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People say the silliest things about Bitcoin. It isn’t legal tender and it never will be. The reason that some people say otherwise is that they don’t understand what legal tender is and they don’t understand what Bitcoin is.

Britain’s Minister of Finance, a man of the people who for historical reasons is known as George Gideon Oliver Osborne, of the Baronetcy of Ballentaylor and Ballylemon in the County of Waterford, Chancellor of the Exchequer and Second Lord of the Treasury, gave a speech at the Innovate Finance conference in London, in which he said that he had instructed Treasury officials to work on a study (ie, hire one of the usual management consultancies to knock up a study) looking at the benefits and threats of digital currencies, although he didn’t say the benefits to whom or the threats from what. Rather bizarrely, this was reported as (in The Telegraph, for example) “Chancellor embraces Bitcoin”. Strange. A more accurate headline, I’m sure, would be “Chancellor has only a faint notion of what Bitcoin is and, frankly, doesn’t really care”. I even saw one or two comments  along the lines of “British government may legalise Bitcoin”, which set me thinking…

Bitcoin is a decentralized, unregulated virtual currency now used by some 100,000 merchants worldwide. It is not legal tender in most countries.

[From Irish Central Banker Lays Down the Law at Bitcoin Gathering – Digits – WSJ]

It is not, as far as I know, legal tender in any country. Nor, I would wager, will it ever be. Legal tender is an outdated and essentially meaningless concept, which is why I am baffled by the reporting around the topic. And the regulation of Bitcoin in general. To pick one example, having asked a few different experts, I’m none the wiser as to what it means to say that California has “legalised Bitcoin” or anything like it and would welcome clarification from experts in the field.

“Existing law prohibits a corporation, flexible purpose corporation, association, or individual from issuing or putting in circulation, as money, anything but the lawful money of the United States,”

[From California legalizes bitcoin – San Francisco Business Times]

Precisely how the new law from Governor Moonbeam (which is what he was called when I used to live in California) is going to change anything is entirely opaque to me. Businesses were free to accept to Bitcoin in payment before, just they were free to accept wampun or used tea-bags, since it’s a matter of private contract. What you couldn’t to is force a business to accept Bitcoin, and you still can’t. But then, you can’t force a business to accept US dollars either, as I mentioned here eight years ago. So what was the barrier that was torn down in California?

According to the report “governments should consider eliminating any and all regulatory or legal obstacles to the use of private monies”.

[From Finextra: Ditch legal tender to unleash bitcoin – think tank]

All regulatory obstacles? Really? I don’t want to transact in the dark! I don’t think we should all regulatory obstacles: I don’t want to live an electronic Somalia. But when it comes to money it seems to me that the obstacles are minimal (pretty much anyone can get an Electronic Money Issuer licence in the EU right now) and it has nothing to do with “legal tender” at all.

Several countries – including the US and Germany – have declared that bitcoin is not a currency but property for tax purposes.

[From Finextra: Ditch legal tender to unleash bitcoin – think tank]

And I agree with this too. Bitcoin is property, not currency. End of. I don’t see why this is in the least bit controversial and I’m surprised that Baronet Osborne didn’t ask me about it, but if his management consultants want a word, I’ll be back in the office on Monday.

1 comment

  1. People tend to look at the world through their own lens and confuse expertise in banking or regulation, with expertise in an entirely new paradigm like digital currencies (which are poorly labelled).

    It needs a new label like digitally signed network based consensus ledger and database… DSNBCLD doesn’t have the same ring to it though…

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