Bitcoin – Is It Really Money?

Florida court dismisses money-laundering case, saying that bitcoin is not money.

Recently, a Florida judge dismissed a money laundering charge against a man who sold $2,000 worth of bitcoin to an undercover agent. The agent claimed he was using the bitcoin to purchase stolen credit card numbers. The judge held that the digital currency is not money. Therefore, it does not fall within Florida’s money laundering statute. The judge stated that trying to regulate bitcoin using a statutory scheme regulating money is “like fitting a square peg in a round hole.” This leaves the door wide open for the Florida legislature to regulate bitcoin and other virtual currency.

Bitcoin was released in 2009. Since that time, courts and legislatures have struggled to fit it into existing legal framework. There are few laws or regulations specifically governing bitcoin and its price fluctuates widely. One expert witness compared bitcoin to “poker chips that people are willing to buy from you” (this expert was paid in bitcoin to appear as a defense witness). The currency isn’t printed, like the euro or the U.S. dollar. The IRS considers bitcoin to be property, as opposed to currency, so any exchanges are deemed to be bartering exchanges. New York now requires “BitLicenses”. They are needed for any businesses that buy, sell, or process bitcoin in the state. New York institutes a multitude of consumer and fraud protections on the businesses. Most notably, the business will have to maintain records of their customers’ names and addresses. This eliminates the anonymity that made bitcoin so appealing in the first place.

It is not just the US that struggles to define bitcoin. In Australia, bitcoin is double taxed. That is because in the country it is considered to be a commodity, not a currency. There is a 10% tax when consumers purchase the currency. They are taxed again when consumers use the bitcoin to purchase goods. Bitcoin is exempt from value-added tax (VAT) in many European countries, indicating that they do not see it as a good but instead as a legitimate currency. In Switzerland, the city of Zug is allowing citizens to pay for public services using virtual currency.

While the trend certainly seems to be towards treating bitcoin as currency, there is still plenty of uncertainty as to what its future will look like. The Florida case may have set precedent for how the rest of the United States will treat virtual currency. It may also encourage legislators to create more laws regulating bitcoin. Only time will tell.

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