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Seongguang Oh | eglobeman

BitCoin & its Legal Status

Jan 6th 2015 at 6:00 AM

1. The definition of the bitcoin

 

The bitcoin is the virtual electronic money that is given as the compensation to the 1st finder of the decryption value of the summery of the decentralized and encrypted public record of all the transaction acknowledged by the majority of the participants in the certain span of time and the 1st finder lets circulate.

 

2. The Legal status

 

Let's scrutinize in the points of view of the following 4 status thought of.

 

(1) National legal tender

 

Though the bitcoin has the traits of the virtual creation and the wide circulation, it can not clearly become the fiat of any country immediately. For the statute makes clear the bitcoin can not be compatible with it, as the article 47(Issuance of Currency) of the law of the Bank of Korea stipulates 'The capacity of the issuance of the currency is owned solely by the Bank of Korea.' and the article 48(Circulation of the note of the Bank of Korea) does 'The note of the Bank of Korea being the legal tender, is circulated for all the transaction without any limit. We can assume this is nearly same with all the currency sovereignty countries.

 

(2) Foreign exchange

 

If so, can the bitcoin be the foreign exchange? The Foreign Exchange Transaction law defines the foreign exchange precisely as the next sentence.

 

The foreign exchange points to the foreign currency, the payments means in the foreign currency, the payments means usable in the foreign countries regardless of the expression of the currencies, the governmental paper money, the bank note, the coin, the cheque, the postal exchange, the letter of credit, the draft, the promissory note and the other payment instruct, the token, the plastic card and the things with the property value input in the electronic or the magnetic way, which can be used for the public payments in the substitution of the currency, the postal payment order, the telegraphic bank wire, the debit(check) card and the similar prepaid card in the foreign currencies.

 

In short, the foreign exchange is defined on the premise that a certain foreign currency and payments means is formally admitted in the foreign currency sovereignty countries. As far as we know, the bitcoin has not been adopted as the fiat or other public payments means by any government. Therefore we can conclude the bitcoin can not be the foreign exchange.

 

(3) Intellectual Property Right

 

The bitcoin might be one of the intellectual property rights that is endowed to the intellectual properties of the human creation worth the legal protection, according to the Computer Program Protection law.

 

We might assume Internal Revenue Service of U.S.A. has this attitude, as it levied the capital gain tax on the appreciation surplus between the different times of the bitcoin.

 

(4) Contraband

 

In the points that the bitcoin could challenge against the monopolistic status of the fiat about the issuance and the circulation and the advent of the bitcoin itself looks too dangerous or offensive in the eyes of the legislator who is soaked in the ideology of ‘the creation of money belongs to the king(貨權在上)’ for thousands years (contraband in se), they could appoint it as one of the contraband like the drug, the fencing and the 'private money' e.t.c. and ban the take hold or the transaction of it.

 

In fact, there might lie the legal ground behind the scenes that some countries has cracked down on the bitcoin exchanges.

 

3. Proposal

 

We have scrutinized the legal status of the bitcoin in compact. In a word, it is very unstable like 'an oil in the water' of the established legal system. Once one of the micro countries with the money sovereignty could adopt it as her fiat by the consensus of her people, the other countries could upgrade it from it's current unstable status to the foreign exchange in the legal sense first of all.

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