Why Florida’s “Bitcoin is not money” law has limited impact

Stephen D Palley is an attorney in private practice in Washington, DC, focusing on developments in the construction, insurance, and software industries, including blockchain and smart contract design.

In recent court cases, Bitcoin has been deemed to have questionable value and not be considered “money”.

A Miami, Florida court recently dismissed a criminal case in which the defendant sold Bitcoin to a police detective as part of an undercover investigation.

Florida v. Espinosa has been documented as a potentially important precedent for the future, particularly in jurisdictions that debate whether Bitcoin is “money” or “currency.” Bitcoin industry advocates will also cite this example in their pursuit of legislative reform and greater regulatory clarity.

As a legal precedent, however, Espinosa’s value may be limited: It was simply a decision made by a Florida state judge based on a state-specific statute.

This was not an appeals court decision. It does not have precedent in any other state or federal court. Half of the opinion was about proving criminal intent, but few of them were relevant to Bitcoin.

Finally, the court analyzed that regardless of the different approaches other courts have taken to the question of whether Bitcoin is a "currency" or "money," it can be adjusted in other cases.

analyze

Whether precedent or not, this case illustrates how courts can apply legal principles and processes to new technologies.

The process by which the court reaches its conclusion will be familiar to anyone who has read a case or two: Find the facts, then apply the law and make a judgment.

The defendant was charged with being an unlicensed “money transmitter” because he sold bitcoins to undercover detectives in exchange for U.S. dollars.

The court rejected these allegations and held that:

• The law does not apply to direct transactions without an intermediary.

• Bitcoin is not a “payment tool”

• The defendant was not a “money transmitter” because he did not collect “fees.”

The first two parts of the analysis involve fairly standard statutory analysis (“the law says,” “the alleged conduct,” “therefore, the law applies/does not apply.”), while the third point is a bit more detailed.

The court held that “money transmission” must include the charging of fees. In cases where the defendant made a profit from sales, the court held that the “profit” from cryptocurrency did not constitute a fee. According to the court’s ruling, fees must be paid in legal currency.

In support of this conclusion, the court noted that “Bitcoin still has a long way to go in order to achieve the same status as legal tender.”

This last point is a somewhat surprising conclusion that not all courts accept.

TOLL

The court also dismissed two counts of money laundering, finding that the defendants did not have criminal intent as defined by Florida statute.

An undercover detective said the defendant's bitcoins would be used for illegal purposes. But the court found that this was not enough to determine that the defendant had the intention to launder money as defined by European law. The court also believed that the provisions of European law were too vague in this case.

The court said that anything can be used to launder money, including Bitcoin. In this case, there was simply not enough evidence to prove the defendant’s criminal intent, and according to the court, the word “facilitate” was not legally clear enough.

It is not difficult to imagine different situations (or different judgments) leading to different results.

Selling it for profit so that third parties will use it to commit crimes (and facilitate crime) may be problematic, depending on the facts and jurisdiction.

Among other things, defendants could risk being charged with being an accessory after the fact, and other courts in other contexts have rejected the idea that Bitcoin’s unique status as a virtual currency shields defendants from conviction.

Unclear precedent

In this regard, Espinosa is also in line with the court's ruling in the Silk Road case, when the defendant did not make an explanation, but the court said that the use of Bitcoin itself is not a problem, the key is "how" you use it. This seems similar to the current situation.

It's just that the court doesn't think Mr. Espinosa did anything wrong. Might Mr. Espinosa prove to have significant and persuasive legal authority in the future? It's too early to tell.

Today, this is an example of the applicability and authority of the law that judges and lawyers need to shape well.