by Will Talley
When we talk about “money,” we think of credit cards, metal coins, and green paper with presidential faces printed on it. Soon, we might also think of virtual currency—bundles of code stored on our phones and computers that we can exchange for products and services like any other form of money. Other definitions are changing, too. Traditional ATMs are boxes where account holders can deposit or withdraw cash, but recently, a new breed of ATM has swept the nation: Bitcoin ATMs.
Though they may seem far-flung and futuristic, Bitcoin ATMs have already arrived in Florida. Some businesses have started accepting virtual currencies like Bitcoin, and Bitcoin ATM operators have placed more than fifty of the machines in South Florida. One of the largest operators, Bitcoin of America, has begun discussions with the Miami-Dade County government to install more than 100 new ATMs.[1] Miami’s stature in the world of virtual currency is growing; the city will host a conference on Bitcoin this month.[2]
It takes more than an entrepreneurial spirit to set up a Bitcoin ATM, however. Operators must follow strict rules to avoid the wrath of financial regulators. At a federal level, the Financial Crimes Enforcement Network under the Department of the Treasury (FinCEN) has issued guidance for these new machines, and under this guidance, money transmitters must comply with Anti-Money Laundering and monitoring requirements.[3] The operator of a Bitcoin ATM qualifies as a money transmitter if they accept or transmit “value that substitutes for currency, such as virtual currency[.]”[4] It is a crime to operate an unlicensed money transmitting business, and property involved in these unlicensed transactions may be forfeited and seized by the government.[5] The controlling federal law for Bitcoin ATMs and other money transmitters is the Bank Secrecy Act of 1970.
Florida has its own suite of laws for money transmission. In Florida, anyone who acts as a money transmitter and does business in the state would classify as a “money services business,” and these transmitters need a license or an exemption from licensing to conduct business.[6] In addition, money services businesses have to register with FinCEN before Florida will consider licensing them.[7] Along with these baseline standards, a licensed business must comply with reporting and disclosure laws.
Although Florida Statutes do not explicitly mention virtual currencies, Florida courts have already tackled that issue. As part of a criminal case involving Bitcoin, the 3rd District Court of Appeals decided in 2019 that the statutes do cover Bitcoin as a form of payment, and this means that one who exchanges between Bitcoin and a more traditional currency counts as a money transmitter.[8] Cases in other jurisdictions have wrestled with the issue of Bitcoin-to-Bitcoin transactions, and those courts have largely found that such transactions qualify as money transmissions and falls within the scope of FinCEN regulations.[9] The Florida legislature has explored clarifying its statutes regarding virtual currencies. This year, one bill proposing such additions passed the state House, but it died in committee in the Senate.[10] Despite the bill’s abrupt end, the Florida legislature has demonstrated a keen interest in the fast-growing world of virtual currencies.
While Bitcoin ATMs have legitimate uses, they can also be exploited for darker purposes. The U.S. Justice Department recently announced the sentencing of a California man who laundered nearly $25 million through a Bitcoin ATM.[11] The ATM operator failed to register with FinCEN and did not establish the required anti-money laundering program, among other violations, and he was ultimately caught by undercover agents who exchanged money for Bitcoin using his services.[12] This was not the first time that a Bitcoin ATM operator had faced charges—the FBI arrested six people in March for money laundering and transmitting virtual currency without a license.[13]
Despite their potential for illegal activity, Bitcoin ATMs are here to stay. Floridians can expect to see more and more of these revolutionary machines in their communities. Federal and state governments have tried to modernize their regulations in response to virtual currencies, and for now, Bitcoin ATMs and their owners seem to have firm legal footing—so long as they get a license, avoid stepping on regulators’ toes, and stay far away from people who would use their services to do harm.
[1] Keith Jones, Company Placing Bitcoin ATMs All Over South Florida, CBS MIAMI (May 11, 2021), https://miami.cbslocal.com/2021/05/11/company-placing-bitcoin-atms-all-over-south-florida
[2] Bitcoin 2021 Is Moving to Miami!, BTC (May 2021), https://b.tc/conference.
[3] Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies, FINCEN GUIDANCE 13 (May 9, 2019), https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf.
[4] Id.
[5] U.S. v. 50.44 Bitcoins, 2016 U.S. Dist. LEXIS 70404 at 3 (D. Md. May 31, 2016); see U.S. v. Lord, 915 F.3d 1009, 1014 (5th Cir. Feb. 15, 2019).
[6] FLA. STAT. § 560.125.
[7] FLA. STAT. § 560.1401.
[8] State v. Espinoza, 264 So. 3d 1055, 1063–64 (Fla. 3d DCA Jan. 30, 2019) (citing U.S. v. Murgio, 209 F. Supp. 3d 698 (S.D.N.Y. 2016)).
[9] See U.S. v. Harmon, 2021 U.S. Dist. LEXIS 73504 (D.D.C. Apr. 16, 2021); U.S. v. Stetkiw, 2019 U.S. Dist. LEXIS 16607 (E.D. Mich. Feb. 1, 2019).
[10] S.B. 1758, 2021 Leg., Reg. Sess. (Fla. 2021).
[11] Yorba Linda Man Sentenced to 2 Years in Prison for Operating Illegal ATM Network that Laundered Bitcoin and Cash for Criminals, U.S. ATTORNEY’S OFFICE IN CENTRAL DIST. OF CAL. (May 28, 2021), https://www.justice.gov/usao-cdca/pr/yorba-linda-man-sentenced-2-years-prison-operating-illegal-atm-network-laundered; Joel Rosenblatt & Olga Kharif, ‘Superman’ Forced to Surrender Crypto in ATM Laundering Bust, BLOOMBERG (May 28, 2021), https://www.bloomberg.com/news/articles/2021-05-28/-superman-forced-to-surrender-his-crypto-in-atm-laundering-bust.
[12] Id.
[13] Asher Klein, FBI Arrests 6 Over NH Cryptocurrency Business, NBC BOSTON (Mar. 16, 2021), https://www.nbcboston.com/news/local/fbi-arrests-6-over-nh-cryptocurrency-business/2330422.
