Courts Wade Into Virtual Currencies08.03.2016
Court decisions regarding the legal status of virtual currencies just might be the kick that state legislatures need to address their status and make them a more viable asset class for institutional investors.
Recently, a Miami-Dade circuit court judge ruled that the state of Florida should not treat virtual currencies as money under existing laws.
Legal experts, however, doubt that decision will set a major precedent on how these currencies are treated in law.
Judge Teresa Pooler detailed her reasoning when dismissing the criminal case against Miami resident Michell Espinoza.
After selling $1,500 worth of bitcoins to an undercover agent of the Miami Electronic Crimes Task Force during a 2014 sting operation, prosecutors charged Espinoza with one count of operating an unlicensed money transfer business as a “payment instrument seller” and two counts of attempted money laundering.
“’Virtual Currency’ in not currently included in the statutory definition of a ’payment instrument;’ nor does Bitcoin fit into one of the defined categories listed,” Pooler wrote.
Her decision likely was a virtual shot at the Florida state legislature, agreed Dax Hansen and Keith Miller, partners in the blockchain technology and digital currency practice at Perkins Coie.
“When you look at the last paragraph or two of her decision, it really is a push for the legislature to adopt laws that are going to address virtual currencies,” said Miller.
Hansen is skeptical that state courts will make similar decisions in the remaining 47 states. (Montana and South Carolina do not regulate the money service businesses in their respective states.)
“It is possible that you will see questions like this arise in other jurisdictions where the law is not that clear and the court reaches a different conclusion,” he said.
Some states are actively addressing the status of virtual currencies within their boundaries.
New York has specific regulations fro virtual currency with its bit license; South Carolina recently updated its money-transmitter law to include reference to virtual currencies, and Washington is considering some amendments now, Hansen noted.
‘”The takeaway from this is that the courts recognize that technology is evolving, and the state laws that are in place have not kept with technology,” added Miller.
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