Buying Alcohol with Bitcoin Is Now Illegal in Ohio, For Some Reason

Can a cryptocurrency thrive if you can’t use it to buy booze? Bitcoin enthusiasts in Ohio are going to find out. The Ohio Department of Public Safety announced last week that you can't use Bitcoin to buy alcohol anywhere in the state, the Cleveland Plain Dealer reported.

The strange law came along after the Cleveland Heights neighborhood set out to establish the first “Bitcoin Boulevard” in the US—a chain of businesses that all accept the virtual coins. (The first is in the world launched last month in the Netherlands.) But the plan ran into trouble when public safety officials said businesses that serve alcohol couldn’t accept Bitcoin as payment.

Why no liquor? The state decided that Bitcoin's value fluctuates too much to consider it a legal currency, and under state law you can’t barter or trade for alcohol—the transaction has to involve money.

Aside from being a major snag in Cleveland's futurist crypto-marketplace, the ruling also illustrates the virtual coins’ uncertain future. The Ohio law is the first state government restriction on how Bitcoin can be used in commerce, and it comes on the heels of the IRS’s similar ruling last month that the volatile coins would be taxed as property rather than as currency.

Of course, not everyone agrees with this classification. According to Nikhil Chand, the founder of CoinNEO, which is spearheading the Bitcoin Boulevard project, the state authorities don't understand well enough how the Bitcoin payment system works.

“Under the state law you can’t barter for alcohol; you can’t trade for alcohol; you can’t do coupons or give away alcohol for free,” Chand told me. “They think it falls under the existing rules and that it’s not a payment.”

But, he went on, “Most of the merchants are using Bitpay, which is a third-party payment processor … and Bitpay is guaranteeing 100 percent US dollar deposits, just as you would for any foreign credit card.”

In other words, he’s arguing that if you can trade foreign currency for US dollars and buy products with that, then you should be able to do the same with Bitcoin. And Bitpay, a payment gateway used by businesses to integrate Bitcoin, guarantees US currency deposits after a payment’s made, as opposed to just transferring someone a set amount of BTC that could change value right after the transaction.

Chand sent a revised concept of the project plan to the public safety department responsible for issuing liquor licenses to try and explain that the virtual currency is stable and safe. He plans to keep fighting to keep alcohol sales as part of the Bitcoin Boulevard experiment, worried that what happens in Cleveland Heights will set a precedent for other US states beginning to adopt Bitcoin as a form of payment.