Bitcoin Forum

I am so confused by this GLBSE crap,
What I am asking is it high risk using pure bitcoins for a stock exchange type thing? i am not sure how/why glbse is under attack but anyway since when is bitcoin considered good as USD?

Whats next bitcoin gambling games are gonna get taken down?

I thought bitcoins were pretty safe from this crap.

We are all waiting to see what kind of charges are against GLBSE, to see if BTC stock exchanges aren't allowed at all, or whether GLBSE did something that wasn't allowed.

Also, GLBSE was in the UK.

And, one of the things that scares the hell out of me right now, is this sort of added attention in my opinion will bring added regulation. As soon as Bitcoin is classified as money, even if its internet money of $ value, like Liberty Reserve, online gaming will start getting restricted.

The real answer is you need legal counsel.

The simple (I am not legal counsel answer) is the SEC regulates the issuance, underwriting, and trading of securities in the United States.  If you offer securities involving American companies/assets/real-estate/etc or to offer securities to American residents then you are subject to their jurisdiction.

The various laws and regulations involving securities could fill a small apartment.   It is a massive legal minefield even for relatively straight forward operations.   There is nothing in the SEC regs which limit the securities subject to regulation to ONLY those bought and sold with USD.  If you were in prison and offered CFD contracts on the price of a pack of cigarettes and inmates paid monthly premiums and margin in cigs then it would still be subject to SEC oversight and regulation.  Now in the real world the SEC does have limited resources.  They don't go after every small biz raising capital but once again the idiots who dumped $5M into Pirate's oh-so-obvious ponzi scheme suddenly made it "big" enough to get the SEC attention.  The passthroughs on GLBSE were a large funnel to feed the ponzi machine.  It is asinine to think the SEC would investigate Pirate but not GLBSE.  Now that it has their attention they can't just "let it go" doing so would be a defacto acceptance of the status quo.

+1 The same is likely true for most securities regulators anywhere in the world. Only replace USD by the corresponding fiat currency.

Bitcoins themselves are pretty safe, but not the services and people who use them without extra precautions.

I see this stated often, but how exactly is this the case, either from a "legal land" standpoint or a logical one? Can someone doing something completely legal in their country magically fall under the jurisdiction of the United States merely because they don't exclude citizens of the United States from their business? How would you even go about that, without collecting and verifying identifying information for every single user of your service?

That's unnecessary. They will simply be labeled "enemy of the state."

I don't think currently there is anyone have enough knowledge about BTC from legal point of view, it is a totally different mindset when working with an internet currency, lot's of things are virtual, and our traditional laws mostly apply to physical things

Read up on the actions taken by the US DoJ against offshore services which were offering online gambling services to US residents.  The gambling wasn't illegal per se but transferring money through US entities for that purpose of allowing US residents to gamble online was.  The DoJ seized the domains of the operators and froze the accounts of their payment processors.  Those services now require proof of residence from their clients.

Many nations already have AML/KYC regulations which require consumers of financial services to be identified by the service operators - that information usually requires proof of both identity and address.  In many countries, service operators would be breaking their own nation's laws by not collecting that information whether or not they offered their service to US residents.

See wikileaks :)

Its funny people keep thinking that because its bitcoin related that its a legal grey area or unregulated.
That bitcoins are used on GLBSE doesnt matter, what does matter is that its an exchange for unregistered securities. Its like silk road, its not because they use bitcoins for payments that its illegal, its the weapons and the drugs. Duh.

First I am not advocating such policies nor do I think they are completely logical however the "long arm of the (US) law" is indeed long.  If you open your exchange in say Somalia you likely are safe (unless the DOD wants to test out some new reaper drone on a "financial enemy of the state") however if you are in a country which has "normal" relations with the US well your fraked.  Your own country will turn you, your assets, your servers, and everything else the DOJ asked for in a split second (and be happy about doing it).  Just ask the people who ran poker sites where it was "legal" and offered play to Americans (in violation of US law).  

As for:

Generally speaking (this applies for any law in any country) when something is deemed illegal it isn't the responsibility of the entity making it illegal to give you an "out".   It would be like saying "wait selling Marijuana is illegal how would I go about legally selling marijuana". :)   However you already expressed the "out" you just don't like it.  Collect KYC/AML information from all participants.  That combined with IP monitoring, and blacklisting known proxies gives you pretty good deniability.  If an American still bought securities on your site it would be pretty easy to prove you didn't have the INTENT to break the law.  Generally speaking (once again the real answer is consult legal counsel) is that violation of any law required INTENT.   While your activity may be technically unlawful (1 out of 200,000 participants is an American despite your best efforts) it doesn't rise to criminality.

