Bitcoin has become increasingly popular as a virtual currency. It is estimated that venture capital investments in the currency now total more than €1 billion. As Bitcoin begins to break into the mainstream, the European Parliament and a Florida court have recently considered the regulation of virtual currencies, with contrasting results. The European Parliament has acknowledged the benefits of virtual currencies and has proposed a light touch to regulation. In the US, however, Bitcoin has not been recognised as money and no form of regulation has been proposed to deal with virtual currencies.
In May 2016, Members of the European Parliament voted in favour of a proposal to set up a task force to monitor virtual currencies, such as Bitcoin. The proposal suggests the taskforce should build expertise in the underlying blockchain technology of virtual currencies. The taskforce would be overseen by the European Commission and would be charged with recommending any necessary legislation to regulate virtual currencies. The proposal recognises the opportunities for innovation and economic development that virtual currencies offer, and recommends a light touch approach to regulating such currencies and associated technology. It acknowledges the nature of virtual currencies as “digital cash” and highlights its potential to transform the financial sector. The proposal has now been sent to the European Commission for consideration.
A Circuit Court judge in Miami held that Bitcoin is not the equivalent of money on 22 July 2016. In The State of Florida v Michell Abner Espinoza, the Court dismissed money-laundering charges against a man accused of selling Bitcoin to undercover detectives. The Court found that Bitcoin could not be accurately defined or described. It held that although Bitcoin had some attributes in common with what is commonly referred to as money, it was different in many key aspects and “had a long way to go” before it could be the equivalent of money. As a result, virtual currency could not be regulated in the same way as traditional monetary instruments. Accordingly, the defendant’s sale of Bitcoin to the detectives did not constitute a money-laundering offence.
The contrasting approaches of the European Parliament and the Miami Circuit Court illustrate the challenges that virtual currencies present to regulators. The European Parliament has acknowledged that more needs to be done to understand blockchain technology before legislation to regulate virtual currencies is proposed. Conversely, the Miami Circuit Court judgment fails to recognise Bitcoin as a currency, let alone propose a form of regulation. The approach in each jurisdiction, however, highlights that the unique nature of Bitcoin means it does not sit easily in the regulatory framework for traditional currencies.