Bitcoins are NOT money?

 d6b179aecb76ff5af20a0314ced0de0e3036ca623fba316662d040285b98685cUnless you’ve been living under a rock the last few years (or maybe a ‘bricked’ phone, as it were), you’ve surely heard of Bitcoin by now – the digital currency… or… commodity… or, wait, what is it?

Exactly.

Bitcoin first gained significant attention when the Silk Road was exposed – an anonymous online market for the trade and sale of everything illegal, dangerous, illicit, and corrupt. From buying drugs, to hiring hitmen and prostitutes, the untraceable “currency” provided users with the ability to exchange ‘value’ for products and services without ever being tied to a government regulated or monitored transaction (i.e. credit cards, PayPal, etc). Although the FBI took care of the website, Bitcoin itself continued on. And, since then, its popularity has only surged as an online payment alternative. It even has its own exchange market, the BTC-E! However, it remains just an online exchange and not “real money” … right?

For one lucky Florida criminal, that questionable discrepancy just landed him a win.

In 2013, the Miami Beach Police, in conjunction with the U.S Secret Service’s Miami Electronic Crimes Task Force, set up a sting operation to weed out illegal activity via the Bitcoin market. They found Michell Espinoza, aka Michellhack, who it turned out was using Bitcoins to purchase stolen credit cards from the Russians. Fast forward through the operation to 2015 when Mr. Espinoza was arrested and charged with one count of “engaging in business as a money services business, to wit, a money transmitter” and one count of money laundering.

Sounds about as guilty as it gets, right? Then just how was the Defendant’s Motion to Dismiss granted? According to Florida State Court Judge Teresa Mary Pooler, Bitcoin is not money and therefore not within the purview of the criminal statutes charged.

In Judge Pooler’s Opinion, she articulates numerous reasons as to why Bitcoin cannot be considered money. For starters, “virtual currency” is treated by the Federal government as property for tax purposes (see IRS Notice 2014-21). To continue, however, Bitcoin is not commonly accepted by merchants; it has a highly volatile fluctuating market (at one time valued 18x greater than the U.S. dollar), with insufficient liquidity and an uncertain future value; and it is decentralized without a reserve, failing to be backed by anything. Oh, yea, and it “cannot be hidden under a mattress like cash and gold bars”.

… Uncertain future value, not backed by anything… If you ask me, that sounds a lot like the U.S. dollar

Regardless, I often write about how our legal system is playing catch-up with an increasing transition to digital ‘everything’. Passing new legislation can be an arduous, lengthy process of research, commentary, and amendment, which by the time is done could already be replaced by the next new thing. But when the topic at hand is currency – very much ‘the thing that makes the world go round’ – it’s not at all surprising to see added backlash by the judicial system; setting precedent which may only further weaken the dollar and/or encourage a shift away from Federally-issued currency is not a favorable position to take.

Eventually, this is an issue which the United States Supreme Court will have to weigh in on. In the meantime, Bitcoin will continue to be traded, exchanged, used and valued, as all things are in a free market.

Advertisements

Penny For Your Thoughts… But Not For Your Tickets

If I Had a Dime for Every Time Someone Threatened This.

Pennies Are CurrencyTake a penny, leave a penny. But don’t leave the equivalent of your ticket or fine, because there’s no obligation for the entity to accept it as payment.

Sure, we’ve all thought about it. If you drive – or even if you only know someone who does – then you’re aware of the frustration which can ensue from an unwarranted ticket or fine. But regardless of any irk or ire, the trend of disgruntled payments has led to some equally-disgruntled official opinions on the matter.

Most recently is the case of Justin Greene out of Chambersburg, PA, who attempted to pay a $25 parking ticket with 2,500 pennies. The citation – parking on the wrong side of the road for 10 minutes – carried a fine he believed outrageous, and thus warranting this instance of a petty penny payment.

“It’s legal currency! You have to accept it!” Well, yes…. and, no.

Yes, pennies are legal tender (see Section 31 U.S.C. 5103). But, that doesn’t mean they’re acceptable as payments for any and all debts. As the Department of the Treasury points out in these cases, there is “no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services.” In fact, “[t]he minor coins of the United States are legal tender for any amount not exceeding 25 cents in any one payment.” Act Feb. 12, 1873, Rev. Stat. 387, Comp. Stat. 6574, 6 Fed.Stat. Anno. 2d. ed. p. 298 (emphasis added).

In other words – if your debt (ticket, fine, etc.) is greater than $0.25, those pennies and nickels are not “legal tender” requiring acceptance in satisfaction.

In the case of Mr. Green, Chambersburg was nice enough to accept his payment (when dealing with a man like that, sometimes it’s just best to smile, nod, take the money, and be done with it). But don’t rely on that generosity next time you take a trip to your local traffic court.

 ————————————————————————————————————————————-

UPDATE (6.16.17)

If only he’d read this blog…

Brian McGonegal has become the latest to learn the lesson – a penny saved is a penny earned, but 27,000 pennies cannot be spent. At least, not to pay your trash fines.

In an attempt to protest fines for trash in his yard, Mr. McGonegal brought bags of pennies to the Jackson city treasurer – unrolled, in $27 increments, which he demanded the treasurer count and process. Aside from being impractical and not the city’s job, this form and method of payment is also not legally mandated.

As noted by Randy Wrozek, “This guy would come in every time at five minutes to five — we close at five — with a big sack full of change. We’re not authorized for overtime down here.” Although it’s not unheard of for such payments to be accepted (see the Chambersburg case above), Mr. McGonegal isn’t winning himself any good will here.