All it took was one bad actor… BTCST was a Bitcoin-based hedge fund savings & trust which turns out to be more Ponzi scheme than investment vehicle. Investors collectively lost 263,104 Bitcoin in principal, that is $1,834,303 based on the daily average price of Bitcoin when they purchased their BTCST investments, or in excess of $23 million based on currently available Bitcoin exchange rates. The founder of the fund Trendon Shavers was formally charged by the SEC in 2012 but Shavers fought back by saying Bitcoin is not money so it isn’t subject to Federal Securities Laws.
It turns out Judge Amos Mazzant disagrees and in a statement mentions that Shavers used Bitcoins to pay his living expenses and moreover explains that even though Bitcoins aren’t accepted everywhere, they can be converted to other forms of currency. Subsequently, based on this logic, Bitcoins are currency – even though they are algorithmic in nature and require no central clearinghouse to be traded between parties.
Some believe this is the beginning of the end for the digital currency as an unregulated vehicle and they may be correct. Another way of looking at the matter though is if there is some regulation – especially with regards to protecting users from being defrauded by this form of money, then perhaps it is beneficial to have government involvement.
In 1933 the US government under FDR confiscated all gold in the US as part of Executive Order 6102. Specifically, this order forbade the hoarding of gold coin, gold bullion, and gold certificates within the continental United States. It further criminalized the possession of monetary gold by any individual, partnership, association or corporation.
The concern some will rightfully have is governments doing something like this with Bitcoins in the future as they represent a potential threat to the reserve status of the US dollar and other monies which are controlled by central banks and often devalued by an ever-increasing money-supply.