On August 19, Judge Jed S. Rakoff of the US District Court for the Southern District of New York issued a ruling in the case of Robert Faiella, holding that bitcoins are “money,” citing the plain meaning of the term in The Merriam-Webster Dictionary. Faiella was charged with operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960, in connection with the sale of bitcoins for use on the Silk Road website, the “deep web” black market website which was shut down by the Federal Bureau of Investigation in October 2013.  Judge Rakoff held that a bitcoin qualifies as “money” or “funds” because it “can be easily purchased in exchange for ordinary currency, acts as a denominator of value, and is used to conduct financial transactions.” The opinion also cited SEC v. Shavers, 2013 WL 4028182 (E.D. Tex. Aug. 6, 2013), in which a Texas magistrate judge held that bitcoins “were a currency or form of money.” 

Given the referenced dictionary definition, Judge Rakoff found that the activities Faiella is alleged to have committed in transferring or selling bitcoins for profit would constitute unlicensed money transmitting. According to the indictment, Faiella received cash deposits from customers, exchanged the cash for bitcoins and then transferred bitcoins to customers’ accounts, thereby “transmitting” money pursuant to Section 1960 of the US Code. Under those facts, Judge Rakoff found that Faiella would qualify as a money transmitter, noting that the Financial Crimes Enforcement Network had issued guidance specifically stating that virtual currency exchangers constitute “money transmitters,” and an exception for those involved in the sale of goods or provision of services does not apply when the only services provided are money transmission services. 

The case is U.S. v. Faiella, 14-cr-00243, US District Court for the Southern District of New York.