Bitcoin: Questions, Answers, and Analysis of Legal Issues
Congressional Research Service 13
security under federal securities law.
In another enforcement action, the Department of
Homeland Security charged Mt. Gox, which is the Japanese-based largest Bitcoin exchange in the
United States, with operating an unlicensed money services business in violation of 18 U.S.C.
Section 1960 and seized its bank account. Subsequently, Mt. Gox filed for bankruptcy in Japan,
and on June 14, 2014, a federal bankruptcy judge approved its petition under Chapter 15 of the
U.S. Bankruptcy Code, allowing the U.S. bankruptcy court to protect its U.S. assets while the
bankruptcy proceedings continue abroad.
The federal banking regulators have yet to issue guidance or regulations governing how banks are
to deal with Bitcoin, outside of the anti-money laundering framework. Under current law, the
federal banking regulator with the greatest responsibility over the payment system is the Board of
Governors of the Federal Reserve System.
In February 2014, Federal Reserve Chair Janet
Yellen told the Senate Banking Committee that “Bitcoin is a payment innovation that’s taking
place outside the banking industry. To the best of my knowledge there’s no intersection at all, in
any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and
regulate.”
Nonetheless, the Federal Reserve Board, in its May 9, 2014, joint meeting with its
Federal Advisory Council, considered Bitcoin’s potential as “a threat to the banking system,
economic activity, or financial stability” and appears to have adopted a policy that may be
characterized as watchful waiting.
That policy produced no regulatory issuances in 2014.
However, studies of the technical aspects of Bitcoin were featured in three research papers, two
issued by Federal Reserve regional banks
and one published by the Federal Reserve Board’s
Divisions of Research and Statistics and Monetary Affairs.
Securities and Exchange Commission v. Shavers, 2013 WL4028182, No. 4:13-CV-416 (E.D. Tex. August 6, 2013).
This appears to be the first ruling addressing the question of whether digital currency issued without the backing of a
government or other official entity is to be legally considered money.
Michael Balthon, “Mt. Gox U.S. Bankruptcy Approved to Help Bitcoin Hunt,” Bloomberg News, June 17, 2014,
http://www.bloomberg.com/news/2014-06-17/mt-gox-u-s-bankruptcy-approved-to-help-bitcoin-hunt.html.
A section of the U.S. Code is entitled “Regulatory responsibility of Board for payment system,” 12 U.S.C. §4008.
Under that provision, which was enacted as part of the Expedited Funds Availability Act of 1987, Congress has
delegated to the Board of Governors of the Federal Reserve System “responsibility to regulate ... any aspect of the
payment system, including the receipt, payment, collection, or clearing of checks, and any related function of the
payment system with respect to checks.”
Senate Committee on Banking, Housing, and Urban Affairs, Semiannual Monetary Policy Report to the Congress,
February 27, 2014, available at http://www.banking.senate.gov/public/index.cfm?FuseAction=Newsroom.Video.
Federal Advisory Council and Board of Governors of the Federal Reserve System, Record of Meeting, May 9, 2014,
http://www.federalreserve.gov/aboutthefed/fac.htm/. The Record of the Meeting at p. 10 includes the following
statement with respect to Bitcoin: “Systemically, Bitcoin’s nascency makes it more curiosity than threat. Its greatest
near-term hazards are its avoidance of consumer protection measures and illicit use, both of which support increased
regulation. Medium- to long-term effects could be more pronounced as the network self-refines and adoption increases,
requiring traditional payment processors to adapt and respond.”
François R. Velde, “Bitcoin: A Primer,” Chicago Fed Letter, December 2013, https://www.chicagofed.org/
publications/chicago-fed-letter/2013/december-317; and Stephanie Lo and J. Christina Wang, “Bitcoin as Money,”
Federal Reserve Bank of Boston, Current Policy Perspectives, No. 14-4, http://www.bostonfed.org/economic/current-
policy-perspectives/2014/cpp1404.htm; and Tim Sablik, “Digital Currency: New Private Currencies Like Bitcoin Offer
Potential—and Puzzles,” Federal Reserve Bank of Richmond EconFocus (3d Quarter 2013).
Anton Badev and Matthew Chen, Bitcoin: Technical Background and Data Analysis, Federal Reserve Board,
Divisions of Research & Statistics and Monetary Affairs, Finance and Economics Discussion Series 2014-10, October
7, 2014, http://www.federalreserve.gov/econresdata/feds/2014/files/2014104pap.pdf.