Chief Judge Beryl A. Howell of the U.S. District Court for the District of Columbia, in a well written decision, found that bitcoin (BTC) is a form of money regulated under the District of Columbia’s Money Transmitter Act (MTA) despite not being officially sanctioned by a government as a form of currency. (United States v. Larry Dean Harmon, Criminal Action No. 19-395, July 24, 2020)
Defendant owned and operated a BTC mixer, Helix, which was designed to conceal the origin of BTC by mixing up the payments with other payments from other users. The intent was to conceal any link between the BTC and illegal transactions that occurred on the Darknet. (The Darknet is a collection of hidden websites “accessible only through anonymization software that obscures users’ internet protocol addresses” by “filter[ing] their traffic through” a network of relay computers called the Tor network). The investigation revealed that the majority of BTC sent to Helix was from Darknet market sites selling illegal goods and services. Some of Helix’s customers resided in the District of Columbia hence the indictment for, among other things, not being a properly licensed money transmitter. A grand jury indicted.
The defendant brought a motion to dismiss the alleged MTA violation, contending that: 1) the MTA does not include BTC within the definition of money and 2) Helix, as a tumbler, was not a money transmitter. The court rejected this argument, finding that while the MTA did not define the term “money,” it is commonly understood to mean a medium of exchange, method of payment, or a store of value – and the court found obvious that BTC fulfills all of those criteria. The court also determined that “receiving bitcoin to send to another location or person in order to mask the original source of the bitcoin…qualifies as money transmission.”
Not surprisingly given the criminal indictment hanging over his head, the defendant makes a valiant effort to argue that BTC is not “money” for the purposes of the MTA, mounting one argument after another based on the many principles of statutory interpretation. The court turns them all away. Additionally, ordinary practice defeats the defendant: the court found several cryptocurrency businesses licensed under the MTA, which belies the argument that the DC government did not view bitcoin as money.
Of great interest, the court chose not to accept the definition of money found in the UCC, which adds the fiat requirement that in order to be money it must be officially sanctioned by a government. As a result, BTC and other cryptocurrencies are not money under the UCC, which poses real questions for UCC-related issues surrounding the perfection of liens and secured transactions. Instead, the court found that the meaning of the word “money” in the MTA is more general, a “token that can be traded for goods or services,” citing to the definitions in the American Heritage Dictionary, the Oxford English Dictionary and the Merriam-Webster Online. In the court’s view, the legislature imbued the term “money” in the MTA with its ordinary meaning and not a more special meaning or a legal term of art codified by the UCC definition with the intent to provide a greater scope of coverage of the MTA beyond “traditional transfers of fiat currency.” While the MTA is focused on regulating a type of business – and hence justifying a wider stance on what is ‘money,’ the UCC has a very different purpose of establishing “default rules” for certain types of transactions among generally sophisticated commercial participants – and hence the need for more narrowly applicable sets of rules.
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