Bitcoin Has a Florida Problem

That's because depending on where you are, bitcoin is either money or it isn't, and selling bitcoin is either money transmission or it's not.

The recent appellate opinion decided that selling bitcoin requires a Florida money service business license, overruling the trial court's order that dismissed criminal charges against Mitchell Espinoza who was alleged to be operating an unlicensed money service business by selling bitcoin.

The trial court dismissed the charges, concluding that bitcoin was not a "Payment instrument" under Florida law, and that selling bitcoin was not money transmission.

The Third District disagreed with both of these conclusions, holding that bitcoin is a "Payment instrument" because the Court had evidence that individuals were willing to accept bitcoin in exchange for goods and services.

The Court cited no technical authorities regarding the development, uses or structure of Bitcoin for non-financial purposes, but instead focused on the fact that Bitcoin could be used as a means to convey value.

The global network is called Bitcoin with a capital "B" and the public ledger that records and validates data entries on the network is called the Bitcoin blockchain.

Each of these non-financial uses requires a user to easily obtain bitcoin to participate in both the financial and non-financial activities facilitated by the Bitcoin network.

By not recognizing the value and developing uses of the Bitcoin network, the Court essentially made it cost-preclusive to start a business that helps to grow or facilitate the still-developing uses of Bitcoin's global decentralized network and created higher burdens for parties who wish to transact on the Bitcoin network.

A new bill has been introduced before the Florida House that would form a working group to advise the State, among other things, of how to regulate bitcoin.

In the meantime, it is imperative that regulators and courts take the time to understand the Bitcoin network's applications beyond its use as value so they do not let Florida fall behind.