Friday, July 29, 2016 : BITCOINS ARE NOT LEGAL TENDER SAYS FLORIDA JUDGE
Cyber currency is property, but not money, Florida judge rules.
Florida Circuit Judge Teresa Pooler made an interesting ruling on the cyber currency Bitcoin this week, finding that it was not legal tender (ie money) but could be characterised as property.
The judge was presiding in a case against a Bitcoin dealer named Michell Abner Espinoza who was caught in a police sting operation and accused of knowingly selling Bitcoin that he knew were going to be used to purchase stolen credit numbers.
Admitting that her knowledge of Bitcoin and cyber currencies was not good, the judge nevertheless observed:
“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 equivalent of money.”
“Bitcoin may have some attributes in common with what we commonly refer to as money,” the judge said, adding that the cyber currency is a very volatile form of exchange with major fluctuations in value.
That volatility, she found, has resulted in the limited ability of Bitcoin to function as a store of value…an important attribute of money as a vehicle of legal tender.
Consequently the judge ruled that Bitcoin could not be regarded as money in the accepted understanding, and she dismissed the case against Espinosa, setting an interesting legal precedent for future Bitcoin cases, particularly in Florida, where there was no previous case law of this type and no statutes.
The judge recognised this, opining: “The Florida legislature may choose to adopt statutes regulating virtual currency in the future. At this time, however, attempting to fit the sale of bitcoin into a statutory scheme regulating money services business is like fitting a square peg in a round hole.”
Legal opinions were divided on the issue. Charles Evans, associate professor of finance and economics at Barry University, was hired as an expert witness by the defence in Espinoza’s case, where he testified that bitcoin is not money.
However, Judith Alison Lee, a partner at the Gibson Dunn law firm who has written on virtual currency regulations in the US, said the judge’s ruling was counter to the direction federal regulators were headed.
“This decision by the judge is flat-right inconsistent with what the feds are doing,” Lee said. “It is surprising.”
Brian Klein, a partner at the Baker Marquart law firm in California who works on financial technology cases, said the case could have wider ramifications.
“The judge got it right,” he said. “Florida law enforcement overreached in charging Espinoza as it did. This decision will reverberate throughout the country and hopefully cause federal and state prosecutors to think twice before pursuing similar criminal charges.”
The US Internal Revenue Service taxes bitcoin as intangible personal property, not currency.