Is the Bitcoin (virtual currency) considered currency according to halacha?
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This abstract discusses the halachic status of the Bitcoin and virtual currency based on the features of currency, with a discussion of its development in past and present.
The Bitcoin is a digital coin that is part of a decentralized digital currency and payment system that can be used for online transactions. Since it is not (1) composed of any substantive material and (2) not issued by a particular government, the two trademark features of currency until now, are these coins considered currency (matbe’a) by halacha? Or would they be viewed as form of commerce? The halachic ramifications include the possible prohibition of interest in taking loans in Bitcoin and redeeming them at a nominal rate. If considered currency, it would be permitted; if considered a form of commerce, then it would be prohibited.
In the past, currency comprised coins whose value were linked with the precious metal they were composed of and their weight. Historically, though, there has been a shift from coins made of precious metals to coins and bills whose value is based only on the sum stated on them. The Ra’avad ruled that such bills are nevertheless considered halachic currency, as do other poskim in his wake, even though they are representative only. This means that from a halachic standpoint, the substance the coin is made of is insignificant and can even be non-existent, that is, virtual. Today, a large portion of business transactions are performed through bank transfers in any case, without a physical transfer of currency: a certain sum is noted as a debit on one person’s bank account, and noted as a credit on another’s.
Not everyone agrees, however, that a means of payment is automatically considered currency, since traditionally currency is issued by a specific government. In his currency-related rulings, the Chatam Sofer relies on the fact that bills are government-issued. The Chazon Ish, however, rules that currency need not be issued by the government but needs only government approval for its use. That is, halachic currency is defined as such based on public consensus.
Virtual currency could be defined as halachic currency if recognized by governments as such. Furthermore, even currency trusted and recognized by the public can be defined as halachic currency for means of payment even if not officially recognized by a given government. Since the Bitcoin is not government-issued, and public reliance on it is limited, it cannot currently be considered a halachic currency, but rather a form of transaction or a promissory note.