A detective in Miami Beach didn’t know he was about to make history in 2013 when he posed as a criminal when buying Bitcoin on the street. Michell Espinoza, 30, took the detective’s cash and in turn sent some Bitcoin, the digital currency, to the undercover officer’s online Bitcoin account.
Because the undercover agent said he’d buy stolen credit cards with the Bitcoin, they arrested Espinoza and charged him with money laundering and engaging in the business of a money transmitter without a license.
It’s the lack of a trading license that led a Miami-area legislator to sponsor House Bill 273, which says, simply: Individuals don’t need a license to trade or transmit such cryptocurrencies as Bitcoin, Tether, Binance and Ethereum. SWFL financial advisors call the law—which passed the Legislature in May—the foundation of Bitcoin regulation in Florida, an important step to the use of cryptocurrency in the state.
And it is new. An appeal court wrote of the Espinoza case: “At all times relevant, there was no mention of virtual currency nor of Bitcoin anywhere within the Florida Statutes.”
As more consumers use cryptocurrency to purchase groceries, art, clothing and other goods and services in SWFL, the question of whether one can use Bitcoin to buy a used car or other item in a private transaction becomes important.
Florida isn’t the only state addressing cryptocurrency; Georgia and Wyoming have adjusted their money transmitter statutes to allow private cryptocurrency transactions. Other states are following suit.
Jeff Janson, a wealth adviser and planner with Summit Wealth Partners LLC in Fort Myers, attended Bitcoin 2022 in Miami Beach in April. He saw government and business leaders crowing about the future of cryptocurrency in that region. The new law should make trading and transmitting cryptocurrency easier, he said.
“The requirement for licensure should have been applied to businesses only and should never have been applied to a transfer of crypto between consumers, either in a pure exchange of fiat for crypto, or in using crypto to purchase a good or a service,” says Janson. SWFL will follow suit, he believes.
“Southeast Florida is smoothing the way for further adoption and use of digital currencies,” he says. “For now, they are a bit more progressive when it comes to cryptocurrency than SWFL.”
Nuts and Bits
Calling cryptocurrency “Bitcoin” is like saying “Scotch Tape” to describe all the brands of clear adhesive tape. Bitcoin is one of nearly 30 “brands” of cryptocurrency. Each fraction of every coin can be identified, assigned ownership and tracked by the unique string of code attached to it. It is distributed using blockchain architecture that maintains a secure and decentralized record of transactions anywhere in the world.
Cryptocurrency exchanges (Forbes estimates 600 worldwide) are central to the availability and transmission of cryptocurrency among individuals. Would-be Bitcoin investors can buy as little as $25 worth through an online exchange such as Coinbase. Of course, $25 represents a tiny fraction of a single Bitcoin, which was worth $40,140 on April 12. Only a finite number of each cryptocurrency will be created, which creates urgency as the last of them are generated. For instance, Bitcoin has a “hard limit” of 21 million coins, which will be reached in 2041, according to Business Insider.
The Dark Side
House Bill 273 is the beginning of a much-needed regulatory framework to protect consumers, but it also allows unregulated cryptocurrency among individuals, said Professor Thomas Smythe, who teaches money and capital markets at Florida Gulf Coast University.
“What I would be concerned about, especially with Bitcoin, is that it’s flying under the radar,” Smythe says. “Cryptocurrency is ripe for consumer fraud. I’ll be stunned if we don’t see criminal activity.”
In a Federal Trade Commission consumer fraud newsletter article titled, “Cryptocurrency buzz drives record investment scam losses,” the FTC says cryptocurrency scammers stole more than $80 million from 7,000 investors between October 2020 through March 31, 2021, and that number has increased since then.
Here’s one common scam, according to the FTC: A scammer, possibly through an online cryptocurrency trade club, convinces another trader to reveal key account information. The trusting target also might agree to send money or cryptocurrency for an investment opportunity. About 20% of the money lost in romance scams was cryptocurrency, the FTC says.
That’s why Smythe believes there are good reasons to require individuals to have a license to trade cryptocurrency—or at least to add digital currency into anti-fraud and money laundering laws.
“There are specific statements you have to say until the transaction clears,” Smythe says. “Who is going to monitor that? If it’s truly without a license, how do you know who’s doing it? If you’re shafted, who do you go to?”
