Florida lawmakers call for Bitcoin to be included in anti-money laundering laws to prevent it from being used for criminal activities

According to the Miami Herald, a Florida legislative committee wants the State Money Laundering Act to cover virtual currencies like Bitcoin, a change that supporters claim will ensure criminals can't use Internet-based currencies to hide financial activity. Law enforcement officials support the measure, but some Bitcoin enthusiasts say it would undermine Bitcoin.

The bill was prepared by Miami-Dade County cybercrime prosecutors after a judge indicted a man accused of selling $1,500 in bitcoins over the Internet in exchange for stolen credit card numbers. Miami-Dade County Attorney Katherine Fernandez-Rondler said high-tech criminals use virtual currencies to hide their illegal activities. The bill being prepared will ensure that criminals cannot use Internet-based currencies to hide and transfer illegal proceeds.

Supporters say

Some Bitcoin supporters claim that the bill could undermine the cryptographic security of trade between Florida and countries like Venezuela, which relies more on Bitcoin because its own banking system has collapsed. Charles Evans, an economist at Barry University who specializes in Bitcoin, said the bill sends the message that financial innovation is unwelcome in Florida. From a competitive perspective, other countries and state governments that welcome Bitcoin will be happy with Florida's bill. The state housing committee passed the bill, sponsored by Miami Representative Jose Felix Diaz, unanimously last week. Two state Senate subcommittees also passed the bill, and the state Senate Appropriations Committee is about to vote. Under current Florida law, transactions that conceal funds obtained from criminal activities are called money laundering. Under the proposed bill, "virtual currency" would be included in the list of "monetary instruments" covered by money laundering. The bill defines Bitcoin as "a medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country." South Florida attorney Andrew Hinkes believes that the new bill will help prosecutors handle Bitcoin-related cases, but they still have to prove the motivation of Bitcoin users to launder money.

Hinkes explained to the Miami Herald:

“I don’t think this bill will affect the average Bitcoin user or investor, but companies that exchange Bitcoin for U.S. dollars may be affected. Once it is proven that there is a motive for money laundering, the trial process in Florida will become very clear.”

Questions raised by money laundering cases

Police charged website designer Michel Espinoza with illegally transferring and laundering $1,500 worth of bitcoin. Someone bought bitcoin from Espinoza through the exchange LocalBitcoins.com and wanted to use the funds to buy stolen credit card numbers. Police arrested Espinoza and another man, Pascal Reid, who pleaded guilty to being an unlicensed broker. Reid agreed to assist law enforcement under a plea agreement regarding bitcoin. Defense attorneys, however, argued that bitcoin is not a currency under Florida law. They told a judge in May 2016 that no bank or central government backs bitcoin, that regulations for bitcoin vary from state to state, and that the IRS considers bitcoin transactions a form of barter. The judge threw out the charges against Espinoza. Prosecutors are appealing the ruling.

Criminals and others are using Bitcoin

Bitcoin has been used by drug dealers to sell drugs. A man in Florida, California, was sentenced to ten years in prison after a Canadian prisoner used Bitcoin to buy Chinese-made synthetic heroin. When Backpage.com's business was rejected by other companies for sex trafficking ads, the site began accepting Bitcoin payments. Pimps and prostitutes began using Bitcoin to buy ads on the site. Some Miami restaurants accept Bitcoin, including the South Beach Hotel and the Cleveland Club.