Earlier this year I touched on Bitcoin, the new electronic money that’s become quite popular. Two of the key points I hit on were:
- Bitcoin is definitely money because it can be used for means of final payment, but it’s a poor form of money because it’s not very widely accepted.
- Bitcoin is likely to be forced to change because its existence in an untaxed system creates a problem in a society where money is viewed as something that serves public purpose as well as private purpose. If money exists purely for private purpose (as Bitcoin does) then it cannot be taxed and used for public purpose. I believe this creates a problem for the US government should Bitcoin ever become too popular and is likely to result in the US government clamping down on the way Bitcoin is operated (perhaps even shutting it down entirely).
So it’s interesting see this cease and desist from the State of California. In the letter the state says Bitcoin is violating the state’s transmission of money laws. So, it looks like certain governments are validating point 1 above. Bitcoin is definitely money. Now, we’re just waiting on how the various state and federal governments will respond to point 2. If Bitcoin continues to grow in popularity and creates a money that potentially detracts from the government’s ability to enact public purpose then Bitcoin will either adapt or die.