Right now Bitcoin is the round peg in the regulator's square hole.

If Bitcoin is deemed to be a security, then certain restrictions might apply on how it is bought, sold, and held. But Bitcoins themselves are not a debt, or a promise, or anything similar so it probably isn't a security.

If Bitcoin is deemed to be a commodity, then certain restrictions might apply on how it is traded, if delivery to the buyer is at some point in the future -- as is the nature of most commodity transactions.

If Bitcoin is deemed to be a foreign currency, then certain restrictions could apply there as well. FinCEN has explicitly stated that it does not see Bitcoin as a foreign currency.

But almost nowhere is there a restriction about acquiring a good, such as like what Bitcoin exchanges provide.

Regulators have not yet really figured out how to deal with Bitcoin, so things can change in the future.

It should be noted, however, that a Federal judge in Texas has ruled that Bitcoin is a legal currency. This came about when a guy set up a Bitcoin ponzi scheme and then tried to claim that he couldn't be persecuted because Bitcoin isn't a real currency. Fortunately, the courts disagreed.

Another way to think of it is this: When you exchange for Bitcoin, you are basically buying Bitcoins. Generally speaking, you are only forbidden from buying things that are expressively forbidden by law (i.e. drugs).

Right now, there is no government regulation that says that you cannot buy Bitcoin. And most likely for the government to set up a regulation against buying Bitcoins, it would have to prove that Bitcoins are harming the generally public (as is their argument in regards to drugs).

Personally, I doubt the government could make that case, and even if it wanted to, there are far more important things on their books.

If and when the government gets serious about regulating Bitcoin transactions, it will most likely focus on drug purchases, money laundering, and things that are illegal regardless of the currency used.

The issue with FinCEN and Regulatory compliance is this- How do they know that the Bitcoin Mr X is trading, exchanging, using, purchasing etc was not just gained for the sale of child porn, drugs, internet gambling, etc. A credit card company can block internet gambling, it can disallow the use of its card to openly pay for illegal stuff like drugs, explosives whatever. So a credit card has a much wider use case than bitcoin.

It is the challenge we are trying to overcome when it comes to providing services for the btc industry. A key piece in MSB activity is being bonded. As of now no bonding company (that we know of) wants to assume the risk. So even though we are a licensed MSB, we want to provide btc services we cannot comply with the regulatory requirements. One of which is bonding. We also need banks to take on the FBO accounts and right now they don't seem to want to do it.

So right now btc can be used within a relatively small environment (in comparison to a credit card or cash) but it will never be widely accepted by commerce until some very real problems can be solved. So I am not even sure if legality or being able to define its legality is relevant right now.

The biggest boon and benefit to bitcoin will come when someone finds a way to substantially show that the btc in my wallet did not come from illicit activity. Once that happens btc will be much easier to use and will hopefully become commonplace.