April 28, 2014 12:00 PM

Ohio Imposes Bizarre Ban On Bitcoin-for-Alcohol Sales

Friday, Ohio regulators  banned Bitcoin-for-alcohol sales in the state.

Ohio regulators impose a bizarre ban on bitcoin-for-alcohol transactions in the state.

Nikhil Chand, founder of CoinNEO and Bitcoin Boulevard, patiently prodded state regulators about the legality of Bitcoin-for-alcohol transactions.  The federal Alcohol and Tobacco Trade Bureau gave him the go-ahead. But when the Ohio Department of Public Safety finally issued an official  response, it was not what he had hoped for.
“Bitcoin cannot be accepted as payment for alcohol in the State of Ohio,” state regulators decided.
The Plain Dealer, the leading Ohio newspaper, reports:

Eric Wolf, agent-in-charge with the Ohio Investigative Unit of the Ohio Department of Public Safety in Columbus, said that because Bitcoin’s value fluctuates so much, it is more like a commodity and “not recognized as legal currency.”

[dropcap size=small]B[/dropcap]ecause of the ruling, Bottlehouse Brewing Co. chose not join its neighboring independent merchants on Bitcoin Boulevrd—offering products and services like handcrafted ice cream, apparel, accessories, and haircuts—when they start accepting Bitcoin payments on May Day.
The decision poses an obvious roadblock for other small business merchants on Lee Road that hoped to accept the crypto-currency. In fact, three of the eight participating merchants listed on the Bitcoin Boulevard website are directly alcohol-related: the Wine Spot, The Tavern Company, and Parnell’s Pub. However, it seems that they can still legally participate, if they chose, by offering other non-alcoholic menu items.

Bitcoin Regulations

“This, to me, marks a first for a US regulatory agency to efficiently ban bitcoin,” Bitcoin Boulevard organizer Nikhil Chand wrote.
In the broader U.S. regulatory context, this is an interesting point. The IRS unveiled tax guidance for taxpayers earlier this year, ruling that Bitcoin is property, not currency. Unclear U.S. regulations have made it risky and cumbersome for Bitcoin businesses to operate in the country. But it does not seem tht any U.S. government agency, local or federal, has banned Bitcoin transactions outright (at least, those that are legal when purchased regular fiat currency). Not to mention, a congressional call for a wholesale Bitcoin ban was stopped in its tracks by an army of eye rolls.
It could pose a precedent for other governments who decided against issuing bans up until now. But maybe it won’t. State regulators may simply be complying with a strange local law that bans the use of non-currencies to purchase alcohol.

Bitcoin Pierces the Brick-and-Mortar Market

While Bitcoin has become an Internet phenomenon, it has been slower to break into the physical-retail realm. Consumers can buy many items online using companies that cater specifically to crypto-currency users, like electronics at Bitcoin Store, or online retailer companies like eGifter and Overstock. As a relatively new invention, Bitcoin has not penetrated the brick-and-mortar sector.
Ohioan merchants are attempting to bring Bitcoin sales to a more hands-on brick-and-mortar world with the Bitcoin Boulevard project. Alcohol, a popular consumer item, seemed like an obvious product to add to the forthcoming Bitcoin-business hub.
Pioneering the Bitcoin market is a risky enterprise, in this day and age, when the regulatory atmosphere is messy and unclear. Users are at risk of  facing new arbitrary rules imposed by government officials, like this one, while the dust settles in the regulatory sphere.
Even as the rule disappoints a few Bitcoin Boulevard merchants, the project itself is undeterred.
Photo courtesy of cyclonebill / Wikimedia.

Alyssa Hertig @AlyssaHertig

Alyssa earn a B.A. in history from the University of Minnesota. She's written for Motherboard, Reason, and PolicyMic. Get in touch on Twitter: @AlyssaHertig