A Miami, FL.-based judge issued a ruling last week in a criminal case involving bitcoin and money laundering that the world’s most popular digital currency is not money, reported Forbes.
Mitchell Espinoza, the defendant in the case, allegedly sold bitcoin for a profit on localbitcoins.com. In 2013, Miami Beach Police Department Detective Arias and U.S. Secret Service Special Agent Gregory Ponzi, while undercover, reached out to Espinoza about a potential acquisition of bitcoin. Court documents say that Detective Arias told Espinoza at a second arranged sale that he was involved in buying stolen credit card numbers from a Russian criminal gang using bitcoin and asked him if he would be willing to accept stolen credit card numbers as payment for bitcoin in the future. Espinoza, say the court documents, said he would think about it, but never did.
According to the documents, more transactions concerning the acquisition of bitcoins from Espinoza were arranged by Detective Arias. At the final one, explain the documents, Detective Arias once again mentioned it to Espinoza that he was in the business of buying stolen credit cards and showed him $30,000 in forged bills that he claimed to be genuine. Espinoza suspected that the cash was not genuine, so he didn’t take it. He was nevertheless arrested and charged with one count of unlawfully engaging in business as a money services business and two counts of money laundering.
Miami-Dade Circuit Judge Teresa Mary Pooler dismissed all charges, also writing in the ruling, “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 the equivalent of money.”
On the charges of money laundering, Judge Pooler wrote that money laundering is “commonly understood to be the method by which proceeds from illicit activity (‘dirty money’) becomes legitimized.” The charges specifically term the transaction under money laundering “financial transaction.” However, Judge Pooler said that there was no financial transaction because bitcoin was not money.
The ruling is consistent with the IRS’s position taken last year, when the bureau issued guidance to taxpayers in 2014 on how to treat bitcoin and altcoins for federal income tax purposes, stating that these coins are to be seen as capital assets.
In its article on the news, Risk & Compliance Journal reported that the global head of investigations and compliance at Navigant Consulting, Ellen Zimiles, said current federal rules involving money transmitters are broader than Florida’s statute, and thus limit the broad implications of the judge’s ruling.
“It may have an extensive impact in Florida, but I think [Treasury’s Financial Crimes Enforcement Network] will look at it and see if it’s consistent with their interpretation,” said Zimiles.