Virtual currencies still exist in a strange regulatory and legal fog where how they’re use is defined seems a bit up in the air. The popularity of Bitcoin in particular has raised questions about its legitimacy as money—especially noting that more and more businesses are now accepting bitcoin in place of dollars. So, as a novel defense against money laundering charges Ross Ulbricht’s lawyer argued that Bitcoin is not money during the Silk Road trial.

In ruling released Wednesday, Judge Katherine Forrest denied a motion by Ulbricht to dismiss charges. Count four, in particular, refers to the money laundering charges and that bitcoins cannot be shown to be a “financial transaction.”

“The Court disagrees,” reads Forrest’s decision. “Bitcoins carry value—that is their purpose and function—and act as a medium of exchange. Bitcoins may be exchanged for legal tender, be it U.S. dollars, Euros, or some other currency. Accordingly, this argument fails.”

Bitcoin as money

This is not the first time that a judge has ruled that bitcoin is or acts as a proxy for money.

During a 2013 court proceeding about a Ponzi scheme involving Bitcoin, Magistrate Judge Amos Maazant of the Eastern District of Texas federal court wrote that, for the purposes of the law, the bitcoins were enough like money to be treated as money.

During the same year, Germany passed legislation making bitcoin equivalent to private money.

Earlier this year, in June, Canada has drafted legislation that regulates bitcoin as money. Under the new law, Bitcoin-related businesses such as exchanges and ATM networks will need to register themselves with Canada’s Financial Transactions and Reports Analysis Centre (Fintrac). As well, they will have to abide by regulations and anti-money laundering regulations.

The money laundering potential of Bitcoin has been a red light for Bitcoin adoption and regulation for some time now. As early as 2012 national watchdogs began to emit concerns on the possible practice. As nations begin to catch up with the trade of virtual currencies, however, it will ease regulatory fears about accepting and trading in virtual coin.

Bitcoin as property

On the other side of the “virtual coin,” there has been precedent for treating bitcoins as property and not money. In the case of the United States Internal Revenue Service, bitcoins and similar virtual currencies are to be treated as property for federal tax purposes.

No doubt Ulbricht’s lawyers hoped this would be the precedent to dismiss the money laundering charges.

The IRS policy decision puts bitcoins (and other virtual currencies) into the same category as stock or bonds and subjects holders of bitcoins to capital gains taxes.

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