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Bitcoin subject to Reach of State Agenecy?




i man must still face felony charges for selling bitcoin for cash, a Florida appeals court ruled Wednesday, opening the door for state law enforcement to go after the unregulated cryptocurrency market.

(AP Photo/Kin Cheung, File)
Florida’s Third District Court of Appeal reversed a trial court’s dismissal of charges of illegal money transmission and money laundering against Michell Espinoza, who sold bitcoin to a Miami Beach undercover agent for cash in 2014.

The appeals court found bitcoin acts as a “payment instrument” and is therefore subject to state regulations requiring registration and to money laundering laws.

“Based on the undisputed facts, Espinoza was acting as a payment instrument seller or engaging in the business of a money transmitter, either of which require registration as a money services business under Florida law,” Judge Norma S. Lindsey wrote in the 33-page opinion. “Given the plain language of the Florida statutes governing money service businesses and the nature of bitcoin and how it functions, Espinoza was acting as both.”

According to court records, Espinoza advertised his unlicensed bitcoin-for-cash business on a website, LocalBitcoins.com, which caught the attention of the Miami Beach Police Department and a federal electronic crimes task force. In a series of controlled buys, detective Ricardo Arias bought $1,500 worth of bitcoin from Espinoza and allegedly expressed the desire to use the cryptocurrency to buy stolen credit card numbers.

In February 2014, after the detective attempted to buy $30,000 worth of bitcoin, police arrested Espinoza and charged him with one count of illegal money transmission and two counts of money laundering.

Espinoza’s attorney argued bitcoin did not fall under Florida’s definitions of currency. In 2016, Miami-Dade Circuit Judge Teresa Pooler agreed and threw out the charges.

“This court is not an expert in economics, however, it is very clear, even to someone with limited knowledge in the area, that bitcoin has a long way to go before it is the equivalent of money,” Pooler wrote in her ruling.

The state then appealed.

In the appellate opinion, Judge Lindsey agreed bitcoin did not fall under the definition of currency in Florida law, but did act as a “payment instrument.” Lindsey noted some Miami restaurants and a local plastic surgeon take bitcoin as payment, which gives value to the virtual currency.

Lindsey also wrote the trial court improperly dismissed the money laundering charges, because “intent, or lack thereof, is a factual issue that should not have been resolved at the pleading stage.”

Judges Kevin Emas and Vance E. Salter concurred.

At the time of Espinoza’s arrest, bitcoin and other cryptocurrencies did not show up in state statutes. In 2017, the Florida Legislature defined virtual currency as a monetary instrument, not unlike money orders or cashier’s checks.

Law enforcement has increasingly become concerned about the use of bitcoin to buy illicit items on the “dark web” or launder drug money.

Espinoza is represented by attorney Frank Prieto in Miami. He did not immediately return a call requesting comment Thursday.


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