New developments in the case of alleged Silk Road kingpin Ross Ulbricht could have a big impact on the future of Bitcoin, and whether or not it US authorities see it as ‘money’ or something else entirely.
Last weekend, Joshua Dratel, the attorney representing Ulbricht, asked judges to dismiss several of the charges against his client based on a number of legal technicalities. This in itself isn’t surprising – it’s what all good lawyers try to do if they think there’s even a sniff of a chance – but things get complicated as the ‘technicalities’ Dratel raises all depend on exactly how the courts define Bitcoin.
If Dratel’s motion succeeds, he and Ulbricht will have a lot to thank the Inland Revenue Service for. That’s because Dratel has basically adopted the same position as the IRS, which recently announced that Bitcoin is ‘property’, and should be taxed as such. With this statement, the IRS is essentially saying that Bitcoin isn’t money, and that declaration could have a big impact on Ulbricht’s case [read more about the IRS’s declaration here].
Even so, the courts are notoriously stubborn and may have a different opinion of what exactly Bitcoin is. We’ve yet to see any major trial in which Bitcoin plays such a fundamental role, and that’s why Ulbricht’s case is so crucial, as it could well set a precedent for how the authorities treat the cryptocurrency beyond just taxation.
As clear as mud
The Feds case against Ulbricht is extremely messy and complex. As well as being charged with money laundering, the alleged Silk Road operator has been accused of conspiracy to commit murder, conspiracy to commit computer hacking, conspiracy to traffic narcotics, and running a continuing criminal enterprise. How Bitcoin is legally defined could potentially impact all of these charges, however the money laundering charge seems to be the one that’s most affected.
In his motion, Dratel argues that this charge should be dropped because Bitcoin isn’t money. According to the attorney, money laundering necessitates “monetary instruments”, yet both the IRS and the Treasury Department have published guidelines that explicitly state Bitcoin isn’t a monetary instrument. Of course, the IRS guidelines only govern Bitcoin as it relates to taxes, whilst the Treasury advice only concerns banking, so this may not impact the court’s perception of cryptocurrencies.
More specifically, money laundering laws state that a monetary instrument is defined as “coin or currency”, something that Bitcoin supposedly isn’t.. However, Ulbricht’s argument gets a little shaky, as a clause states that “investment securities or negotiable instruments” can also be used as monetary instruments. Bitcoin definitely isn’t an investment security, but the US Commercial Code defines negotiable instruments as “an unconditional promise or order to pay a fixed amount of money.” Whether Bitcoin falls under this definition will be a question for the judge to decide.
Should the judge rule that Bitcoin is a ‘negotiable instrument’ then it would mean the cryptocurrency is subject to a whole host of laws as outlined by the Congressional Research Service (CRS) in a report last year. Interestingly, we should note that the CRS also said that Bitcoin “is not legal tender nor is it backed by any government or any other legal entity”, although it did state that there are some federal statutes and regulations that “may have some applicability to digital currency, although none contains explicit language to that effect or explicitly mentions currency not issued by a government authority.”
In other words, Bitcoin is no more regulated than something like dirt. And while dirt may have some value to some people, it’s definitely not money – and would a money laundering charge (or any other charge for that matter) stick if that’s all the supposed offender received? That remains to be seen, though whatever the judge decides will have big implications for how law enforcement authorities treat cryptocurrencies in the future.
photo credit: btckeychain via photopin cc
Before joining SiliconANGLE, Mike was an editor at Argophilia Travel News, an occassional contributer to The Epoch Times, and has also dabbled in SEO and social media marketing. He usually bases himself in Bangkok, Thailand, though he can often be found roaming through the jungles or chilling on a beach.
Got a news story or tip? Email Mike@SiliconANGLE.com.
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