HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/HB 273 Money Services Businesses
SPONSOR(S): Insurance & Banking Subcommittee, Aloupis
TIED BILLS: IDEN./SIM. BILLS: SB 486
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee 14 Y, 0 N, As CS Hinshelwood Luczynski
2) Commerce Committee 19 Y, 0 N Hinshelwood Hamon
SUMMARY ANALYSIS
The Office of Financial Regulation’s (OFR) Division of Consumer Finance licenses and regulates various
aspects of the non-depository financial services industries, including money services businesses (MSBs)
regulated under ch. 560, F.S. Money transmitters and payment instrument sellers are two types of MSBs.
Currently, virtual currency is not expressly within ch. 560, F.S., though in the last 7 years OFR has received
over 70 petitions for declaratory statement relating to whether and how virtual currency is regulated under that
chapter.
Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account,
and/or a store of value. In some environments, it operates like “fiat” currency (i.e., the coin and paper money of
the United States or of any other country that is designated as legal tender, circulates, and is customarily used
and accepted as a medium of exchange in the country of issuance), but it does not have legal tender status in
any jurisdiction. Bitcoin is one example of a virtual currency.
In a recent case, the Third District Court of Appeal’s holdings related to bitcoin illustrate the need to expressly
provide whether and how virtual currency falls within ch. 560, F.S., as well as the need to clarify certain
definitions in that chapter. In particular, the court held that the definition of “money transmitter” requires
licensure for third-party intermediaries as well as for individuals in a two-party transaction.
Within ch. 560, F.S., the bill adds a definition for “virtual currency” and amends the definitions of “electronic
instrument”, “monetary value”, “money transmitter”, “payment instrument”, and “stored value”. The
amendments to these definitions provide clarity as to their meaning; make virtual currency expressly subject to
money transmitter regulations but not regulations for other types of licenses under ch. 560, F.S.; and clarify
that a money transmitter license is only required for a person acting as an intermediary between two parties,
meaning that neither person in a two-party transaction is required to be licensed. As a result of the addition of
virtual currency to ch. 560, F.S., the bill makes conforming changes to the prohibition on unlicensed activity,
adds rulemaking authority for recordkeeping requirements related to virtual currency, and amends the
permissible investments statute. Without a change to the permissible investments statute, the effect would be
to require a money transmitter that transmits virtual currency to not only have control over the virtual currency
being transmitted but also hold the equivalent value in cash or other enumerated assets. Instead, the bill would
only require that, during the period of transmission, the money transmitter must hold virtual currency of the
same type and amount owed or obligated to the other location or person on the receiving end of the
transmission. Lastly, the bill makes conforming changes under the Financial Technology Sandbox in s.
559.952, F.S., as well as other conforming changes within ch. 560, F.S., to reflect the addition of virtual
currency to money transmitter regulations.
The bill has no fiscal impact on local governments and an indeterminate fiscal impact on the private sector and
the state. See Fiscal Analysis & Economic Impact Statement.
The bill provides an effective date of January 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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 FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Regulation of Money Transmitters and Payment Instrument Sellers
State Regulation
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions,
finance companies, and the securities industry.1 The Division of Consumer Finance within OFR
licenses and regulates various aspects of the non-depository financial services industries, including
money services businesses (MSBs) regulated under ch. 560, F.S. Money transmitters and payment
instrument sellers are two types of MSBs, and both are regulated under part II of ch. 560, F.S.
A money transmitter receives currency,2 monetary value,3 or payment instruments 4 for the purpose of
transmitting the same by any means, including transmission by wire, facsimile, electronic transfer,
courier, the Internet, or through bill payment services or other businesses that facilitate such transfer
within this country, or to or from this country.5 A payment instrument seller sells, issues, provides, or
delivers a payment instrument.6 State and federally chartered depository institutions, such as banks
and credit unions, are exempt from licensure as an MSB.7 Currently, virtual currency is not expressly
within ch. 560, F.S., though in the last 7 years OFR has received over 70 petitions for declaratory
statement relating to whether and how virtual currency is regulated under that chapter.
An applicant for an MSB license under ch. 560, F.S., must file an application with OFR and pay an
application fee of $375.8 The license must be renewed every 2 years by paying a renewal fee of $750.9
Money transmitters and payment instrument sellers may operate through authorized vendors by
providing OFR with specified information about the authorized vendor and by paying a fee of $38 per
authorized vendor location at the time of application and renewal. 10 A money transmitter or payment
instrument seller may also engage in the activities authorized for check cashers 11 and foreign currency
exchangers 12 without paying additional licensing fees.13
1 S. 20.121(3)(a)2., F.S.
2 The term “currency” means the coin and paper money of the United States or of any other country which is designated
as legal tender and which circulates and is customarily used and accepted as a medium of exchange in the country of
issuance. Currency includes United States silver certificates, United States notes, and Federal Reserve notes. Currency
also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign
country. S. 560.103(11), F.S.
