A quick look on the Investopedia, an Internet site devoted to investment education, a legal tender is defined as any currency that has been declared legal by a government.
Going by this definition, are other forms of currencies illegal? Are you committing a crime by accepting, holding or settling debts using bitcoins?
Well, to answer these questions, we first need to understand what money is and how a legal tender fits in it.
In The Law Of Bitcoin, a book published in 2015 and the first to delve into cryptocurrency law in Canada, Germany, the United Kingdom and the United States, the author explains that there is no universally accepted definition of money.
Money is either monetary objects or monetary value
But all the definition commonly used fall into two categories; economic and legal. The former emphasizes on money being a store of value, unit of account and medium of exchange, and the latter is concerned with it as a tool for performing contracts.
Further, according to the book, money is either monetary objects (Physical money) or monetary value (the right to receive monetary objects). And it is the power to create monetary objects (legal tender notes and coins) that the law confers exclusively on government through such agencies as the Federal Reserve in the US.
That implies that creation of monitory value is open to everyone as long as others are willing to accept it. Indeed, the major difference between a legal tender and other forms of currency is in the fact that a creditor or a merchant has a right not to accept a currency as long as it is not a legal tender.
You can’t say no to legal tender
In other words, the owner of a restaurant in New York City, for instance, cannot refuse to accept dollars from a customer settling bills but he can choose to say no or yes to Bitcoin or a cheque.
Before mass digitization that came with the internet the question as to whether money and legal tender referred to the same was of little concern to the general public. It was almost an exclusive debating point for the academicians, lawyers and economists.
Now, that is no longer the case. The world is seeing a major shift in the idea of money and ordinary consumers like you and me at one time or another have to grapple with this basic question.
Indeed, the emergence of decentralized digital currencies like Bitcoin has forced not only consumers but also regulators, banks, lawyers and all other stakeholders to give another hard look at the ideas of money and legal tender. This might result in a change of legal definition of money and legal tender going forward.
The classification of Bitcoin is not uniform
However, that is far into the future. Meanwhile, financial and other relevant regulators around the world are issuing guidelines on how the already existing laws accommodate these new forms of money.
The respond is far from uniform around the world but majorly, except in few cases where it has outrightly been banned, it has been classified as either commodity money, property or private money.
That means it is not legal tender, which, therefore, every creditor cannot decline as a form of payment, but where two individuals agree it serves the purpose of money adequately and legally.
We recommend that you to do more research especially on Bitcoin’s status as money in your jurisdiction.
