During a hearing held last Friday, a bankruptcy court judge said that bitcoin is property not cash. The hearing relates to a suit filed by the trustee of bankrupt bitcoin mining firm HashFast Michael Kasolas against Marc Lowe, a former promoter for the service, seeking to recover 3,000 bitcoins (approximately $1.3 million) that had been paid by HashFast to Lowe for promoting the service.

In a January 22 filing, Kasolas asked for a “partial summary judgment” against Lowe that requires
“(1) determining that for purposes of section 550(a) of the Bankruptcy Code the 3,000 bitcoin transferred to Defendant constitute a commodity, not currency, and (2) directing that if the subject transfers are avoided the estate is entitled to either the bitcoin or the value of the bitcoin as of the transfer date or time of recover, whichever is greater”.

Lowe's lawyer, Brian Klein, asserted before the court that the bitcoin legally belongs to his client and asked Judge Dennis Montali to consider treating bitcoin as a currency rather than a commodity, The Recorder reported. Klein pointed out that the firm used bitcoin "as a medium of exchange and currency" in its business dealings. He said that it was hypocritical of the firm to seek the current value of the bitcoin it paid Lowe, especially when the firm took contrary positions when creditors made claims that they were owed in bitcoin.

Montali acknowledged that although the bankruptcy code "wasn't written with bitcoin in mind”, the cryptocurrency is "intangible personal property," not cash. He also said that even though the firm and Lowe might have used bitcoin to conduct a business deal "that doesn't make them dollars".

However, Klein tried persuading the judge saying that dollars and bitcoin were the "exact equivalent" in this particular case, to which Montali quipped that although bitcoin might be more widely accepted, "but you try paying your bar ticket with one."

The judge, however, didn’t rule on the underlying ownership dispute and said that if it is established that the transfer was invalid, he will decide later whether Lowe will have to hand over the bitcoin itself or the dollar equivalent.