Unless 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?
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.