3 The term “monetary value” means a medium of exchange, whether or not redeemable in currency. S. 560.103(21), F.S.
4 The term “payment instrument” means a check, draft, warrant, money order, travelers check, electronic instrument, or
other instrument, payment of money, or monetary value whether or not negotiable. The term does not include an
instrument that is redeemable by the issuer in merchandise or service, a credit card voucher, or a letter of credit. S.
560.103(29), F.S.
5 S. 560.103(23), F.S.
6 S. 560.103(30) and (34), F.S.; definition of “payment instrument”, supra note 4.
7 S. 560.104, F.S.
8 Ss. 560.141 and 560.143, F.S.
9 Id.; s. 560.142, F.S.
10 Id.; ss. 560.203, 560.205, and 560.208, F.S.
11 The term “check casher” means a person who sells currency in exchange for payment instruments received, except
travelers checks. S. 560.103(6), F.S.
12 The term “foreign currency exchanger” means a person who exchanges, for compensation, currency of the United
States or a foreign government to currency of another government. S. 560.103(17), F.S.
13 S. 560.204(2), F.S.
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 A money transmitter or payment instrument seller must at all times:
 Have a net worth of at least $100,000 and an additional net worth of $10,000 per location in this
state, up to a maximum of $2 million.14
 Have a corporate surety bond in an amount between $50,000 and $2 million depending on the
financial condition, number of locations, and anticipated volume of the licensee.15 In lieu of a
corporate surety bond, the licensee may deposit collateral such as cash or interest-bearing
stocks and bonds with a federally insured financial institution. 16
 Possess permissible investments, such as cash and certificates of deposit, with an aggregate
market value of at least the aggregate face amount of all outstanding money transmissions and
payment instruments issued or sold by the licensee or an authorized vendor in the United
States.17 OFR may waive the permissible investments requirement if the dollar value of a
licensee’s outstanding payment instruments and money transmitted do not exceed the bond or
collateral deposit.18
While MSBs are generally subject to federal anti-money laundering laws,19 Florida law contains many
of the same anti-money laundering reporting requirements and recordkeeping requirements with the
added benefit of state enforcement. An MSB applicant must have an anti-money laundering program
that meets the requirements of federal law.20
Pursuant to the Florida Control of Money Laundering in Money Services Business Act, an MSB must
maintain certain records of each transaction involving currency or payment instruments in order to deter
the use of a money services business to conceal proceeds from criminal activity and to ensure the
availability of such records for criminal, tax, or regulatory investigations or proceedings. 21 An MSB must
keep records of each transaction occurring in this state that it knows to involve currency or other
payment instruments having a greater value than $10,000; to involve the proceeds of specified unlawful
activity; or to be designed to evade the reporting requirements of ch. 896, F.S., or the Florida Control of
Money Laundering in Money Services Business Act. 22 OFR may take administrative action against an
MSB for failure to maintain or produce documents required by ch. 560, F.S., or federal anti-money
laundering laws.23 OFR may also take administrative action against an MSB for other violations of
federal anti-money laundering laws such as failure to file suspicious activity reports.24
A money transmitter or payment instrument seller must maintain specified records for at least 5 years,
including the following:25
 A daily record of payment instruments sold and money transmitted.
 A general ledger containing all asset, liability, capital, income, and expense accounts, which
must be posted at least monthly.
 Daily settlement records received from authorized vendors.
 Monthly financial institution statements and reconciliation records.
 Records of outstanding payment instruments and money transmitted.
 Records of each payment instrument paid and money transmission delivered.
 A list of the names and addresses of the licensee’s authorized vendors.
 Records that document the establishment, monitoring, and termination of relationships with
authorized vendors and foreign affiliates.
 Any additional records, as prescribed by rule, designed to detect and prevent money
laundering.
14 S. 560.209, F.S.
15 Id.
16 Id.
17 S. 560.210, F.S.
18 Id.
19 31 C.F.R. pt. 1022.
