Bitcoin Is Not Technically Fungible or Centrally Backed – Trial Appellate and District courts vary in their Outlook

Bitcoin Is Not Technically Fungible or Centrally Backed – Trial Appellate and District courts vary in their Outlook

February 25, 2019 Off Maheen Hernandez By Maheen Hernandez

Utility is considered to be the major driver of price; however, when it comes to cryptocurrencies that price of the asset types is based on the fervor of speculation.

The uncertainty about cryptocurrency is now gone. Researchers believe that the price of Bitcoin going below $1000 is not likely.

An interesting fact is that Bitcoin is not accepted as money in all the parts of the world.  For instance, in the United States, in some states, you need to have a state license to sell it, and in other countries, you need not have a state license to sell it.  Whether Bitcoin is money or not is dependent upon which state of US you are residing in. Bitcoin is either money or not money in some states. Also, selling Bitcoin is money transmission in some states and not money transmission in some other states.  A whole lot of confusion is due to the regulatory inconsistencies.

Bitcoin was declared to be not a “payment instrument” per Florida law, per the trial court where criminal charges were filed against Mitchell Espinoza for selling Bitcoin.  The allegation was that Mitchell Espinoza was selling Bitcoin, therefore was involved in an unlicensed money service business.

However, the appellate opinion was that Bitcoin should be sold only with a Florida Money service Business by overruling the trial court’s order.

The third district court stated that Bitcoin is a “Paying Instrument” and thereby disagreed with the decisions of the trial court and the appellate authority. No reference was made to technical authorities when the court gave this decision, but the court simply focused on the fact that Bitcoin is used as a means to transfer value.

Florida’s Money Transmitter Act was compared with Federal Law, and by reading the plain text of the Florida Law, it was expressly declared that a third party need not be included in the transaction for the transaction to be called a money transaction.

The court also stated that selling one’s Bitcoin is known as a “money transmission” which can be done only with a license, exclusive record keeping, and a detailed written protocol. This decision contradicts with the definitions of what constitutes a money service business and also opposes a declaratory statement in law that states, “Parties who buy and sell their Bitcoin do not need money transmission license.”

In reality, Bitcoin is a global network with nodes worldwide that permits the participants to authenticate the data related to the transmission of data without a central authority. It is not technically fungible or centrally backed.

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