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Comment by personalcompute | Hacker News Reader

I'm really interested to see if bitcoin will survive the law. I'm not a lawyer, but my understanding is that creating an alternate currency is strictly illegal. Maybe this is the first indication of the end of bitcoin?

(Edit: This is incorrect. See comments.)

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Depending on your level of interest, a Yale Law student published a 40+ page paper on Bitcoin. It is a preliminary draft at this point. http://www.bitcoin.org/smf/index.php?topic=6247.0

Very interesting, thanks for posting.

I'm not a lawyer, but my understanding is that creating an alternate currency is strictly illegal.

IANAL either, but I would be interested in a citation on that. My understanding is that say in the US (a) you can't print US dollars (because the Fed has a monopoly on that) and (b) you can't refuse to take US dollars (because they are legal tender). That said, I don't know of a law that says you can't also use an alternative currency. For example if a school had "school money" where "credits" are earned for good grades and are exchanged for lunch or snacks, that is a form of alternate currency that surely is not illegal.

You can certainly refuse US dollars in the United States, however you cannot refuse them for payment of debt.

Of course, the line between "illegal" and "can get you in legal trouble" is never a crisp one.

exactly. thats why point B does not work in most government facilities nowadays. try to pay a court case, get drivers license, pay for taxes or your license plate with cash --- a nice clerk will tell you "check, money order or credit card only".

The Federal Reserve does not print US dollars, nor does it have the right or power. The US Mint and the Bureau of Engraving (both part of the Deptartment of the Treasury) produce coinage and print dollars at the advice and counsel of the Federal Reserve, and are the only agencies so empowered.

Each dollar bill has the words "Federal Reserve Note" in big type at the top. That is because they represent debt of the federal reserve. The bureau of printing and engraving prints them for the federal reserve to hand out and is reimbursed for the cost of printing by the federal reserve.

Federal reserve notes have the very handy attribute in that they are the only currency that can be used to settle U.S tax liabilities.

What about websites that offer credits? If Bitcoin is illegal, then so are stuff like Facebook Credits and Flattr for being alternate currencies.

Or casinos. Both with the chips themselves and Player's Cards. Or Frequent Flier miles, which are so much of an alternate currency that the IRS taxes them at a certain point.

This exact argument was discussed in depth recently: http://news.ycombinator.com/item?id=2451302

Start treating those casino chips as currency and the government will step in and stop it.

Just ask the e-gold guys: http://www.wired.com/threatlevel/2009/06/e-gold/

That was one of the things Neal Stephenson got right- you almost certainly need to hide inside a non-US sovereignty.

Alternative currencies are fine, as long as they are not being represented as US currency. Most of the private currencies, including casino chips, are merely tokens of private contracts between the holder and the issuer.

The issue with alternative currencies is primarily that of tax evasion. Income earned in any currency/denomination is taxable, and most users of alternative currencies underreport or do not report their income. This problem is especially prevalent where the currency's value is not tied 1:1 with the US dollar.

What are the options of stopping bitcoin? It could be banned from paypal and card transactions. But you can't really ban it otherwise. If I want to give you something for bitcoins, we can do the exchange. There's no real trail, so it simply can't be stopped for personal use.

What value are bitcoins if nobody can legally accept or use them? The IRS is not known for being understanding toward things that look like tax evasion.

Multiple identities make this almost impossible to track. You can have a separate wallet for every transaction and then pass the bitcoins through http://doubletrouble.bitcoinbet.com/ if you want to be paranoid. If you verify your bitcoin history, you should be pretty safe from IRS-like companies.

Wasn't this the whole purpose of the distributed system? It was created with such situations in mind where a governments and others try to stop the flow of money through certain areas or to individuals.

Alternate currencies seem to be legal in the US. There's a minor movement of people setting up local currencies to encourage doing business with local merchants.

http://en.m.wikipedia.org/wiki/Local_currency

One guy named Bernard von NotHaus created the "Liberty Dollar" and is now facing a 45 year prison sentence. After a little googling, it's unclear why exactly he is being punished, but this how one article summed it up:

"Congress has exclusive power to coin money in the U.S. and to regulate its value, according to the Treasury Department."

He's being punished primarily because his coins look too similar to U.S. coins.

This makes me wonder: is it illegal to use non-US coins for transactions in the US? Like if I use Euro-coins? (I say coins because there seems to be a specific prohibition on issuing "coin" and not other forms of currency unless they resemble US dollar bills.)

Counterfeiting, mostly. The coins he made looked like normal US coins, except that the presidents were swapped out for Ron Paul or other anti-establishment figures.

It's not illegal in a lot of jurisdictions, including Canada and the UK.

At the moment. Laws can change.

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