The question of whether cryptocurrency is money was raised in a recent court case. The court’s deliberations got us no closer to an answer.
The Australian Federal Police went to the New South Supreme Court earlier this year seeking orders allowing them to seize funds, digital currencies and other assets in connection with alleged money laundering by John Bigatton and his company, JB’s Investment Management.
In 2017, Bigatton was appointed as the local promoter of BitConnect, a UK business that offered investment in cryptocurrencies.
According to the AFP, BitConnect had around 20 Australian investors who invested around A$258,000.
BitConnect’s principal investment opportunity, BitConnect Lending Program, “allowed investors to profit from the BitConnect trading bot and volatility software”. The program was closed down in 2018, with substantial losses incurred.
Bigatton was accused of operating an investment scheme that was not registered. He was also accused of dealing in suspected proceeds of crime with a value of more than $100,000.
In his ruling, Justice Richard Cavanagh said: “I should say something about cryptocurrency. Cryptocurrencies are known as virtual currencies and may be considered a form of electronic money.
“Cryptocurrencies can be bought and sold on exchange platforms and can be used to pay for goods and services from a person or entity that is willing to accept the particular cryptocurrency as payment.”
As part of his defence, Bigatton argued that anything related to cryptocurrency or advice in relation to cryptocurrency is not a financial service within the meaning of the Corporations Act.
He also argued that “dealing in cryptocurrency is not dealing in ‘money’ within the Corporations Act and that cryptocurrency does not meet the requirements of a financial product.”
He said he made it clear to investors that they were engaged in a form of gambling.
The judge said: “Whether or not cryptocurrency is money, the definition of managed investment scheme refers to money’s worth. There does not appear to be any case as yet which has been determined, which offers guidance on the submission made by Mr Bigatton that bitcoin is not money.”
“I am satisfied that there are reasonable grounds for suspecting that he was operating in the jurisdiction of a managed investment scheme that was required to be registered. It had more than 20 members and was promoted by Mr Bigatton. There was pooling of funds and the investors did not have day-to-day control of their funds.”