Why Bitcoin Isn’t A Security Under Federal Securities Law

Georgia attorney John William Nelson explains why Bitcoins don’t meet the legal definition of a security under federal securities law; which therefore means they lie outside of the SEC’s ability to regulate and control them.

A snippet of the full article:

There are questions as to whether Bitcoin falls under the regulations of federal securities law. Federal securities law is a complex area of law that grants courts and the SEC great leeway in classifying investment products as securities. Nevertheless, a Bitcoin in-and-of-itself is not a security that can be regulated under federal securities la…

BUT IF CURRENCY CAN BE A SECURITY, THEN BITCOIN IS A SECURITY BECAUSE IT’S A TYPE OF CURRENCY, RIGHT?

Wrong. Bitcoin is not really a type of currency, at least not of the type recognized as securities. No entity or assets back up Bitcoin value. Bitcoin value is entirely virtual—a Bitcoin is only worth what another person thinks its worth. This is different than currency issued by countries.

A country’s currency is backed by that country’s government. This backing can either be by fiat (government regulation or law) or by commodity (such as the gold standard the U.S. used to use). Some compare Bitcoin’s value to the value of fiat money, because like fiat money it is not backed by a commodity, but this is where the similarities between Bitcoin and fiat money end.

Bitcoin is backed by no entity, no commodity, no organization. Bitcoin value is not based on government regulation or law mandating its use in a country. Similarly, it is not backed by a whole bunch of gold sitting in Fort Knox.

Of course, I don’t believe the federal government has the legitimate authority to regulate voluntary exchanges of private property, so I find the whole argument to be academic anyways.

If the criminal class wants to regulate something out of existence, it is a simple matter for them to make a decree and then send out some armed goons to make sure it is enforced.  Bitcoins will be pushed into the black market as they gain traction; however, the days of the State’s ability to wage violent warfare against the peoples’ property are soon coming to an end with the collapse of the dollar.

While the State may be able to regulate Bitcoins into the black market for a while, such criminal behavior will not and can not last forever.  Eventually the State will collapse under the burden of its own greed and Bitcoins will once again move out of the shadows to play a prominent role in the rebuilding of a free and peaceful society.