- United States v. Stetkiw
- Defendant accused of operating an unlicensed money transmitting business that did not comply with money transmitting business registration requirements
- Defendant argued that buying/selling Bitcoin without a license isn’t a crime
- The Court rejected Stetkiw’s arguments, which could lead to a string cite for the proposition that bitcoin is “money” or “funds” for purposes of U.S. federal law that requires licensure for money transmission businesses
Disclaimer: These summaries are provided for educational purposes only by Nelson Rosario and Stephen Palley. They are not legal advice. These are our opinions only, aren’t authorized by any past, present or future client or employer. Also we might change our minds. We contain multitudes.
As always, Rosario summaries are “NMR” and Palley summaries are “SDP”.
United States v. Stetkiw, 2019 U.S. Dist. LEXIS 16607 (E.D. Mich, Feb. 1, 2019) [SDP]
A string cite has nothing to do with string, which is something you probably only know if you’re a lawyer or went to law school. It’s a bunch of case citations that are used seriatim (that means “in order” and is also a lawyer word) to support a legal proposition. So if you wanted to say that a negligence claim requires breach of a duty to a foreseeable plaintiff, you would show how well-established that principle is by citing a whole bunch of cases, a STRING, in other words. Hence “string cite.”
Why am I going on about string cites? Because it looks like we are close to having a pretty good string cite for the proposition that bitcoin is “money” or “funds” for purposes of a U.S. federal law that requires licensure for money transmission businesses. And that’s what this new case from a Michigan federal court deals with. (If you are a regular reader of these posts you will remember we dealt with a similar issue last week under Florida law, in the Espinoza case).
This particular opinion rules on a criminal defendant’s motion to dismiss a criminal indictment and to suppress evidence. He was charged with “violat[ing] 18 U.S.C. § 1960 by operating an unlicensed money transmitting business — i.e., a Bitcoin exchange service — that did not comply with the money transmitting business registration requirements of 31 U.S.C. § 5330.”
The defendant argued that buying/selling Bitcoin without a license isn’t a crime under the statute because (1) bitcoin isn’t money or funds as those terms are used in the statute and because it doesn’t enjoy the protection of a “sovereign government” and (2) it “covers only situations where a defendant acts as an intermediary to transfer money from one person or entity on behalf of another; he says it does not cover the type of two-party transactions Stetkiw is accused of conducting, where he would buy Bitcoin, store it in his own digital wallet, and then later sell and transfer that Bitcoin to an unrelated second person.”
The Court rejected all of these arguments.
First, it said Bitcoin is money or funds under the statute because “they can be easily purchased in exchange for ordinary currency, act[ ] as a denominator of value, and [are] used to conduct financial transactions.” It gave a string cite for that proposition, citing a bunch of cases (and can now be added to a string cite for the next opinion on the subject).
Second, the Court said that the transactions were money transmission because the transactions involved ultimately movement of money from one location to another location and between different people. It cited FinCEN interpretive guidance to this effect, noting that it did not have force of law, but as useful persuasive authority. (If defendant had been “buying and selling Bitcoin strictly as an investment for his own account”, there likely would have been a different resolution but here the indictment said that he “engaged as a business in the exchange of Bitcoin for real currency” and also charged a per transaction fee).
Finally the Court rejected a Hail Mary argument that the statute was ambiguous and that under something called the Rule of Lenity he should be cut a break.
Bottom line — this appears to be one more case for the string cite supporting the proposition that bitcoin is “money or funds” under federal law governing money transmission and MSB licensure.
The Block is pleased to bring you expert cryptocurrency legal analysis courtesy of Stephen Palley (@stephendpalley) and Nelson M. Rosario (@nelsonmrosario). They summarize three cryptocurrency-related cases on a weekly basis and have given The Block permission to republish their commentary and analysis in full. Part I of this week’s analysis, Crypto Caselaw Minute, is above.