You may know Bitcoin as a kind of digital cash that can be spent just like the U.S. dollar and can't be traced to a person's specific identity. Maybe you've even heard it described as a virtual "currency."

Well, Bitcoin supporters are now distancing themselves from the word — at least as it's used in Florida law.

Advocates of the payment technology are defending two men who earlier this year were accused of using Bitcoin in a money laundering scheme. According to documents filed in state court, Pascal Reid and Michel Abner Espinoza were approached months ago by an undercover Miami Beach police officer and a Secret Service agent. The law enforcement officers told Reid and Espinoza that they were interested in buying bitcoins to obtain stolen credit card numbers.

Reid later allegedly sold $25,000 worth of bitcoins to the Secret Service agent. At today's prices, that would amount to 42 bitcoins.

The state of Florida has charged the two suspects with money laundering and, in Reid's case, one count of being an unauthorized money transmitter. The outcome of the case, which prosecutors say may be the first time a state has charged Bitcoin users in connection with money laundering, could become a bellwether for Bitcoin regulators moving forward.

It's the last count that Bitcoin supporters are hoping to get dismissed. They're arguing that Bitcoin isn't currency — so Reid can't have been a money transmitter under Florida law.

"'Currency' is defined as '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," lawyers for the Bitcoin Foundation, an industry group, wrote Thursday in an amicus brief to the state court. "Bitcoin most certainly is not 'the coin and paper money of the United States.'"

The Bitcoin Foundation's own former vice chairman, Charlie Shrem, was accused earlier this year of money laundering and conspiracy in connection with Silk Road, the online marketplace where bitcoins were routinely traded for illicit drugs.

Still, the Bitcoin Foundation may find support for its position, and in an unlikely place: The federal government. The Internal Revenue Service said in March that it considers Bitcoin a form of property akin to shares of stock. For tax purposes, at least, Bitcoin is not money.

Reid's allies also argue that a recent Treasury Department memo on Bitcoin has exempted individuals from the regulations associated with money transmitters. They say that because Reid was a lone person engaging in a peer-to-peer transaction, he falls outside the scope of the Florida law meant to deal with money transmitters.

But things are a little less clear here. The Treasury Department memo cited by the Bitcoin Foundation explicitly points out that someone who mines Bitcoins and sells them later, or buys Bitcoins and trades them for real currency later, is a money transmitter.

All the legalese aside, the Bitcoin Foundation is now in the position of having to answer an uncomfortable question. Is Bitcoin a currency, or isn't it?
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