Bitcoin is a payment instrument: says Espinoza:
The nature of Bitcoin is misunderstood. The latest appellate decided that selling of bitcoin shall require a business license of Florida, which overruled the verdict that was given by the trial court which dismissed the criminal charges on Mitchell Espinoza who was unproven to be operating a money service business by selling bitcoin which was unlicensed.
The trial court further dismissed the charges and concluded that the bitcoin is not a “payment instrument” under Florida law and that selling of bitcoin was not money transference. The Third District disagreed with both of these conclusions and held that the bitcoin is a “payment instrument” because the Court had evidence that individuals were willing to accept Bitcoin in exchange for goods and services.
Therefore, the Court found that selling one’s own bitcoin comprises of money transmission, which requires a license and extensive keeping of record.
Florida: Bitcoin is not money
Bitcoin is not money as it lacks several fundamental characteristics that people recognize and are required for something to be called money. Even after this (because the word coin appears in its name), it is usually described as digital money or digital gold.
But in reality, Bitcoin is neither of these things. It is, in fact, a worldwide global network of computers that allow participants to authenticate the data first without obtaining permission from a centralized authority.
This global network is called Bitcoin with a ‘B’ in uppercase and the Bitcoin blockchain is the network that records and validates data entries. Before Bitcoin, secure peer-to-peer electronic transactions of data were impossible because digital information is easy to copy. And also the digital representations of value could be copied and spent twice. Bitcoin solves this issue by using cryptographic tools. The internal network reward mechanism is confusingly called bitcoin, with a lower-case “b.”
Users who wish to add or change data tracked on Bitcoin’s blockchain first need to pay fees in bitcoin, then only they can change or add data. There is a cost to add new data or to change the existing one.
Miners who invest their resources to verify changes to the blockchain must be trusted to act honestly and not guarantee false data. The bitcoin reward also provides a monetary incentive to those participants who only accept valid transactions.
The decision of the Third District and what can be done:
The opinion of the Third District focuses especially on the financial uses of the bitcoin. But their analysis ignores other uses of the Bitcoin network which includes a publication network which is censorship-resistant, a time-stamping tool, a document authenticator, a platform for smart contract (using RSK Rootstock) with broad application across many industries, and the ability to enable forms of micro-communications (utilizing Bitcoin’s lightning network) that are otherwise technologically not possible.
The non-financial uses require a user to obtain bitcoin to participate in both the financial and non-financial activities facilitated by the Bitcoin network without any efforts.
Despite ignoring the existing policy of permitting individuals to sell their digital property without obtaining a money services business license of the state, the Court has transformed Florida from one of the more innovative states for the industry of blockchain and virtual currency into one of the smallest.
The decision of the Third District Court of Appeal is at balance with Florida’s Office of Financial Regulation and its proper understanding of the many aspects of both non-financial and financial of the Bitcoin network.
Furthermore, a new bill has been introduced before the Florida House that would form a group which will work to advise the State on other things, of how to regulate bitcoin and more. As it is a legislative solution, it may take months or years.