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Shabbat Parashat Pekudei 5776

Ask the Rabbi: Halachic Status of Bitcoin

Rav Daniel Mann

[Bitcoin, often called a cryptocurrency, has money-like functions without any coins or bills. Rather, it is a unit to exchange value used by probably millions of people internationally. When one transfers bitcoins as pay for a commodity or service, the seller informs the network of the transaction, and a bitcoin address is created with the information including the code (key) that the buyer will need to control the bitcoins. Within minutes, the network ledger (called the block chain) updates the new status of ownership of the bitcoins. One of bitcoin’s advantages is that it enables quick, inexpensive transfer of “money” between people worldwide. (There are now over 450 million transaction “addresses,” with some people owning multiple addresses). The system is self-regulated by the community of users. It is viewed in widely different ways within the financial world, governments, and legal systems.]

 

Question: I have been learning about bitcoin. Is it considered like money or a shtar (document) for a variety of halachic issues, e.g., marrying a woman, buying property?

 

Answer: We will not express a view about the value or danger (there are claims of links to money laundering and other criminal activity, dangerous volatility, …) but will look at a few areas in halacha in which determining bitcoin’s status would be significant.

Kiddushin can be accomplished by a groom giving a bride anything of value, whether a currency, a commodity (Kiddushin 2a), or theoretically even a service (see the complication discussed in Kiddushin 63a and Shulchan Aruch, Even Haezer 28:15). If a groom transfers to the bride rights to a debt a third party owes to him, even if done by speech without handing her a shtar, it can still work (Shulchan Aruch ibid. 13). The important thing is that he provides value, as long it is done positively, as opposed to something such as forgiving payment of a debt (ibid. 10). Even in the latter case, if one says he is marrying her with the benefit she receives by forgiving the debt, it is valid (ibid.). Therefore, with the right wording, a bitcoin transfer from groom to bride can work (it is a good question at what point in the electronic process the kiddushin would take effect).

It is unclear what you mean by shtar. A shtar for kiddushin or for land sale states that it is coming to effectuate that matter. Bitcoin is obviously not that. It is also unlike a shtar of debt with Shimon owing Reuven and Reuven using that shtar as payment to Levi. Bitcoin is not an individual’s promise of payment, nor is it legal tender or a bank note, in which a country or a financial institution stands behind the note. Rather, it is an unusual commodity. It is not a physical object that one can use, but one wants to possess it because others are willing to pay for it (a monetary use, in place of legal currency, which is also reminiscent of a pyramid scheme). Many commodities, e.g., oil, gold, have both functions.

Halacha distinguishes between currency (tiv’a) and commodities (peiri). One contemporary application relates to the kinyan of chalifin (appr., barter), which applies to commodities and not money(see Bava Metzia 44a-45a). Another is in terms of a Rabbinic form of ribbit (usury) called se’ah b’se’ah. That is, that it may be (depending on complicated parameters) forbidden to lend a certain amount of a commodity, demanding that it be replaced by the same amount of that type of commodity. This is because loans are defined in terms of currency. If one borrows 5 lbs. of apples costing $10, he is to return $10 in some form (including apples), and not 5 lbs. of apples, if the price has changed. If one borrows $100 of cash, he is to return $100, even if the dollar’s value has gone up or down. In these regards, bitcoin is a commodity, not a currency. The clearest reason is that bitcoin is not presently universally accepted as payment (Bava Metzia ibid.). Even a national currency has that status only in a country in which it is widely accepted among people. Bitcoin is not yet close to achieving that.

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