Electronic Frontier Foundation again takes bitcoin donations

The Electronic Frontier Foundation has resumed accepting bitcoins donations, saying some of the legal ambiguity around the virtual currency has disappeared.

The influential digital watchdog stopped accepting bitcoins two years ago citing a raft of complex legal questions that could have inadvertently thrust the nonprofit as a defender rather than an observer of an emerging technology.

The EFF wrote on its blog that its own research along with recent guidance from the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) "have confirmed that, as a user of Bitcoin or any virtual currency, EFF itself is likely not subject to regulation."

Bitcoin's challenge

It's still early days for how bitcoin will be viewed under the law. But FinCEN found in March that users of bitcoin do not need to register with the organization, but those exchanging bitcoins for U.S. dollars qualify as money services businesses and do need to register. The largest bitcoin exchange, Mt. Gox, has already run into trouble for not registering.

"While some have raised concerns about the FinCEN ruling, and noted that it's not binding, it did confirm our own analysis of risk to us as a user and reduced our concerns that by accepting Bitcoins EFF risked moving away from its role as a defender of innovators and into the role as a possible defendant," the EFF said.

The EFF made clear it is not endorsing bitcoin and that it may just end up being a "first draft" for better-crafted virtual currencies. The EFF supports "cryptographic experimentation" and said it believes "the best answer to Bitcoin's potential shortcomings is for others to come along and offer superior alternatives."

Payment processors have also arbitrarily enforced policies that would appear to conflict with First Amendment free speech rights, it said.

"Because of this, we're generally interested in ways of diversifying the market around payment options, so that a handful of big market players won't be able to exercise such a stranglehold over online speech," the organization said.

Secure setup

To process bitcoin donations, the EFF is using BitPay, an Atlanta-based company that builds software tools to handle the virtual currency. BitPay also allows merchants to cash out of their bitcoin holdings daily to avoid exposure to bitcoin's volatile trading price.

The Bitcoin system was launched in 2009. It uses peer-to-peer software to transfer bitcoins, which are a essentially a secret number that can be transferred to other computers using a cryptographic process that verifies transactions are legitimate.

The system has been described as brilliant in concept, but like any new technology suffers from scalability and usability problems, which were among the many issues discussed over the weekend at the Bitcoin 2013 conference in Silicon Valley.

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