Exploring Florida’s Cryptocurrency Conundrum with Bitcoin and Its Unique Classifications
While the states on the American West coast seem to be busy trying to make it easier to setup blockchain businesses, other states seem to be rather undecided. Most are still trying to decide about the regulations to be put in place. It is certainly understandable that governments would rather err on the side of caution, however, what seems more apparent is the decided lack of understanding and knowledge. This directly results in rising costs for such technologies and emits ill-will and a sense of hostility for the entire industry. Something that has recently come to the fore in Florida, thanks primarily due to such muddled jurisprudence.
Espinoza Vs The Interpreters
In their wisdom, and also highlighting the crux of the problem, a recent trial court order was overruled by a higher court. The court had earlier dismissed a criminal charge against Mitchell Espinoza for operating an unlicensed money service business by selling bitcoin. The judge had taken the view that bitcoin, as per the definitions of Florida State law, was not a payment instrument, thus there was no money transmission.
Unfortunately for Espinoza, the Third District court came to a different conclusion. Reasoning that since people were already bartering goods and services facilitated via bitcoins, it is a means to convey value. What further exasperated the situation was that all this was devoid of any technical discussion about the use or setup of Bitcoin for non-financial purposes.
It seems the court took suo motu interpretation of Florida’s Money Transmitter Act and concluded that money transmission did not necessarily need a third party to be included in a transaction. This led to the ruling that even if one is looking to sell their own bitcoin, a whole heap of legal and financial formalities needs to be cleared.
The court's reinterpretation of “money transmission” would now necessitate a license, a detailed compliance protocol, and extensive record keeping. Yet all this seems to be contrary to the Federal courts view on money service business. It further muddies the waters as the states own Office of Financial Regulation had previously stated that crypto trading had no need to obtain a money transmission license.
Define Money And Bitcoin
This latest hullabaloo has demonstrated a clear lack of understanding of what Bitcoin is how it can be used. While the coin is in the name itself the moniker is misleading. Unlike traditional money it is not centrally operated nor is it interchangeable.
Bitcoin global network of computers that does data authentication, without a central controlling authority. And this global network is called Bitcoin. The public ledger that records and validates those data entries on the network is called the Bitcoin blockchain. Now to complicate matters, Bitcoin uses a game theory based system that incentivizes participants to invest computational energy to validate new data. This network reward mechanism is confusingly also called bitcoin, but with a lower-case b.
Judiciary And Legislature
It is important to also note that the Third District court’s observations seem to omit the other uses of the Bitcoin network, It covers much more than the financial domain., the network is a censorship-resistant publication, a time-stamping tool, it is used as a document authenticator and a smart contract platform. There are certainly other uses where a bitcoin can facilitate both financial and non-financial activities on the network.
This one unconscionable decision will have a ripple effect. The immediate one will be the clash with the State’s existing policy. The Courts ruling will also have a butterfly effect of transforming Florida's reputation in relation to virtual currency. This action will further burden the nascent industry and make it harder for the state's businesses to adopt or transact on the Bitcoin network.
It should be noted that no one is advocating for a cavalier approach to technology. However, the desire to prevent unlawful behavior should be tempered with being selective and sensible with restrictive policies. There are many moving parts in the story that deserves a second look into. Yet for the time being the matter is no longer the concern of the courts but a matter for the Florida House. A new bill is being introduced that will, amongst other things, look for clarification on the regulations of bitcoin.