currency cryptocurrency money-laundering money-service
When does it become illegal to exchange bitcoin for cash?
<p>I've read several "stings" and raids for running unlicensed money transfer businesses for people buying and selling bitcoin on localbitcoins. All of the articles are extremely vague and don't explain exactly when it becomes illegal. Is there any direct source or any laws with numbers? Is it one transaction over $10,000 that's illegal, or anything adding up to $10,000 or just whoever the police feel like arresting that's selling a lot.  <a href="https://www.vice.com/en_us/article/j5qa7y/people-keep-getting-charged-with-a-crime-for-selling-bitcoin" rel="noreferrer">1</a> <a href="https://www.reddit.com/r/Bitcoin/comments/1to08d/arrested_by_the_police_for_localbitcoins_business/" rel="noreferrer">2</a> <a href="https://www.theglobeandmail.com/news/national/how-a-canadian-was-charged-with-money-laundering-in-sale-of-bitcoins/article16831445/" rel="noreferrer">3</a> <a href="https://www.fastcompany.com/3059770/selling-bitcoin-could-land-you-in-jail-but-rules-remain-fuzzy" rel="noreferrer">4</a> What about when someone buys with stolen money or money from illegal proceeds. Did you commit a crime if you sell bitcoin to someone and the money is stolen, or the gift cards are stolen? </p>

<blockquote>
  <p>When does it become illegal to exchange bitcoin for cash?</p>
</blockquote>

<p>When the transaction purposefully skips the controls in place regarding anti-money laundering.</p>

<p>Generally speaking, the issue is not the mere involvement of cryptocurrency in a transaction, but the crimes a wrongdoer seeks to camouflage or conceal by means of cryptocurrencies. Such crimes typically involve money laundering, identity theft, stolen card numbers, and the like. As quoted in <a href="https://www.theglobeandmail.com/news/national/how-a-canadian-was-charged-with-money-laundering-in-sale-of-bitcoins/article16831445/" rel="noreferrer">one of the links</a> you provide, "<em>[t]he use of bitcoins in the transactions is a new technological flourish to this very old crime</em>".</p>

<blockquote>
  <p>Is there any direct source or any laws with numbers?</p>
</blockquote>

<p>Apropos of your first link, mentioning that "<em>a Florida judge threw out money transmitting charges against a bitcoiner</em>" (see also <a href="https://www.miamiherald.com/news/local/crime/article91682102.html" rel="noreferrer">here</a>), I will point out that the court's dismissal of charges against that defendant has been reversed early this year. See <a href="https://www.leagle.com/decision/inflco20190130174" rel="noreferrer"><em>State v. Espinoza</em>, 264 So.3d 1055 (2019)</a>.</p>

<p>Although the judges' narratives of a case are questionable and/or sloppy and to be taken with a grain of salt, the appellate decision cites language from Florida legislation as applicable to virtual currencies (and, impliedly, cryptocurrencies). You will notice that the focus in the <em>Espinoza</em> decision is the interpretation of Florida Statutes in its sections 560.125(1) and (5)(a) (regarding unauthorized vendors), and <a href="http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&amp;Search_String=&amp;URL=0500-0599/0560/Sections/0560.103.html" rel="noreferrer">560.103</a>(21), (29) (defining <em>monetary value</em> as "<em>a medium of exchange, whether or not redeemable in currency</em>").</p>

<p>As usual, each legislation may present subtle and/or fundamental variations. For instance, the court in <em>Espinoza at 1065</em> identified that federal law is inapplicable there in that 31 C.F.R. § 1010.100(ff)(5)(i)(A) contemplates that "<em>the transmission of currency, funds, or other value that substitutes for currency <strong>to another location or person</strong> by any means</em>" (emphasis added), and Espinoza's transaction(s) did not involve a third party. By contrast, the Florida statute does not allude to third parties in that transmission of monetary value, hence preventing the statutory sanctions from being <em>preemptively</em> foreclosed in the matter of Espinoza.</p>

<blockquote>
  <p>What about when someone buys with stolen money or money from illegal proceeds. Did you commit a crime if you sell bitcoin to someone and the money is stolen, or the gift cards are stolen?</p>
</blockquote>

<p>That also depends on the jurisdiction and the facts of the case. In <em>Espinoza</em>, he was allegedly informed that the cash he received (or was about to receive) in exchange for bitcoins "<em>derived from engaging in illegal activity and that [the buyer] was planning to use the bitcoins to engage in further illegal activity</em>", <em>Espinoza at 1058</em>. The court highlighted the State's argument that "<em>dismiss[ing] a charge of money laundering is improper because money laundering requires <strong>intent</em></strong>" (emphasis added), which is sanctioned by section 896/101(3)(c).</p>
