Florida v. Espinoza
On January 30, 2019, the Third District Court of Appeals in Florida in the matter of Florida v. Espinoza held that an individual’s sale of Bitcoin for cash constitute money transmission and the sale of a payment instrument. In this instance, the seller was not licensed to act as a money transmitter or money service business. The implication for cryptocurrency based hedge funds may be significant insomuch that compliance with state money transmission laws may become necessary. As indicated here previously, exceptions to federal-level Money Service Business registration exist for instances where the seller is exchanging virtual currency for its own account. This recent decision in Florida muddies the waters as individual states typically constitute the exchange of bitcoin and other cryptocurrency for currency to fall under state money transmission laws. The question that is not answered in the Appeals Court decision is whether Florida money transfer laws were implicated only because the seller accepted physical currency versus draft or bank transfer.
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