This stuff gets confusing!  If you follow the links I've provided you'll find that it might not be clear WHAT Bitcoin is, and this might be why we don't see any definitive opinion on this from the US Treasury, inasmuch as they might not want to make a mistake that result in a court ruling in favor of Bitcoin.

That seems to be the way of it for systems that promote themselves as ways to circumvent law.  Perhaps Bitcom will change into something less like a big bullseye and survive?

There are lots of local currencies in the US too, but one that tried to be more than a local currency was outlawed (Liberty Dollars).  Does anybody know a resource for the currency laws in the UK?

Check out the links in the comment above and you'll find info that might be useful.  You are right that nobody has to use US currency in the US (or any money for that matter), but "legal tender" means that if anyone refuses payment in US currency then the debt can be canceled by court order, which means they cannot sue for payment.

Here is a link to a PDF of a book excerpt that addresses many of issues involved in alternative currencies in the US:

http://www.smallisbeautiful.org/local_currencies/Book.pdf

Unfortunately, it's from photocopies and so not searchable.

It mentions, for instance, that issuing coins or notes that are fractions of US dollars is illegal and subject to criminal penalty.  This seems to signify that any foreign currency used in commerce in the US or any scheme such as Bitcoin might do poorly in Federal Court because they were/are issued with values that are fractions of dollars.  Of course, nobody much cares until these currencies aim to circumvent law or replace US currency.

Here's a nice resource:

http://money.stackexchange.com/questions/3582/are-there-any-countries-where-citizens-are-free-to-use-any-currency

and another interesting post:

http://www.quora.com/Is-Bitcoin-legal

and from aljazeera

http://stream.aljazeera.com/story/bitcoin-and-alternative-currencies

Cheers!

As you say, a compilation is a must for the system, but it's also interesting to discover what users believe, especially given that Bitcoin is advertised as an activity that can circumvent rules, and because Bitcoin is a fiat currency and so user opinion is the source of its value.

Following the link you provide, I note that China has banned the use of virtual currency for the purchase of real goods, as you report, but that it also restricts the use of virtual currency to virtual goods provided by the issuer of the currency, and thus Bitcoin is effectively banned in China.  You suggest that the definition of a virtual currency includes that it is backed by one issuer that can provide goods and services and that it is pegged to a specific exchange rate.  Do you have a reference for that definition as a general rule, or are referring to China only and extrapolating from the link?

Thanks!

I've offered to give answers to questions directed at me, but I don't want to misinform, so I'm going to duck this a little because the answers are legally complex and I'm not an expert.  But I'll offer an example to illustrate what this topic is about.

In the US, there was/is a currency called "Liberty Dollars".  It still exists, but it is illegal to use because it was ruled in a court that it is counterfeit US currency.  It's issuer is facing years in prison.  He promoted his alternative currency (AC) as a replacement for the US Dollar, and the US Treasury warned him to stop.  His AC was a terrible currency because it was backed by silver, which is hoarded when the value is high and difficult to spend when the value is uncertain.  People bought it for all kinds of reasons but there was never enough of it in circulation to interfere with commerce anywhere.  However, he was warned for years, but used the warnings to gather attention, and so he was eventually prosecuted and found guilty of a variety of offenses.

The lesson that the US Treasury wants us to take from this, presumably, is to heed its rulings.  This is why I think that what nations have officially said about Bitcoin is relevant, and I'd like to get a clearer picture of that so that I can better understand the story as it unfolds.  Nobody really cares, I think, about those cute Disney Dollars, or other tiny currencies, and Bitcoin is also tiny but it advertises as a way to circumvent rules, is under scrutiny (according to news posts), and has a wildly fluctuating value...so the writing is probably on the wall.

Hi Stephen.

I've found that Paul Glover at Ithaca Hours, in Ithaca, New York, is a great source for accurate information on the law regarding US currency through his guide to creating local currency, which he sells.  He was the first to answer this for me, about twenty years ago.  Since then I've had it confirmed by the US Secret Service, which is the primary US government agency that deals with financial crime.

http://www.secretservice.gov/criminal.shtml

By the way, I see you are online now and that you are a "hero", so perhaps you can answer my question by naming one nation that has ruled bitcoin either legal or illegal.

Exchanging foreign currency in the US is strictly regulated, but not considered commerce.  I've heard that many ethnic communities in the US use foreign currency in commerce, but that is nevertheless illegal and if the numbers get big then I suppose they take a risk.

Thanks, andrepcg.

It is illegal in the US to use foreign currency because it is illegal to use any money that is not denominated in US Dollars.  More specifically, it is illegal to denominate money in a foreign currency.  Interestingly, Canadian coins are in common use in the US near the Canadian border, but I doubt if anyone has ever been prosecuted.

Can anyone name one nation that has declared this type of exchange system either legal or illegal?

In the US, there are laws defining money and regulating its use.  Bitcoin is a money in the US by definition if it is used as money (almost anything can be used as money), but I believe it isn't legal for several reasons.  One reason is that legal money in the US must be denominated in a US Dollar value with a minimum value of 1 USD.  Bitcom neglects obvious questions in its FAQ section, such as "What is the value of a bitcoin?" (and "Where are bitcoins illegal?", etc.) and thus it can not be legally used as money in the US.

So, I'm interested in collecting useful data on these issues, beginning with a list of nations that have declared bitcoins legal or illegal.

Anyone?

Please post links to government websites that state their nations' legal opinions on bitcoins.

Thanks!

P.s. I'll check back and answer questions and compile the list from your posts of legal and illegal nations (if any) directly below this sentence.

Banned in China:  http://english.mofcom.gov.cn/aarticle/newsrelease/commonnews/200906/20090606364208.html
(Phillipsjk notes below that China has banned the use of virtual currency (in general) for the purchase of real goods, and the link he provides also notes that virtual currency can not be used to purchase virtual goods except from the issuer, so Bitcoin is effectively banned in China.)

Can anyone name one nation that has declared this type of exchange system either legal or illegal?

In the US, there are laws defining money and regulating its use.  Bitcoin is a money there by definition if it is used as money (almost anything can be used as money), but it isn't legal for several reasons.  One reason is that legal money in the US must be denominated in a US Dollar value with a minimum value of 1 USD.

Bitcom neglects obvious questions in its FAQ section, such as "What is the value of a bitcoin?" (and "Where are bitcoins illegal?", etc,) and thus it can not legally be used as money in the US.

So, I'm interested in collecting useful data on these issues, beginning with a list of nations that have declared bitcoins legal or illegal.

Anyone?  Is there an existing list?