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I doubt Bitcoin will be made illegal. By itself, the Bitcoin network is just a mechanism for passing around signed messages and calculating hash values. It woul

I doubt Bitcoin will be made illegal. By itself, the Bitcoin network is just a mechanism for passing around signed messages and calculating hash values. It would be difficult to outlaw that without running into constitutional free speech issues. Where Bitcoin might run into trouble is the trading of bitcoins for dollars or commodities. Depending on how bitcoins are classified legally, there may be additional regulations that sellers or buyers of bitcoins need to adhere to. However, because bitcoins are so different to any existing currency or commodity, I think we'll need to wait for a court to decide whether they fall under any existing regulation, if at all.

joe_the_user 15y ago
There is no doubt that bitcoins will fall under one or another regulations. One argument would be that bitcoin is an illegal pyramid scheme. Another would be that bitcoin is means circumvent the tax system (all barter and local currency systems, for example, have to pay taxes). I'm sure many other arguments could be found.
- webXL 15y ago
  I'm sure many other arguments could be found. Like, "Bitcoin is anti-American" or "Bitcoin will be used by heroin dealers who will sell your daughters into prostitution" If bitcoin is a means to circumvent the tax system, then we'd have to apply whatever tax regulation that results to all other forms of currency. Social Security is an illegal pyramid scheme because it wasn't sold to the American public that way. Let's start applying the law equitably before we stomp on innovation.
  - nandemo 15y ago
    Well, it is already being used by drug dealers (see Silk Road). In fact, if you have bitcoins it's probably easier to exchange it for illegal drugs than for food.
    - cristoperb 15y ago
      Maybe so, but at least you can exchange it for food: http://www.bitmunchies.com/ http://www.bitmunchies.com/
  - joe_the_user 15y ago
    No the US dollar is the legal pyramid scheme and the point is that nothing can compete with that part of the dollar. That is, any "money" is both a medium of exchange and a store of value. It's OK to compete with the dollar as a medium of exchange but if you compete as a store of value, then you've wandered into some heavily guarded turf...
- weavejester 15y ago
  Actually there's a lot of doubt. Bitcoins are not a pyramid scheme, and whilst they could be used as a method to circumvent tax, any skilled accountant can already suggest a dozen other means to achieve the same thing. Bitcoins are probably most at risk from being classified as a type of security, which would put them under the scope of a large number of financial regulations. It wouldn't make them illegal, but it would make them more difficult to trade. However, in general I'm optimistic about Bitcoin's chances. I certainly don't believe it is inevitable that they will be regulated out of existence.
Joakal 15y ago
It is likely to be illegal; banking without a licence, not revealing the ownership, etc. Look at E-Gold's fall: http://www.wired.com/threatlevel/2009/06/e-gold/ http://www.wired.com/threatlevel/2009/06/e-gold/
- webXL 15y ago
  Isn't the "bank" on your hard drive? E-Gold was a commercial enterprise with only 20 employees and no legal team. Very easy to take down. It will be hard for the feds to take down a P2P network, although very easy for them to police e-commerce sites that accept it.
  - Joakal 15y ago
    A P2P network means nothing to a country infamous for filesharer penalties up to trillions of dollars.
  - JoachimSchipper 15y ago
    Bitcoin transactions are public, right? It's not exactly hard to find out who's using them...
    - janv 15y ago
      You can have separate addresses (accounts) for every transaction, which makes tracking much harder (not impossible). Oh, you can also launder your bitcoins. :-) See https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity
    - moreati 15y ago
      The transactions are pseudonymous - a public key of each participant is recorded, and world readable. The public key doesn't have to be connected to a real world identity. An attacker could analyse the transaction history to infer the identity controlling a given key, depending on how it was reused/managed.
      - 15y ago
yason 15y ago
Where Bitcoin might run into trouble is the trading of bitcoins for dollars or commodities. But even if trading was made clearly illegal in the U.S. all that we need is a company abroad under benign legislation that allows you to buy/sell bitcoins and that accepts credit cards. You're right that you obviously can't make it illegal to perform mathematical calculations over big numbers. Also, you can't make it illegal to interpret the result of the calculations or giving them a context. But I think you can't make it illegal to trade bitcoins either: if everything else fails we can always have bitcoin trading parties where the participants can exchange bitcoins to money and money to bitcoins with no third party in the middle.
jasonwatkinspdx 15y ago
While I am sympathetic, this is the same sort of argument that was made in the past with napster and the trend of later laws has been to hold "enablers" liable (at least when it comes to copyright). Given what happened with egold I would not have much faith that the US (and western world) legal establishment will tolerate something like bitcoin. But who knows, maybe we'll get a judge who is willing to make fine distinctions from technical arguments, or is more favorable on free speech vs the interests of those who currently control the flow of capital. Follow up: egold plead guilty to "operation of an unlicensed money transmitting business". While I'm not familiar enough to say definitively if bitcoin could avoid this same statute in the US, I'd guess not.
- weavejester 15y ago
  Napster had a centralized search engine. Later P2P networks, like Bittorrent and Gnutella are decentralised, and no-one has yet declared those technologies illegal. Even more so than Napster, E-Gold was very centralized, and thus an easy target. Bitcoins are an entirely decentralized network like Bittorrent or Gnutella, which have not been declared illegal.
cookiecaper 15y ago
I don't see much point in this kind of rationalization. We know that it's probably not technically illegal to run the bitcoin network. I'm sure they'll find some way to postulate that btc as a currency is technically illegal, but even if they didn't, you have to know that everything that is big in government and the power scene right now is going to collude to take btc out of the picture as far as possible. They are going to marginalize and destroy it as much as they can. The government hates it because it's difficult to track the money; they'll claim it's used for terrorism, money laundering, and other forms of illegal funding, and as you know, once such a claim is solidified in the public psyche it doesn't really matter what statute the actual legal charge is based on. They'll also hate it because it makes taxation much more difficult. You may argue that cash does the same, but cash still originates and terminates in the government's officially sponsored banking system and it bears official government markings that are used to track its movement. Cash has also been (intentionally) corralled into disuse by the major financial players (governments, banks, huge businesses). The banks will hate it because it cuts them out of their usual money-shifting shenanigans, which are both obscenely profitable and generally amoral, if not in principle, then in practice due to gouging and misrepresentation. Bitcoin allows easy and practically free e-commerce. Bitcoin allows for extremely innovative new banking interfaces and practices. Bitcoin is at least practically if not technically unbound by the onerous regulations and rules that bankers have installed for themselves to help control which people are allowed to play with them. Banks aren't going to like that kind of competition at all. Bitcoin is in for it as soon as any kind of normal usage begins to occur. It is silly to pretend otherwise. I have extremely high doubts that btc will be allowed to stand; the only way I can see that happening is intervention from US intelligence services, requesting that btc be allowed to continue to operate without molestation because of that agency's specific plans for the platform.
- weavejester 15y ago
  I don't subscribe to the theory that the US government is a nigh-omnipotent entity that always gets its way. There are plenty of things the US government doesn't like that it has to live with, such as strong cryptography, pornography and P2P networks. I also really dislike the fatalistic attitude that those in power will always get their way, and that we should never try to change the status quo because we will always fail.
rmc 15y ago
So essentially you're saying they can't make bitcoin illegal, just make it completely illegal to use in any practical manner. That sounds like making bitcoin illegal.
- weavejester 15y ago
  That's not what I said at all. Regulation does not necessarily mean "make it completely illegal". Food is regulated, but that doesn't mean the government has made it illegal (or even difficult) to eat.
  - rmc 15y ago
    In some countries (eg UK) prostitution isn't illegal. It's just illegal to ask for money for sex, its illegal to imply you'll pay someone for sex, etc. that sounds like what the government could do to bitcoins. As a result prostitution is de facto illegal.
    - weavejester 15y ago
      Yes, the government could do that, but it's not guaranteed they will. My point is merely that regulation does not necessarily mean making something completely illegal.

