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Bitcoin breakthrough: US judge rules bitcoin should be recognised as an official currency

Tuesday, 20 August 2013 | By Rose Powell

A landmark ruling in the US around the legitimacy of virtual currency bitcoin has been welcomed as a boost to the emerging market at the edge of financial innovation.

 

In early August, US federal judge Amos Mazzant ruled bitcoin should be officially viewed as a form of money. The decision was made in order for US regulators to prosecute Trendon Shavers, who is accused of running a bitcoin Ponzi scheme.

 

Bitcoin is a rapidly growing industry currently dominated by start-ups.

 

In the last week alone, one Australian bitcoin start-up has become embroiled in a dispute with the Commonwealth Bank and a new bitcoin trading exchange has launched.

 

Evan Lucas, a market strategist at IG Markets, an investment and trading company that trades in a variety of assets including bitcoin, told StartupSmart the ruling was a good step forward.

 

“It’s not surprising that the US has moved forward with this, given who is backing it (such as early Facebook investors the Winklevoss twins) and how much money is running into it,” Lucas says. “Essentially it’s an online paper trading idea, where people will be able to trade physical goods for digital currency. If people want to do this, then it should be recognised.”

 

Lucas says while he has no doubt the reach of bitcoin will continue to develop, it will require regulation if it’s to reach its full potential.

 

“It’ll certainly be growing in its reach more and more as people start to look at it, but it’s still a very infant currency and the concern that a lot of analysts have about bitcoin is its regulation,” he says. “The fact it’s completely free of regulation means it’s open to manipulation and we have seen that quite substantially. They’re still scaring a lot of people off, as it fluctuates so hard.”

 

He adds that for bitcoin to reach the largest possible market, it will need to be regulated.

 

“If it wants to become mainstream, it is going to have to subject itself to regulation. That will be a very interesting situation for those involved to subject themselves to that kind of scrutiny,” Lucas says. “Whether it has the same excitement once it’s regulated, we’ll have to wait and see.”

 

He says he expects there are people already working on a regulated version such as a global currency managed by an international body such as the World Trade Organisation, and that it could emerge in three to five years and overtake the more freewheeling bitcoin options.