Bitcoin is not money, according to a judge in Florida. On Monday, Miami-Dade Circuit Judge Teresa Mary Pooler decided the virtual currency was not "tangible wealth" since it is not backed by any government or bank.
After reviewing the case, Judge Pooler dropped the charges against the defendant. Since Bitcoin is not considered real currency, Espinoza cannot be charged with illegally transmitting or laundering money.
"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."
During the trial, defense attorney Frank Andrew Prieto presented a 1966 U.S. quarter to the court and asked expert witness Charles Evans, who was paid $3,000 in Bitcoins for his appearance, if Bitcoin was a real coin. Evans, a Barry University economist, answered, "No."
"Basically, it's poker chips that people are willing to buy from you," he added.
Espinoza's case was the first money laundering prosecution that involved Bitcoin. Florida's law lacks clarity when it comes to the classification of virtual currency.
"Nothing in our frame of references allows us to accurately define or describe Bitcoin," Judge Pooler wrote.
The Internal Revenue Service considers Bitcoin physical property and is taxed as such. If an individual sells it, any profit made is taxable in the same manner as selling a house or share of stock. In 2015, the Commodities and Futures Trading Commission deemed virtual currencies as commodities for regulatory purposes.
Judge Pooler must have considered these definitions in her eight-page opinion.
"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. There is unquestionably no evidence that the defendant did anything wrong, other than sell his Bitcoin to an investigator who wanted to make a case."
The Miami-Dade State Attorney's Office plans to review and possibly appeal the court's decision.
Authorities fear the anonymous character of the currency makes it easy to use on the black markets, such as the now-defunct Silk Road network. In another South Florida case, a defendant was sentenced to 10 years in prison after buying Chinese-made synthetic heroin using Bitcoins.
Just before Espinoza was arrested two years ago, Miami detectives contacted him through a Bitcoin exchange site known as LocalBitcoins.com. The officers told Espinoza they were going to use the virtual currency to buy stolen credit card numbers.
Another man, Pascal Reid, was also arrested with Espinoza. Ultimately, he pleaded guilty to acting as an unlicensed money broker and put on probation. As part of the plea deal, Reid agreed to teach law enforcement about Bitcoin.
Eventually, governments around the world will need to address and define Bitcoin. They will need to put regulations in place that remove the ambiguity surrounding the virtual money and agree whether it is currency or property.
[Photo by George Frey/Getty Images]