Bitcoin does not actually qualify as money, a Miami-Dade judge ruled Monday in throwing out criminal charges against a Miami Beach man charged with illegally selling the virtual currency.
Monday’s decision came in a case that is being closely watched in tech, financial and legal circles as the popularity of the virtual currency has skyrocketed in recent years.
The defendant, Michell Espinoza, was charged with illegally selling and laundering $1,500 worth of Bitcoins to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers.
But Miami-Dade Circuit Judge Teresa Mary Pooler ruled that Bitcoin was not backed by any government or bank, and was not “tangible wealth” and “cannot be hidden under a mattress like cash and gold bars.”
“The court is not an expert in economics, however, 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,” Pooler wrote in an eight-page order.
The judge also wrote that Florida law – which says someone can be charged with money laundering if they engage in a financial transaction that will “promote” illegal activity – is way too vague to apply to Bitcoin.
“This court is unwilling to punish a man for selling his property to another, when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning,” she wrote.
Law enforcement has struggled to figure out how Bitcoin fits into illegal activities, and Espinoza’s case is believed to be the first money-laundering prosecution involving the virtual currency.
The controversial virtual currency allows some users to spend money anonymously, and can be also be bought and sold on exchanges with U.S. dollars and other currencies.
The currency has gained popularity with merchants selling legitimate goods and services. In Miami, there are a few restaurants that accept the virtual currency and even a plastic surgeon.
Regulated services such as CoinBank, which operates similar to PayPal, allow people to buy, sell and use the Bitcoins. But authorities have raised concerns about the currency being used in the anonymous black market.
Most notoriously, Bitcoins were used to traffic drugs in the now-shuttered Silk Road network. In an unrelated South Florida case, a Miramar man got 10 years in prison after using Bitcoins to buy Chinese-made synthetic heroin from a Canadian prisoner.
Espinoza was arrested along with another man, Pascal Reid, who pleaded guilty to acting as an unlicensed money broker and was sentenced to probation. Under his unusual plea deal, he agreed to teach law enforcement about Bitcoin.
At a hearing in May, a defense expert, Barry University economics professor Charles Evans, testified that Bitcoin was not actually money.
No central government or bank backs Bitcoin, like the United States does the dollar. Government regulation of Bitcoin remains a messy hodgepodge from state to state, country to country. The IRS considers Bitcoin deals no more than bartering, he said.
“Basically, it’s poker chips that people are willing to buy from you,” said Evans, a virtual-currency expert who was paid $3,000 in Bitcoins for his defense testimony.