Bitcoin Bill will likely land Silk Road's Founder in Jail

Ross William Ulbricht, the person who was in charge of the Silk Road website, should not be charged with money laundering, according to his attorney, Joshua Dratel, who stated that Bitcoin are property and not real currency citing the IRS’ recent ruling.

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Bitcoin Bill will likely land Silk Road's Founder in Jail

Ross William Ulbricht, the person who was allegedly in charge of the Silk Road website, should not be charged with money laundering, according to his attorney, Joshua Dratel, who stated that Bitcoin are property and not real currency citing the IRS’ recent ruling

 
The Silk Road “mastermind” is charged with using Bitocoins to launder money related to drug deals and criminal services such as hit man-for-hire that was allegedly made available through the site. 
 
 
First Bitcoin Bill 
 
This is where it gets interesting as yesterday at Inside Bitcoins NYC, Congressman Steve Stockman (R-TX) announced that he is planning to introduce a bill on virtual currencies later in the day. The Virtual Currency Tax Reform Act would authorize the Internal Revenue Service to treat virtual currencies as currency for federal tax purposes. 
 
 
Section 2 of the proposed legislation reads:
 
“The Classification of virtual currencies as property means that users would be required to pay capital gains tax on any transaction using the virtual currency based on any gain over the virtual currency’s value from the time of purchase.” 
 
The bill then defines the term ‘virtual currency’ as “a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value.” 
 
The Bitcoin Foundation is certainly not a proponent of IRS’ stance saying that this could result in unrealistic reporting. 
 
Reactions from the ‘Bitcoin Crowd’ 
 
The IRS’ ruling has received much criticism from users since according to the rules, users would need to keep track of all of their transactions and calculate gains/losses at the end of the year. This means more number-crunching, red tape as well as the possibility of fraudulent reporting. 
 
Therefore, it is no surprise that Stockman’s proposed bill had received a lot of support yesterday. 
 
“We salute Congressman Stockman for making good on his promise to support digital currencies like Bitcoin,” said Nick Spanos, NYC Bitcoin Center founder. 
 
He continued, “The Congressman displayed an interest in Bitcoin’s path-breaking, job-creating technology early on. On behalf of the entire digital currency community who have a stake in this nascent industry’s growth and its normalization into the economy, Bitcoin Center NYC thanks Congressman Stockman for leading the charge amid what often seems like conspicuous silence on the matter.” 
 
Ulterior motive or coincidence? 
 
Stockman is certainly no stranger to virtual currencies as he is the first member of U.S. Congress to accept Bitcoin contributions. And speaking on his proposed law, the congressman stated: 
 
“This is a nascent industry. Along with 3-D printers and nanotubes, cryptocurrency is the future. “We need to encourage it, not discourage it. There is risk associated with every budding industry in America.” 
 
We can only speculate as to whether this initiative by the Congressman is mere coincidence, however, the penultimate section of the bill states: 
 
“The Internal Revenue Service shall treat virtual currencies as currency for federal tax purposes.” 
 
In a court filling last Saturday, Dratel wrote: “Bitcoins, the exclusive means of payment on Silk Road, do not qualify as 'monetary instruments,' and therefore cannot serve as the basis for a money laundering violation.” 
 
Therefore, for federal tax purposes or not, if this bill were to pass, it would conveniently enable prosecutors to throw out Dratel’s claim that Bitcoin is not real currency. 
 
And while Dratel’s other arguments include that Ulbricht, whether he ran Silk Road or not, shouldn't necessarily be held liable for deals made by others on the site, the newly proposed law would significantly weaken Ulbrich’s case against federal prosecutors. 
 
 
Reactions from the Bitcoin community 
 
Michael Yeung: Good initiative. Taxing bitcoins = less reason to fear it. It'll look more legitimate if it's currency. This will have a domino effect, merchants will love it. 
 
I think Ulbrich is no longer important for the government or for Bitcoin in general. This space lives its life in dog years. Silkroad and related "industries" are a distant memory by the time the case is finally resolved. 
 
So I'd say that changing the asset class of bitcoins from property to currency has nothing to do with DPR 
 
Mathew Cunningham: This really should be a non-issue at least in terms of the progression of Bitcoin. Ross Ulbricht and his attorney are looking for a way to keep him from going to jail while the government is just trying to obtain the most tax income from its use in the market.
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