31 January 2023

Cash, Card, Or Crypto? – Florida's License Requirement For Crypto Currency

Butler Snow LLP


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Since what feels like the beginning of time, cash currency has dominated the business of monetary compensation.
United States Finance and Banking
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Since what feels like the beginning of time, cash currency has dominated the business of monetary compensation. Beginning in the 1950's, cash met one of its toughest competitors: the credit card. Piggybacking off the idea of digital currency came the debit card in the 1970's, making it possible for people to access all of their funds and exchange currency with the swipe of a plastic rectangle. The credit card and debit card reigned as the champions of digital currency for almost 40 years, until the rise of a new competitor: crypto currency.

The use of crypto currency has exploded since Bitcoin's introduction. People have created a high-value market for the usage of crypto currency, consistently increasing its value by opening more channels that allow the currency's trade amongst those who possess it. The use of the currency has progressed from local exchange between person-to-person to the point where some companies have participated in contractual negotiations and currency exchanges using strictly crypto currency.

So, what happens when crypto currency becomes dominating to the point of what appears to be no return? The State of Florida regulates it. Beginning January 1, 2023, Florida has enacted a bill that imposes a license requirement for transmitters when transacting business involving what the Sunshine State deems as "virtual currency", but this license requirement only applies to specific transmitters. In HB 273, Florida's legislature defines virtual currency as "a medium of exchange in electronic or digital format that is not currency." Excluded from this definition are online platforms that have their own distinguished forms of currency that cannot be exchanged outside of that platform (i.e., online video games with their own forms of "currency" given to make purchases throughout the game). The legislation also appears to exclude reward program points that can be converted for usage strictly with the publisher giving the reward points so long as those points cannot be "converted into or redeemed for currency or another medium of exchange." In other words, the license requirement applies only to those crypto currency exchanges that involve a third-party intermediary for the currency conversion.

While the legislation can come off as intimidating and restrictive at first glance, the legislature's intent actually reveals the opposite. Instead, Florida intends to decrease the possibility of money laundering using the popular "virtual currency" in business transactions. Along with the license requirement, HB 273 requires the third-party transmitter to hold virtual currency of the same type and in the exact amount as that being transmitted to the currency's recipient until the transmission completes.

What to Do

For those businesses that carryout transactions involving crypto currency and third-party transmitters, the key to avoid violating this Florida legislation is ensuring that the intermediary transmitting the currency satisfies license requirements. License requirements include having at least $100,000, corporate surety bonds, and permissible investments. Failing to abide by the license requirements when applicable to the transmitter could result in being subject to Florida's criminal money laundering laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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