One last point, I was just using US because it is the laws I am most familiar with.  I am 99% sure  that every other "first world" country had similar laws and an SEC equivalent used for regulation.  So it isn't just a matter of block Americans it becomes block Americans, French, Canadians .... .  That being said there likely are ways to get bend the law.  If one operated an exchange out of a financial privacy country ("aka offshore"), accepted connections only via tor, and made payments only via Bitcoin (think Silk Road equivalent for securities) while it likely would still be on the SEC radar there wouldn't be much they could do about it.

The way GLBSE went about it was just asinine.  It was just anonymous to bring in every scammer, huckster, and conman on the planet while just public enough to ensure that eventually it would bring the attention of an entity like the SEC.

See this is a misnomer

If buying drugs with dollars on the street corner is illegal, then buying drugs over the internet using bitcoins is just as illegal.  Bitcoin doesn't "magic" away laws simply because ... Bitcoin.
Likewise if selling unregistered securities for USD is in violation of US securities law then accepting Bitcoins didn't magically put it out of the jurisdiction of the SEC.    So a potential business owner has two options.  Make your business legal within the law (MtGox) or accept it is illegal and take steps to ensure the law can't reach you (Silk Road).  GLBSE did neither.  It was blatantly in violation of US securities law yet remained publicly known and operated from a state with close ties to the US.

This is the TL/DR version.  Puppet expressed it in a paragraph what I rambled on about for pages.

I think it's worth trying to understand the wider context around these sorts of laws and regulations (as noted elsewhere, regulations are simply laws created by unelected civil servants).

Securities laws were introduced in the 30s and extended many times to deal with fraud and abuse related to investments. You don't need to look very far in the bitcointalk forums to find the sorts of scams the regulations are intended to prevent. Arguably there's no need for regulations to stop people investing into obviously bogus schemes like the one run by pirateat40 because "caveat emptor" should suffice, but many problematic investments did not appear so obviously absurd and hence securities laws were passed to force transparency.

The underlying goal of these laws is to ensure investors understand what they are investing in. If you look at the 34 page long SEC Form 1-A it is asking questions like:  who is issuing this security, what is their background, what are they doing and what are the risks involved? Note that not stating things has been interpreted by the courts as fraud in the past, so filling out this form often involves considerable amounts of disclosure.

For example, had pirateat40 attempted to comply with these regulations, he would not have been anonymous and he would have had to explain how he was getting the returns he promised. Obviously, he didn't have any interest in doing either of these things as the explanations would have been unsatisfactory.

So as far as financial regulations go, the spirit of securities laws is pretty reasonable. This is especially the case when you recall that we all live in strongly inflationary environments today, which means the only way to save money for retirement is to give all your savings to a third party so they can invest it for you. In an environment where everyone is literally forced to hand over their life savings to the securities market at least 50% of all investors will be of below average intelligence, so an overbearing "nanny state" is understandable.

Where things come unglued is the intersection of old laws with new technologies. Securities laws have built-in assumptions that are invalidated by new capabilities we are developing via Bitcoin related research. Primarily, they assume that (a) securities are issued and traded on a small number of exchanges (b) exchanges are businesses that have a geographical scoping and (c) securities have inherently high overheads. In future none of these things will be true.

If a security is offered over the internet, is it being "sold into a state" from the USAs perspective? Probably. Does that mean you should have to try and simultaneously comply with every countries and country sub-regional laws simultaneously simply to issue a bond online? That would be absurd and unhelpful, and almost certainly impossible given that countries requirements often conflict - but it's one interpretation of existing laws.

If a security is not sold on an exchange at all but is done using some kind of peer-to-peer network, then we stumble into a whole other field of problems. Technically the rules around operating securities exchanges would become irrelevant, but the regulations governing the issuance of the securities would still apply. That's not inherently a problem (the principle that people should know what they're investing is still helpful), the problem is the proportionality of the regulations. The assumption that issuing a bond or stock is already complicated so making it even worse doesn't matter, is a huge stumbling block for any kind of lightweight market where issuers may be individual citizens or one-man companies. Once technology makes issuing a bond a one-click operation, a 34 page form seems ridiculous unless you're trying to raise millions of dollars. And it's not just the complexity of the paperwork. Many countries fund the regulatory agencies via fees levied on those being regulated! So that right there basically kills the idea of having lightweight P2P markets for issuance of micro-securities.