joe_the_user 15y ago

There is no doubt that bitcoins will fall under one or another regulations. One argument would be that bitcoin is an illegal pyramid scheme. Another would be that bitcoin is means circumvent the tax system (all barter and local currency systems, for example, have to pay taxes). I'm sure many other arguments could be found.

webXL 15y ago
I'm sure many other arguments could be found. Like, "Bitcoin is anti-American" or "Bitcoin will be used by heroin dealers who will sell your daughters into prostitution" If bitcoin is a means to circumvent the tax system, then we'd have to apply whatever tax regulation that results to all other forms of currency. Social Security is an illegal pyramid scheme because it wasn't sold to the American public that way. Let's start applying the law equitably before we stomp on innovation.
- nandemo 15y ago
  Well, it is already being used by drug dealers (see Silk Road). In fact, if you have bitcoins it's probably easier to exchange it for illegal drugs than for food.
  - cristoperb 15y ago
    Maybe so, but at least you can exchange it for food: http://www.bitmunchies.com/ http://www.bitmunchies.com/
- joe_the_user 15y ago
  No the US dollar is the legal pyramid scheme and the point is that nothing can compete with that part of the dollar. That is, any "money" is both a medium of exchange and a store of value. It's OK to compete with the dollar as a medium of exchange but if you compete as a store of value, then you've wandered into some heavily guarded turf...
weavejester 15y ago
Actually there's a lot of doubt. Bitcoins are not a pyramid scheme, and whilst they could be used as a method to circumvent tax, any skilled accountant can already suggest a dozen other means to achieve the same thing. Bitcoins are probably most at risk from being classified as a type of security, which would put them under the scope of a large number of financial regulations. It wouldn't make them illegal, but it would make them more difficult to trade. However, in general I'm optimistic about Bitcoin's chances. I certainly don't believe it is inevitable that they will be regulated out of existence.

