Florida judge rules that Bitcoin isn't money
In the short term, the decision resulted in the dropping of charges in the first money-laundering case, but the ruling could also be precedent-setting as a major blow to the legitimacy of bitcoins as currency.
Bitcoin is not money, ruled Miami-Dade Circuit Court Judge Teresa Mary Pooler on Monday, dismissing the charges in what's thought to be the first money-laundering case against someone dealing in bitcoins.
"Nothing in our frame of references allows us to accurately define or describe Bitcoin," wrote Judge Pooler of the Eleventh Circuit Court of Florida in an eight-page opinion, summing up years of debate and confusion over how to classify the virtual currency.
The ruling comes as a blow to the Bitcoin community, which has sought to gain legitimacy for the digital currency from the business community for years. Bitcoin has become an alternative currency for techies, Libertarians, black-market entrepreneurs, hackers, and experimental investors, largely because of its detachment from the federal banking system. It was that lack of traditional banking infrastructure, however, that prompted Pooler to negate Bitcoin's standing as a currency.
"Bitcoin may have some attributes in common with what we commonly refer to as money," she said. However, as it lacks backing from any government or bank, "it is very clear, even to someone with limited knowledge in the area, the Bitcoin has a long way to go before it the equivalent of money."
The decision came in a money-laundering case against Michell Abner Espinoza that was the result of a sting operation by Miami Beach detectives. Mr. Espinoza was accused of illegally selling and laundering bitcoins to undercover detectives, who told him they intended to use the virtual currency to buy stolen credit card numbers.
The charges were dismissed, as the court ruled that since Bitcoin is not money, no money laundering took place.
Since the inception of Bitcoin in 2009, experts have struggled to define just how exactly the currency fits into existing legal and economic framework. Some, like economist Larry Kudlow, argue that Bitcoin's lack of regulation prevents it from ever being a legitimate form of money.
"It is not a reliable medium of exchange, nor is it a reliable store of value," writes Mr. Kudlow in a column for CNBC. "It has no central bank regulation, network operations or even centralized issuance. And because of its wild price fluctuations, bitcoin can never be a reliable payment system."
In the money laundering trial, defense witness Charles Evans, an economics professor at Barry University in Miami, compared the virtual currency to "poker chips that people are willing to buy from you," The Miami Herald reports. The value of bitcoins, he said, is similar to the assigned value of a comic book or baseball card by collectors.
Bitcoin isn't backed by any central government or banks, regulation varies by jurisdiction, and the IRS considers Bitcoin trades as bartering, said Dr. Evans, who, incidentally, was paid $3,000 worth of bitcoins to appear as a defense witness.
On the other side are those who say that the definition of money isn't dependent on the backing of central government or banks.
"At various times in history, feathers have been money, shells have been money, dollars and euros are money, Bitcoin is money.... There are many different kinds of money," said Jim Rickards, author of "The Death of Money: The Coming Collapse of the International Monetary System," in a video interview with reinvent.money.
All types of money, he said, "are backed by one thing, which is confidence. If you and I have confidence that something is money and we agree that it’s money, then it can be money."
The prosecutor in Mr. Espinoza's case, Tom Haggerty, pointed out that some restaurants accept Bitcoin as payment, giving it a more legitimate value than poker chips or baseball cards.
"You don't purchase a hamburger with a comic book," Mr. Haggerty told the court. "You usually purchase it with cash, or in this case, a bitcoin."