20 S. 560.1401, F.S.
21 S. 560.123, F.S.
22 Id.
23 S. 560.114, F.S.
24 Id.
25 Ss. 560.1105 and 560.211, F.S.
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 Recent Case Law: State v. Espinoza
Through an online directory of buyers and sellers of bitcoin, a detective with the Miami Beach Police
Department arranged to meet a person with the username Michelhack, which turned out to be the
defendant Michell Espinoza, in order to purchase bitcoin. 26 The detective arranged multiple
transactions with the defendant as follows:
 During the course of the first transaction, the detective made clear his desire to remain
anonymous and implied that he was involved in illicit activity. 27 The detective paid Mr. Espinoza
$500 in cash and received a portion of a bitcoin valued at $416.12, thus earning Mr. Espinoza a
profit of $83.67.28
 The detective arranged a second transaction with Mr. Espinoza during which he told Mr.
Espinoza that he needed the bitcoins to pay for stolen credit card numbers, since he was in the
business of buying and selling stolen credit card numbers from Russian sellers. 29 The detective
paid Mr. Espinoza $1,000 in cash and received one bitcoin, thus earning Mr. Espinoza a profit
of approximately $167.56.30
 The detective then arranged a third transaction with Mr. Espinoza.31 The detective inquired how
fast the transaction could be completed because his “Russian buddies” would not send him his
“[stuff] until they get the coin.”32 The detective deposited $500 into Mr. Espinoza’s bank account,
and Mr. Espinoza transferred 0.54347826 bitcoins to the detective. 33
 In the fourth and final transaction, the detective negotiated the transfer of bitcoins worth $30,000
and represented to Mr. Espinoza that it was to pay for a new batch of stolen credit card
numbers acquired from a recent data breach.34 Although Mr. Espinoza questioned the
authenticity of the $30,000 roll of money that the detective gave him, he otherwise remained
ready and willing to consummate the entire transaction.35 Mr. Espinoza was then taken into
custody.36
Mr. Espinoza was charged with: (1) one count of unlawfully engaging in the business of a money
transmitter and acting as a payment instrument seller as a result of not being licensed to conduct such
activity (Count one); and (2) two counts of money laundering (Counts two and three).37 Mr. Espinoza
filed a motion to dismiss as to all counts, which the trial court granted for the following reasons:
 As to Count one, the trial court found that neither bitcoin nor Mr. Espinoza’s conduct fell within
the ambit of ch. 560, F.S., requiring registration as a money services business. 38 Regarding Mr.
Espinoza’s conduct, the trial court reasoned that a “money transmitter” would necessarily
operate like a middleman in a financial transaction, much like how Western Union accepts
money from person A, and at the direction of person A, transmits it to person or entity B. 39 Mr.
Espinoza was not acting as a middleman; rather the transactions with the detective were two-
party transactions in which Mr. Espinoza sold his own bitcoin to the detective and received U.S.
Dollars in return.
 As to Counts two and three, the trial court found that the conduct at issue qualifies as a
“financial transaction” under the money laundering statutes but that Mr. Espinoza lacked the
requisite intent to be guilty of money laundering.40
26 State v. Espinoza, 264 So. 3d 1055, 1059-60 (Fla. 3d DCA 2019).
27 Id. at 1060.
28 Id.
29 Id.
30 Id.
31 Id.
32 Id.
33 Id.
34 Id. at 1060-61.
35 Id. at 1061.
36 Id.
37 Id. at 1057 and 1061.
38 Id. at 1057 and 1061.
39 Id. at 1065.
40 Id. at 1057 and 1061.
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 The state then appealed the trial court’s dismissal of the information. 41 On appeal, the Third District
Court of Appeal (court) held that:
 The trial court erred in dismissing Count one because Mr. Espinoza acted as both a money
transmitter and a payment instrument seller and, as such, was required to be licensed as a
money services business.42
 The trial court erred in dismissing Counts two and three on the basis that Espinoza lacked the
requisite intent to be guilty of money laundering.43
In the reasoning as to Count one, the court determined that bitcoin is both “monetary value” and a
“payment instrument” under ch. 560, F.S.44 This interpretation illustrates the need to expressly provide
whether and how virtual currency falls within ch. 560, F.S. The court’s interpretation also illustrates the
need to clarify the definition of “payment instrument”. “Monetary value” is akin to “currency” within ch.
560, F.S. Conceptually, a payment instrument is an instrument denominated in currency (or monetary
value), but currency and monetary value should not in and of themselves be a payment instrument.
Another important aspect of the Espinoza case is that in determining that Mr. Espinoza acted as a
money transmitter, the court addressed whether the definition of “money transmitter” covers only third-
party intermediaries, in which case Mr. Espi