On Tuesday, a New York judge postponed the Court’s decision in a case that might determine the legal status of bitcoin. Oral arguments centered on (1) the standing of the petitioner, (2) the jurisdiction of the New York State Department of Financial Services in establishing the BitLicense, and (3) whether bitcoin is a financial product or a commodity.
On October 10, 2017, Judge Carmen St. George ruled that the Court’s decision in the case of Theo Chino against the New York State Department of Financial Services (DFS), et al, will be reserved for a later date. Tuesday’s arguments focused attention on whether Chino has standing in the case, whether the DFS had the jurisdiction to create the BitLicense, and whether bitcoin is a financial product or a commodity. The Court will next address the case on January 11, 2018.
ETHNews spoke with Chino while he was on his way to the courthouse to collect a transcript of the proceedings. He later published a scanned copy of the document online.
Chino made it clear that he worries about large corporations that have a vested interest in the continued existence of New York’s BitLicense. “The companies that have BitLicenses invested a lot of money into getting them. So, they don’t want it to go away,” said Chino. But, “What I’m arguing is the definition of what a bitcoin is,” he explained in earnest.
For the last several years, Chino has argued that bitcoin is a commodity, which – he contends – would preclude the DFS from regulating it. He attempted to encourage bitcoin adoption by bodegas, but due to the prohibitive cost of compliance and capital requirements among other obstacles, Chino said, he was forced to close down his business. In March 2017, ETHNews explored the litigation in depth.
Forget for a moment whether bitcoin is a “financial product” or a “commodity.” One element that has been lost in all the legalese is where bitcoin actually intersects with consumers. Chino maintains that retail adoption of bitcoin is crucial for the success of larger bitcoin enterprises.
“You’ll never get adoption if you don’t have small business and big business. What [the DFS has] done is completely eliminate the small business market,” he said. “When I walk up to a small restaurant and [ask them to accept bitcoin], I have to do a lot of hand-holding. They don’t just go ‘I want to accept bitcoin because it’s beautiful and shiny.’”
The price of bitcoin has exploded from $400 at the end of 2015 to more than $5,000 today, so trying to fit bitcoin and other cryptocurrencies into the narrow classifications of regulation might be difficult. It also seems unprofitable for small businesses to invest time and effort in bitcoin payment systems, given the volatility of the asset, the complexity of taxation, and the existing alternatives of cash and credit.
There was another fascinating component that ETHNews discussed with Chino: ripple effects that sometimes occur in the judicial system. Readers may remember an unrelated incident from April 2017, wherein the body of Sheila Abdus-Salaam, an associate judge on the New York Court of Appeals, was discovered in the Hudson River. In the aftermath of her death, Chino said, a series of promotions meant that a new judge was suddenly assigned to preside over his case.
While Chino awaits a resolution, it is obvious that the judicial system is just beginning to understand how to address the changing financial landscape, and switching judges did him no favors.
This is best exemplified by one utterance by Judge St. George: “I mean, how – I’m still stuck on virtual currency is a digital form of money. Is it not?”