Bitcoin Users Are Struggling To Shrug Off A Texas Judge's Ruling On Their Currency

This week, a Texas judge ruledthat Bitcoin can be considered a formal currency in a case regarding a man who allegedly ran a Bitcoin ponzi scheme.

The ruling allows the SEC to go forward with its prosecution.

But many are interpreting it as another sign that one of the most important features of Bitcoin — its lack of rigorous regulation — is eroding.

Bitcoin businesses are trying to shrug off the ruling. Alan Silbert, the CEO of luxury goods site BitPremier, told us by email that the opinion signaled nothing more than growing pains.

“It’s just part of the process of the Fed and State governments going through the learning process and feeling out how to handle virtual currencies.”

Indeed, the number of regulatory bodies taking a shot at classifying Bitcoin keeps rising: FinCen, the Treasury’s Financial Crimes Enforcement Network ruled in March that Bitcoin money transmitters must register with the government, and that the Texas ruling itself was borne of an SEC enforcement action.why the Justice Department’s crackdown on another digital currency meant increased regulation was likely.

For Bloomberg View’s Timothy Lavin, Bitcoin will end up suffering from its own legitimization:

The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange. And the less useful it is as a method of exchange, the harder it is to see why it has any value at all.

Almost all the advantages Bitcoin has — it’s cheap, somewhat convenient, anonymous, free from centralized authority — derive from the fact that governments haven’t taken it very seriously. As the Texas case shows, that’s changing.

Several members of BitForum, one of the largest Bitcoin discussion group, published comments like the one here which seemed to reflect that view:

Bitcoin being a currency means now the entire banking infra can enforce laws and policies on bitcoin. Welcome to fees, regulation, and loss of freedom.

It’s wasn’t immediately clear how Bitcoin prices responded to the Texas ruling, which was first published Monday. Prices stayed flat until Thursday, when they suddenly fell. They finished the week down nearly -3% at $US103.

The next shoe to drop will likely be from the CFTC and Bart Chilton, who said in May that the agency was monitoring Bitcoin derivative products.

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