The definition of Bitcoin is categorized as its own identity and confusing interchangeable terms between digital currency and virtual currency. Here I explore a little bit further the likely ideas of some legal interpretation on what money really is based on the U.S. legal framework.
The United States Constitution, Article I, Section 10
It prohibits the state-issued legal tender that contradicts the Federal Reserve’s monetary power.
Coinage Act of 1792
This article specifically tells people that one dollar is equal to 24.056 grams of silver or 1.5 grams of gold. It defines a dollar as a unit of account and its value is confined.
Legal Tender Act of 1862 during the Civil War
The US government issued paper dollars to support the war but eventually declared it unconstitutional due to restricting the power of Congress. The paper dollar was not legal tender but a legal currency.
Further legal cases after the Civil War defines the legal tender
Hepburn v. Griswold (1870)
The case defines the Congress can mint and issue currency but doesn’t have the power to issue legal tender. But they can regulate legal currency.
Knox v. Lee (1871)
The case granted the Confederate army purchased sheep through legal tender.
Parker v. Davis (1871)
A similar case granted legal tender as an obligation to pay for the service.
Juilliard v. Greenman (1884)
The greenbacks were legal tender that was enforceable in the courts.
Definition of legal tender
Legal tender’s definition is clear that it will be issued by the central bank to enforce payment from creditors to service providers. Once the service has been performed, creditors are obligated to pay but service providers can have a choice on which payment they would like to receive.
Post wars economy
Bretton Wood System 1944
The global gold pegged convertible fiat currency system was born. The idea was to stable the price of goods and services.
Wage/price controls in 1971
Bretton Wood system was ended in 1971 due to massive war spending in the US and the US demands the currency supply more than ever it needed.
Digital currency era
Convertible virtual currency
It is a currency but not a legal tender to trade within the nations. It can be either open or closed, centralized or decentralized.
Open vs. Closed
Open means you can freely convert into real currency while closed means you can only trade within constrained environments like a video game.
An example of open virtual currency is a credit card and an example of closed virtual currency is a gift card.
Centralized vs. Decentralized
The centralized system will have administrators to oversee the transactions and settlement while the decentralized system is peer-to-peer without a third party involved.
An example of centralized virtual currency is an E-gold and an example of decentralized virtual currency is Bitcoin.
Bitcoin is likely to fall in open and decentralized virtual currencies.
This topic will continue debating and evolving. I just list some of the history snapshots about how it evolved and what it may become.
Photo by Richard Horvath on Unsplash
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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose cryptocurrencies are mentioned in this article. This information is only for educational