California Bankruptcy Judge Says Bitcoin is Property, Not Currency
A US district judge has ruled, for the purposes of a bankruptcy case in California, that bitcoins are a kind of intangible property.
As reported earlier this month by CoinDesk, the US Bankruptcy Court for the Northern District of California is hearing a case filed by the bankruptcy trustee for HashFast, a bitcoin mining firm thatdeclared bankruptcy in 2014.
The trustee is suing a former promoter for HashFast, Mark Lowe, and is seeking the return of 3,000 bitcoins alleged to have been fraudulently transferred to Lowe prior to the firm’s collapse.
In recent weeks, both sides have submitted arguments over whether bitcoin should be considered a currency or a commodity for the purposes of the case.
At stake is roughly $1m in value. If bitcoin is deemed a currency, then Lowe would only have to return the 3,000 BTC at the value they held when he received them, which amounts to about $360,000. If deemed a commodity, then the appreciated value of that 3,000 BTC – about $1.3m today – is up for grabs.
During a hearing on 19th February, US Bankruptcy Judge Dennis Montali sided with the trustee, declaring that bitcoin is an “intangible personal property” rather than a currency.
Lawyer Brian Klein of law firm Baker Marquart, one of the attorneys representing Lowe, pushed for the court to pay attention to how the bitcoins were treated when Lowe was being paid for promoting HashFast’s products – in this case, bitcoins were being treated as the same as dollars at the time.
Yet, Montali disputed that notion, stating that bitcoins and dollars are not the same, saying:
“But that doesn’t make [bitcoins] dollars, that’s my point. I understand how the parties acted, but that doesn’t make them dollars.”
The matter up for discussion wasn’t entirely settled, as Montali indicated that he would, for now, only weigh in on the currency vs commodity angle.
Montali said that he would return to the question of whether, if required, Lowe would transfer the 3,000 bitcoins or the equivalent dollar amount.
The judge indicated that he would issue an order on the decision, which at press time is currently unavailable.
As noted by industry experts, the ruling will add to relevant case law concerning the question of how bitcoin should be treated in civil legal cases, though it is likely to have few larger ramifications.
For example, while US agencies like the US Commodity Futures Trading Commission (CFTC) and the Internal Revenue Service (IRS) have ruled bitcoin should be treated as a commodity, other federal agencies are likely to rule differently as they seek to define the technology under their mandates.
The US Securities and Exchange Commission (SEC), for instance, has been encouraged by blockchain advocacy group Coin Center to consider how some uses for bitcoin may meet its definition for security, while others may not.
Other US regulatory bodies may come to similar conclusions, suggesting there may be no one definition for how bitcoin ultimately falls under US law.