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Bitcoin: Currency or commodity?

The question of the legal status of crypto currencies is increasingly coming to the fore, especially with regard to possible upcoming state regulations. The case of former Bitcoin entrepreneur Theo Chino posed the question to a New York court: Is Bitcoin to be treated Bitcoin Evolution like a currency or like a commodity? The answer: Unclear.

The BitLicenses, as distributed by the New York State Department of Financial Servives (NYDFS), are a costly affair. Many one-man companies fail to obtain licenses to trade crypto currencies simply because they cannot afford to register with the NYDFS.

New Yorker Theo Chino filed a lawsuit against the NYDFS in 2015 and stopped working as a Bitcoin entrepreneur.

Bitcoin EvolutionĀ isĀ a costly affair

Two years after filing court documents for the first time, Bitcoin Evolution China’s lawyer argued at the trial last Tuesday that the so-called BitLicense regulations had put an early end to his client’s career.

The legal dispute was mainly based on two allegations. Chinos’ lawyer argued on the one hand that the NYFDS had exceeded its powers. The other side argued that Chino had no legal basis for his lawsuit.

What happened then can be seen as characteristic of the current legal limbo, with the discourse about crypto currencies and blockchain. The decision of the court was postponed. Judge Carmen Victoria St. George scheduled the verdict for January 11, 2018.

The plaintiff Theo Chino
For Chino and his lawyer, the decision can be seen as a small victory. The case brings the issue to the public and gives hope to smaller companies affected by the law.

The driving force of his argument is and was that as a “small entrepreneur” he does not have the necessary monetary resources to go through the comparatively expensive process of obtaining a BitLicense. Not only does it cost $5,000, but it also ends up paying the court costs in addition.

In addition, the prospects for an application are not exactly rosy. The status quo is that only a few BitLicenses have actually been issued, while a much larger number are still in the processing status.

When asked whether Bitcoin was a financial instrument, the lawyer replied, “No, absolutely not. He defined Bitcoin much more as a commodity, relying on a U.S. Commodities Futures Trading Commission definition.

The Defence
On the other side of the charge, however, Jonathan Conley, www.onlinebetrug.net/en who represents the NYDFS, has spent a lot of time bypassing this question.

Instead of dealing with Bitcoin’s unclarified legal definition, he argued that Chino had no right to continue his lawsuit because, among other things, he screwed up his BitLicense application.

According to Conley, Chino did not fill out the documents correctly. In many fields, he marked “not applicable” and “I will not disclose” with a cross. According to Conley, damages were “purely speculative”. So instead of going into the actual charges and looking at the consequences for individuals, Conley’s focus was on inconsistencies in filling out the form.

These ambiguities, which seem to permeate the entire case, will have eventually led the judge to her decision to postpone the verdict. Until January the US-Americans will have to wait for a decision for the time being. But what is the situation in Germany?

Does Bitcoin need its own Silicon Valley?

When Steve Jobs was still a boy, he looked for the name “William Hewlett” in the local phone book and actually managed to get the founder of Von Hawlett-Pack on the phone. The technologist supported the later Apple computer inventor by offering him a summer job, giving him a few computer components and helping him with advice and action.
Anecdotes like these make it clear how the spatial proximity of one wave of innovation can trigger the next. Although it is very unlikely that Mark Zuckerberg’s phone number can be found in Palo Alto’s local phone book these days, many hopefuls with clever ideas are pouring into the cities around San Francisco. Because there, the driving forces sit just like the venture capitalists. The big networking events take place there several times a year, where a large pool of talented computer scientists can sense the great opportunity.
Would Bitcoin benefit as much from geographical proximity as the technology sector? Silicon Valley veteran and investor Mark Andreessen wrote an article entitled “What does it take to create a new Silicon Valley?” on this topic.

“Imagine a Bitcoin Valley, for example. A place where a country fully legalizes digital currencies for all financial functions.”

Venture capitalist Tim Draper, who recently bought 30,000 Bitcoin at the Silk Road auction, says he already sees a Bitcoin Valley forming within Silicon Valley.

Bitcoin is not high-tech
A concentration of talent and a simple exchange of ideas is good for any up-and-coming industry. But Bitcoin is so different from high tech that you can’t say for sure if what’s good for an industry also applies to Bitcoin. Unlike the chip and component manufacturers that make up Silicon Valley, Bitcoin companies don’t need physical manufacturing or R&D labs to operate. It also feels somewhat ironic to pin geographically to the headquarters of a globally dispersed industry whose greatest virtue is the unrestricted geographical distribution of users.

“Bitcoin Valley can be anywhere you want it to be,” Draper joked in an email.

Most Bitcoin followers have a split opinion about the Silicon Valley concept. On the one hand, they say it might be helpful, but on the other hand, they wonder if it’s necessary at all.

“The Internet already exists and anyone can communicate with anyone from anywhere in the world,” says Bitcoin evangelist Roger Ver.

The talent pool lives
According to Hemant Taneja of General Catalyst Partners, even in a widely scattered world, companies have to be guided by where the talent pool is deepest. Bitcoin could consider several cities at the same time.

“New York would give Silicon Valley the run for its money,” says Taneja, referring to the depth of Big Apple talent in the financial sector.

Taneja continues:

“You can look at the talents from two points of view. When it comes to making Bitcoin consumer-oriented and finding the right companies, Silicon Valley is probably the right place. But when it comes to understanding and appreciating the regulation and compliance of financial instruments, I dare say that New York is the right place for the talent pool.”

A Distributed Industry
Meyer “Micky” Malka, founder of Ribbit Capital and investor of Coinbase and other Bitcoin companies, sees a more distributed future in the Bitcoin industry. A future in which companies are created where they are needed.

With his background in international finance, Melka sees some pain points in developing countries; for companies in developing countries it may take a little longer to get financial support, but it will happen:

“We see a lot of good ideas all over the world, but the capital we need is still flowing very centrally into Silicon Valley.

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