The Bitcoin Foundation on Tuesday asked government to investigate the Department of Justice (DOJ). The agency is going after merchants and vendors on the grounds they are selling bitcoin as “illegal money transmitters.” However, the Bitcoin Foundation said bitcoin is not money, at least not how Senate Bill 1241 is defining it. The Bitcoin Foundation also took issue with the fact government believes terrorism is being financed by cryptocurrency.
Llew Claasen, executive director of the Bitcoin Foundation, wrote a letter to the Senate Judiciary Committee. He takes issue with Section 12 of the “Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017.” This piece of the bill expands the way money transmitters keep records so government can track money launderers. The bill was originally introduced by politicians Dianne Feinstein (D‑CA), John Cornyn (R‑TX), Chuck Grassley (R‑IA), and Sheldon Whitehouse (D‑RI).
Are Cryptocurrencies Money?
In the Bitcoin Foundation letter, Claasen argued that bitcoin is not money the way governments are defining it. He said:
Bitcoin lacks the characteristic of monetary instruments or financial products which S. 1241’s Section 13 attempts to regulate. Several states, as well as federal agencies have already taken conflicting positions on both the economic nature of “virtual currencies” such as Bitcoin, as well as on the legal approach to regulate such a new technology.
Claasen further stated governments need to do more research on cryptocurrencies before jumping the gun. They seem to be attacking cryptocurrency without verifying it is actually “money.” The Bitcoin Foundation argued in the letter that different government agencies do not even have consistency in their definitions of cryptocurrency. For instance, the IRS claims it is a property. However, the Financial Crimes Enforcement Network has basically called it money. This inconsistency within government creates confusion in the law. This is why the Bitcoin Foundation asked the Government Accountability Office to investigate the DOJ.
Are Terrorists Using Bitcoin?
The Bitcoin Foundation also opposed the DOJ’s notion that terrorists are using bitcoin to finance their activities. Claasen’s letter read, “In the news release announcing the Bill’s introduction, Senator Grassley explicitly states that he is targeting digital currencies because of its potential use by terrorist organizations. Contrary to this assertion, there is little to no systemic evidence that terrorist organizations use virtual currencies.”
The letter also pointed out that terrorists will not use blockchain technology, especially bitcoin, because it is highly traceable. It does not make sense for a criminal to use such a highly transparent financial instrument. Furthermore, the Bitcoin Foundation says that criminals will continue to fund their activities the way they always have: with fiat currency.
However, even though various groups are making powerful arguments for bitcoin and rejecting the idea that it funds terrorism, many politicians seem to be spreading fear. In Australia, their political leaders have made similar arguments. They said most recently that cryptocurrency is being heavily used by organized criminal syndicates to fund their illegal enterprises.
Amend The Statute
As a result of the inconsistencies and faulty information, Claasen and the Bitcoin Foundation certainly want government to stop going after “illegal money transmitters.” A Theregister article clarified the position:
“Citing three prosecutions of Bitcoin sellers since 2011, Claasen goes on to decry the DoJ’s use of money transmitting laws to go after Bitcoin sellers. Bitcoin, he insists, is not covered under these laws, and if Congress wants it to be, legislators should amend the appropriate statute.”