Joakal 15y ago

It is likely to be illegal; banking without a licence, not revealing the ownership, etc. Look at E-Gold's fall: http://www.wired.com/threatlevel/2009/06/e-gold/ http://www.wired.com/threatlevel/2009/06/e-gold/

webXL 15y ago
Isn't the "bank" on your hard drive? E-Gold was a commercial enterprise with only 20 employees and no legal team. Very easy to take down. It will be hard for the feds to take down a P2P network, although very easy for them to police e-commerce sites that accept it.
- Joakal 15y ago
  A P2P network means nothing to a country infamous for filesharer penalties up to trillions of dollars.
- JoachimSchipper 15y ago
  Bitcoin transactions are public, right? It's not exactly hard to find out who's using them...
  - janv 15y ago
    You can have separate addresses (accounts) for every transaction, which makes tracking much harder (not impossible). Oh, you can also launder your bitcoins. :-) See https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity
  - moreati 15y ago
    The transactions are pseudonymous - a public key of each participant is recorded, and world readable. The public key doesn't have to be connected to a real world identity. An attacker could analyse the transaction history to infer the identity controlling a given key, depending on how it was reused/managed.
    - 15y ago

yason 15y ago

Where Bitcoin might run into trouble is the trading of bitcoins for dollars or commodities. But even if trading was made clearly illegal in the U.S. all that we need is a company abroad under benign legislation that allows you to buy/sell bitcoins and that accepts credit cards. You're right that you obviously can't make it illegal to perform mathematical calculations over big numbers. Also, you can't make it illegal to interpret the result of the calculations or giving them a context. But I think you can't make it illegal to trade bitcoins either: if everything else fails we can always have bitcoin trading parties where the participants can exchange bitcoins to money and money to bitcoins with no third party in the middle.

jasonwatkinspdx 15y ago

While I am sympathetic, this is the same sort of argument that was made in the past with napster and the trend of later laws has been to hold "enablers" liable (at least when it comes to copyright). Given what happened with egold I would not have much faith that the US (and western world) legal establishment will tolerate something like bitcoin. But who knows, maybe we'll get a judge who is willing to make fine distinctions from technical arguments, or is more favorable on free speech vs the interests of those who currently control the flow of capital. Follow up: egold plead guilty to "operation of an unlicensed money transmitting business". While I'm not familiar enough to say definitively if bitcoin could avoid this same statute in the US, I'd guess not.

weavejester 15y ago
Napster had a centralized search engine. Later P2P networks, like Bittorrent and Gnutella are decentralised, and no-one has yet declared those technologies illegal. Even more so than Napster, E-Gold was very centralized, and thus an easy target. Bitcoins are an entirely decentralized network like Bittorrent or Gnutella, which have not been declared illegal.

cookiecaper 15y ago

I don't see much point in this kind of rationalization. We know that it's probably not technically illegal to run the bitcoin network. I'm sure they'll find some way to postulate that btc as a currency is technically illegal, but even if they didn't, you have to know that everything that is big in government and the power scene right now is going to collude to take btc out of the picture as far as possible. They are going to marginalize and destroy it as much as they can. The government hates it because it's difficult to track the money; they'll claim it's used for terrorism, money laundering, and other forms of illegal funding, and as you know, once such a claim is solidified in the public psyche it doesn't really matter what statute the actual legal charge is based on. They'll also hate it because it makes taxation much more difficult. You may argue that cash does the same, but cash still originates and terminates in the government's officially sponsored banking system and it bears official government markings that are used to track its movement. Cash has also been (intentionally) corralled into disuse by the major financial players (governments, banks, huge businesses). The banks will hate it because it cuts them out of their usual money-shifting shenanigans, which are both obscenely profitable and generally amoral, if not in principle, then in practice due to gouging and misrepresentation. Bitcoin allows easy and practically free e-commerce. Bitcoin allows for extremely innovative new banking interfaces and practices. Bitcoin is at least practically if not technically unbound by the onerous regulations and rules that bankers have installed for themselves to help control which people are allowed to play with them. Banks aren't going to like that kind of competition at all. Bitcoin is in for it as soon as any kind of normal usage begins to occur. It is silly to pretend otherwise. I have extremely high doubts that btc will be allowed to stand; the only way I can see that happening is intervention from US intelligence services, requesting that btc be allowed to continue to operate without molestation because of that agency's specific plans for the platform.

weavejester 15y ago
I don't subscribe to the theory that the US government is a nigh-omnipotent entity that always gets its way. There are plenty of things the US government doesn't like that it has to live with, such as strong cryptography, pornography and P2P networks. I also really dislike the fatalistic attitude that those in power will always get their way, and that we should never try to change the status quo because we will always fail.

rmc 15y ago

So essentially you're saying they can't make bitcoin illegal, just make it completely illegal to use in any practical manner. That sounds like making bitcoin illegal.

weavejester 15y ago
That's not what I said at all. Regulation does not necessarily mean "make it completely illegal". Food is regulated, but that doesn't mean the government has made it illegal (or even difficult) to eat.
- rmc 15y ago
  In some countries (eg UK) prostitution isn't illegal. It's just illegal to ask for money for sex, its illegal to imply you'll pay someone for sex, etc. that sounds like what the government could do to bitcoins. As a result prostitution is de facto illegal.
  - weavejester 15y ago
    Yes, the government could do that, but it's not guaranteed they will. My point is merely that regulation does not necessarily mean making something completely illegal.