoin has these: 1 Bitcoin is the same as any other, and it can be broken into 0.5, 0.1 and even 0.0001 Bitcoins.
I think the sticking point there is differences in definition of 'unit of account'. My main point is that Bitcoin is nobodies liability; this is by design. The dollar is a liability of the issuer, which can be used to extinguish tax debt.
This goes into a much larger point about the nature of money and how it evolved from ad-hoc credit arrangements.
Regardless of its "technical" or "economic" definition, to the layman and all its users, Bitcoin is treated, traded, and consumed as money.
The exact origins of Bitcoin do not change its utility, which is as a unit of exchange, which is what money is in its most general and flexible definition.
All true, but it does not diminish my point; that since the dawn of capitalism, money has been a balance sheet phenomenon: being simultaneously someone's asset and someone else's liability, and in this Bitcoin is different.
That seems odd - if A visits will road and buys drugs off B then A owes B one bitcoin - that is a human level contract that is clearly understood. A balance sheet accounting of this transaction would as easily be In bitcoins as dollars (A has a liability of 1 bitcoin, B has an asset)
As long as B wishes to denominate their accounts in bitcoins this is quite reasonable.
Or am I missing something ?
(Interestingly the Indian mathematician who invented negative numbers did so using accounts and debt as an example (bhagravita? 500AD)
I don't understand - why is banking meaning that I owe someone 100 bitcoins a problem? It's an unstable currency yes but the same can be said for Zimbabwean dollar
In your case, the transaction is barter, a transfer of one non-financial asset for another.
If you have a contract to provide 100 BTC, then that contract would be money, denominated in BTC (not the BTC themselves). It would exist on one balance sheet as an asset, and on another as a liability (at the same time).
The article says this was a motion to dismiss all charges, on grounds that bitcoin isn't money and that Ulbricht wasn't responsible for website users' actions.
What happened to the murder-for-hire charges? Those seemed pretty damning...
The claim is that the term "funds" included in the definition of "financial transaction" [1] covers bitcoins.
"Funds" typically denotes cash or an asset that is highly liquid, not just anything which can be purchased or sold. Black's Law Dictionary defines "fund" as a "sum of money or other liquid assets established for a specific purpose."
Bitcoins, at this stage, are accepted almost nowhere, recognized by few people as currency, and represent a tiny, highly volatile and risky niche compared to other markets. It's much easier to convert a used iPhone (the top search on eBay) into cash, sell concert tickets on craigslist, or trade collectibles, than it is to convert bitcoins into legal tender, but no one would mistake those goods for "funds." The law isn't intended to cover anything which can be exchanged for cash. In fact, it specifically enumerates the following types of property separately when defining the scope of "financial transaction": "real property, vehicle, vessel, or aircraft." [1]
Because currency is accepted nearly everywhere as payment, the government considers it difficult to police and subject to special penalties when used for criminal ends. Goods like collectibles or bitcoins don't operate at that scale, since they're accepted by relatively few businesses and specialized experts as payment. If a tiny (in comparison to the economy at large) experiment like bitcoin is "funds", then almost any object bought or sold in a zillion stores and marketplaces can be construed as "funds". Any quid-pro-quo could be considered laundering, which broadens the law beyond its intended scope.
The ruling says:
"Ulbricht's alleged conduct is more akin to a builder who designs a house complete with secret entrances and exits and specially designed traps to stash drugs and money; this is not an ordinary dwelling, but a drug dealer's 'dream house.'" [2]
It's not illegal to build a house with secret entrances and compartments. Such a house could be used by anyone who wanted to hide their own possessions on their own property. The fact that someone might use it for illicit purposes doesn't implicate the owner or builder. It must be proved separately that the owner or builder knowingly entered into some kind of agreement with another conspirator to facilitate a crime [3]. Merely hosting a chat room isn't a conspiracy.
Unfortunately, this is just a perpetuation of the same pointless drug war. The prosecution's position is wildly overblown. The alleged activities are akin to operating a motel where a victimless offense might have been committed by a third party.
Drug prohibition is ineffective and is on the way out in favor of treatment and social programs that are more effective.
(A) a transaction which in any way or degree affects interstate or foreign commerce
(i) involving the movement of funds by wire or other means or
(ii) involving one or more monetary instruments, or
(iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or
(B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree;
It's easier to create a PayPal account, link it to your bank account, list an iPhone, wait for someone to buy it (could take anywhere from minutes to days realistically), wait for them to pay you, take it to UPS/FedEx to deliver it, and then transfer the funds to your account than to visit one of the Bitcoin exchange sites?
>It's much easier to convert a used iPhone (the top search on eBay) into cash, sell concert tickets on craigslist, or trade collectibles, than it is to convert bitcoins into legal tender
Really? What about all the services like Bitstamp? I am fairly sure that bitcoin is more liquid than used iPhones.
> Really? What about all the services like Bitstamp? I am fairly sure that bitcoin is more liquid than used iPhones.
The actual problem is that the entire concept of trying to separate currency from commodities is defective. Forget about used iPhones. You can walk into any pawn shop and exchange a bar of silver for goods or cash. Does that mean silver is a currency? What about copper? Or gasoline? Try to buy something on Craigslist and offer to pay with a gas card. More likely to succeed than offering bitcoin.
Bitcoin aims at being money, notwithstanding its relative lack of convertibility. I went to the bitcoin Foundation website just now: 'Bitcoin Foundation standardizes, protects and promotes the use of Bitcoin cryptographic money for the benefit of users worldwide.' (my emphasis)
Bitcoin has been referred to as a 'cryptocurrency' since its inception, and much as I treasure my own copy of Black's Law Dictionary, its definitions are not legally binding. You might as well say 'my clients large collection of unfinished diamonds and gold nuggets don't amount to a hoard of wealth - have you ever tried to buy groceries with an unfinished diamond? I rest my case!'
As an analogy, I would say a law against counterfeiting money shouldn't apply to things which aren't currencies (like counterfeiting a designer handbag or forging Linden dollars in Second Life...). If the law's purpose is to protect and maintain the legitimacy of certain bedrock instruments the public relies on (cash, real estate titles), I think it's overreaching to extend it to every aspiring virtual (or even gaming) currency...
The laws against counterfeiting money don't apply to counterfeiting designer bags or Linden dollars. They have separate counterfeiting laws to cover that.
I think you made the counter-point yourself - because "cash" is so difficult to police governments treat it specially. Bitcoins are or perhaps are becoming a medium of exchange that is hard to police and attractive to criminals. So irrespective of our current definitions of funds society has an imperative to treat bitcoin as funds and so as something to be policed. Hence the ruling.
Well ok, the ruling was really "no, there is no way you are snidely gettin off Scott free because the law forgot to think of crypto-currency"
So basically you're arguing that bitcoin's lack of success thus far at achieving its explicitly stated aims is a defense? What if he were conducting transactions in Syrian or Iranian currency? This is a disingenuous argument.
No, it doesn't. It says any currency, along with all kinds of things that aren't currency but which can more-or-less readily be converted into currency, including travelers' cheques and negotiable instruments, both of which are probably less liquid than bitcoins. Indeed, a bitcoin is a "negotiable instrument".
I quote:
(5) the term “monetary instruments” means
(i) coin or currency of the United States or of any other country, travelers’ checks, personal checks, bank checks, and money orders, or
(ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery;
