In a recent interview, two senior counsels highlighted the challenges that legal practitioners face in dealing with cryptocurrency regulations in the United States. Justin Wales and Matt Kohen are both working for Carlton Fields’ digital currency and distributed ledger technology group.
Wales and Kohen are presently working on a case involving Michell Espinoza, a Localbitcoins trader based in Florida. Espinoza is charged with felony over money laundering violations and for operating an illegal money service business. The case is ongoing for more than three years now.
Initially, all charges against Espinoza were dropped. Since bitcoin was not considered a legal tender in 2016, Judge Teresa Mary Pooler of the Eleventh Judicial Circuit of Florida ruled that he could not be charged with offenses of illegal money transmission. However, Pooler’s ruling was recently overturned, citing the difficulties in juridical apparatus relating to digital currencies in the United States.
Kohen highlighted the inconsistencies that usually arise between state and federal legislation, saying that the present regulatory apparatus is a “patchwork.” Kohen emphasized that digital currencies seem to be different to every agency, adding that “IRS can look at it as property like a gold bar. SEC gets to say we have a different view. Then you have state regulators who think a digital asset is a commodity or currency. It is tough waters to navigate.”
“One of the potential issues is we have securities regulators viewing through a lifetime of experience looking at securities. CFTC is doing the same thing. State and money transmission officers doing the same thing. Tax regulators who do not know what to think of it, look at is as property because it does not look like money. Regulators need to spend more time with a holistic view of what these are,” Wales added.
As for the regulatory frameworks established by international regulators, Wales said: “Every regulatory agency in every country is struggling to come up with a solution.”
Wales also noticed that some countries view cryptocurrency as “an opportunity,” thus the “relaxed guidelines,” as opposed to the tough stance showed by U.S. agencies and lawmakers.