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Ask the Rov: Does\u00a0halacha\u00a0<\/em>recognize a peer-to-peer transfer of Bitcoin and other virtual currencies?<\/strong><\/strong><\/p>\n By Rabbi\u00a0Chaim Hillel Raskin<\/strong>\u00a0<\/strong>\u2013 Rov of Anash in Petach Tikvah<\/em><\/p>\n Paper currency is currently backed by its issuing government, and that is what gives it worth. Halacha recognizes it as having value at least like a loan document, or even as having inherent value (gufo mamon)\u00a0<\/em>like standard money.1<\/sup><\/p>\n Bitcoin, a virtual currency is unique in that it isn\u2019t regulated or backed by any central authority, rather its value is based on the agreement between the currency\u2019s community members, and the value fluctuates greatly. Bitcoins are found (in the form of letters and numbers) in a central \u201cblockchain\u201d and proof of ownership is in each individual\u2019s digital \u201cwallet.\u201d<\/p>\n So far, Bitcoin hasn\u2019t been declared by the government as the legal tender of the country and isn\u2019t the generally accepted currency used for transactions. Therefore, it doesn\u2019t have the halachic status of currency, rather as a commodity. Thus, if you borrow Bitcoin from someone, you would need to return the\u00a0value\u00a0<\/strong>of the Bitcoin you borrowed, not actual Bitcoin, to avoid the transgression of\u00a0ribbis\u00a0<\/em>known as\u00a0se\u2019ah b\u2019se\u2019ah\u00a0<\/em>(\u201cmeasure for measure\u201d).2<\/sup><\/p>\n Is trading Bitcoin considered gambling?<\/p>\n According to the Rambam and Shulchan Aruch, one who gambles transgresses \u201cavak gezel<\/em>\u201d (borderline theft) as the one who loses the gamble isn\u2019t receiving anything and only agreed to the arrangement based on a false hope (asmachta<\/em>), and one who engages in gambling is invalid to testify. Rama holds that the issue with gambling is that he\u2019s engaged in something that has no purpose for the world\u2019s benefit (eino osek b\u2019yishuvo shel olam<\/em>).<\/p>\n Purchasing Bitcoin, albeit a gamble, is different. The transaction is done whole-heartedly (thus it isn\u2019t\u00a0gezel<\/em>) and it is commonly traded by millions of people (thus it benefits trade). Even if it has nothing substantial behind it, one cannot say that one who deals with it is dealing with something which has no purpose.3<\/sup><\/p>\n How do you take ownership of a Bitcoin?<\/p>\n In order to acquire an item, paying for it isn\u2019t enough, and one must do something to affect a\u00a0kinyan<\/em>. Since Bitcoin isn\u2019t a physical item, the regular\u00a0kinyanim\u00a0<\/em>won\u2019t work. One option might be a\u00a0kinyan situmta<\/em>, an action customarily done by merchants to consummate a deal, such as shaking hands. While there usually isn\u2019t any face-to-face contact between the buyer and seller, the Bitcoin moving out of the seller\u2019s ownership is the accepted mode of transfer and may affect a\u00a0kinyan<\/em>.4<\/sup>\u00a0Others\u00a0question whether this works for a \u201cdavar she\u2019ein bo mamash<\/em>,\u201d a thing without substance.5<\/sup>\u00a0Some suggest\u00a0kinyan odisa<\/em>, which is\u00a0an admission by the seller that he sold the Bitcoin, since all transactions are recorded irreversibly in the central blockchain.<\/p>\n Since cryptocurrency is still in its early stages, it\u2019s possible that it will undergo change and one must check out each cryptocurrency independently.<\/p>\n See Sources<\/a>\u00a0(open PDF)<\/em><\/p>\n From\u00a0The Weekly Farbrengen<\/a>\u00a0by Merkaz Anash<\/em><\/p>\n<\/div>\n