Corey Vertich, a partner with Uhler and Vertich Financial Planners of Fort Myers, provides planning services, financial investment and estate planning for high-net worth clients. His world, of securities, stocks and other traditional investments, is highly regulated for a reason. He sees volatility in unregulated cryptocurrency.
“If you buy something in another country, the Bitcoin market requires anti-money laundering and fraud regulations,” Vertich says. “In the securities world, we develop a very great number of investor protections to prevent schemes such as pump and dump. There’s ample evidence that there is a tremendous manipulation of the cryptocurrency price.”
Part of the Future?
Some people trade Ethereum, Tether, Bitcoin and other such cryptocurrency in such online trading clubs as “Bitcoiners of SWFL.’’ That group has some 850 members, says Bill D’Antuono, who owns a fishing charter business. “Peer-to-peer transactions are instantaneous and will inevitably be the catalyst for many new start-up business and entrepreneurs of our time,” the club’s online mission statement says.
SWFL businesses have been accepting digital currency for various goods and services, especially high-dollar items such as jet aircraft, real estate and art, Smythe said. Marlissa Gardner, owner of Emillions Art Gallery in Naples, got media attention when she made history selling an original Picasso to a customer who paid with cryptocurrency.
State lawmakers hope House Bill 273 and subsequent legislation will convince the public that cryptocurrency is safe enough to use in everyday transactions.
One SWFL small business owner says she accepts cryptocurrency from her customers when they order online. They simply click on crypto as a payment option and go from there.
“We have people who buy chicken, beef, bacon, eggs and other farm-fresh items with crypto,” says Nicole Cruz, who, along with her husband Manny, owns Circle C Farm Store in Bonita Springs. “There is a positive energy around crypto and its utilization. I don’t think crypto is going anywhere, it will continue to be a presence for a very long time, like Apple Pay and PayPal. It has now solidified, with emotional safety surrounding its use.”
With Bitcoin, volatility is the nature of the beast
The cryptocurrency market took a major drubbing in May, but financial advisers remain confident in cryptocurrency’s future. Such price fluctuations have happened before.
From May 4 to May 18—two weeks—in round numbers, Bitcoin fell from $40,000 to just below $30,000. That represents a loss of one-fourth of its value. Bitcoin, however, has recovered from worse. According to Fast Company, in 2018, when it was newer, Bitcoin fell from $20,000 per coin to $3,000. It then shot to $68,000 in November 2021, its highest level ever.
According to CNBC’s online “Cryptoworld,” cryptocurrency prices fell with stocks in May after the Bureau of Labor Statistics reported an 8.3% hike in April consumer prices. That spooked investors, which led them to abandon riskier investments, including crypto. That means investors consider Bitcoin and other virtual currencies bona fide investments some of the time. Nervous investors will return and new ones will take a chance.
“I don’t think Bitcoin is dead,” says Smythe. “I do think people are starting to see why it could never be used as a true currency—there is nothing backing it like the Fed or the taxing authority of government.”
Bitcoin owners like that cryptocurrency rates are not tied to any nation’s economic performance; its price floats free of grain sales, or the price of oil, for instance. When it launched in 2009, it was worth zero.
“I think the other issue is one that Bitcoin supporters have actually promoted as good and that is there is no national boundary to Bitcoin,” Smythe says. “That means its value can swing based on what is going on anywhere in the world.”
What if a national government created a digital currency tied to its national banking system? It would possess the convenience of cryptocurrency but be much more stable. China, the European Central Bank and the Bahamas are creating digital currencies tied to their banking systems. The Bahamas, by the way, call theirs the “Sand Dollar.”
The United States Federal Reserve is expected to introduce a central bank digital currency, or CBDC, in the next several years, Smythe said.
“As for a central bank digital currency, it’s coming,” he says. “The Fed seems to be taking a bit of a wait-and-see attitude, but it’s coming. The difference between this and Bitcoin is that the Fed would still back it and it is tied to a country, meaning it is still tied to inflation and economic output.”
An American CBDC would theoretically be more stable and attract more currency traders and investors, but until then, Bitcoin and other cryptocurrencies continue to work for millions of people.