It's not all bad news. Technology is always ahead of the law and competent lawmakers know that. For instance, crowdfunding platforms like Kickstarter were in a legally grey area because the projects there could have been interpreted as being securities. Governments around the world are looking at passing laws that explicitly legalize what they're doing, and they're debating the compliance requirements for them now. As always the concern is how to minimize both fraud and paperwork. It's unlikely Kickstarter, or people who raised money via it, will ever be prosecuted for violating securities laws even if technically that might be possible.

I'm hopeful that in future if decentralized bond/stock markets become popular, the law will be amended to ensure the requirements are proportional and handle jurisdictional issues better. Most likely, waiving some of the requirements if the securities are below a certain size and dropping the requirements to follow a countries laws if a security is merely purchasable there. That sort of thing already happens, we just need more of it. I doubt anonymous securities will ever be allowed unless somebody can find a really compelling use case for them.

It does! Bitcoin is not money. A stock exchange that doesn't deal with money shouldn't be regulated by the government.

You gotta love this place. Some  irony that a well thought out,  reasonable and informative post like Mike Hearn just wrote is followed by a single line post showing drop dead stupidity, ignorance and even inability to read whats been written already.

i know by using bitcoins it wont make all laws go away lol,
but why does SEC not take over those stupid virtual stock exchanges where you can get real cash back?

You'll grow someday, puppy. Then you'll understand. Patience.

Of course one thing which we've seen happen with Bitcoin businesses is them starting out handling small amounts of other people's funds and eventually handling large amounts.  There'll likely always be a threshold above which operators will be required to do the full box and dice registration, and operators who don't plan for that from the beginning should probably be avoided or you are just going to see lots of businesses closing down when they reach that threshold because they either can't be bothered with or can't afford the registration process.  The is all the kind of stuff which should be allowed for in the business plan of any viable enterprise anyway.


What you believe the law should be doesn't affect how it operates in the real world.  That Bitcoin is intended to be a currency is explicitly stated in the "official" documentation regarding the protocol.  Satoshi himself descibes it as "electronic cash", so you're not going to get far arguing that it's merely a payment processing method.  Even if it was just a payment processing protocol, payment processing is subject to regulation.  So are commodities.  So is stored value. 

The only sane course is to assume that all Bitcoin-based businesses are illegal whether they appear to be so or not.

Even if you think it's completely lawful protect yourself by running it in a way that you'd be safe even if it was illegal.

There were no actual registered companies on glbse. It was mostly people listing their mining rigs and other things.

The other funny part is that here were no companies that even accepted fiat it was mostly mining operations.

I doubt any glbse "companies" actually listed any of their glbse shareholders on a shareholder register.

At least in Australia a pty ltd company needs to have a share register somewhere. Since you didnt know who owned your shares at any time on glbse there was no way to keep that register thus to list you are probably breaking at least some company laws.

Wrong. Let me address point by point.

Every object in this Universe is a stored value. Because every object that exists has some value. Stored value concept is flawed.

If they treat bitcoin as commodity then they should treat bitcoin stock exchange as barter exchange!

Bitcoin is not a payment processing protocol. If it is then every message or email sent is a payment and is subject to monetary regulation!?

Bitcoin is not money. Bitcoin network is a system for announcing trust relations between people. One bitcoin is a standard measure for trust on this network. By assigning 2 standard measures of trust to Bob's public key and 1 standard measure of trust to Carol's public key, via the block chain Alice announces to the world that in this particular moment she trusts Bob twice as much than Carol. Nowhere in the world to my best knowledge trust relations between people are taxable or subject to monetary regulations!

Not just Pty Ltds (who have to give ASIC details related to share-holdings).  Ltd companies have to maintain a share registry which can be inspected by the public and organisations which have members (such as unions and non-profits) have to maintain records of membership.

At law, regardless of how many Bitcoin enterprises have styled themselves in an effort to make themselves sound legitimate, most of them are either sole traders or simple partnerships - meaning that the business has no separate legal existence from its owners and that they have full personal liability in respect of its activities.

It's even possible that by using language which has a specific legal meaning to inaccurately describe their operations, some Bitcoin enterprises have intentionally misled their users in a manner which is an offence in and of itself.

Thank you for your compelling legal argument.  The first entity which gets dragged into court over Bitcoin should hire you to represent them.

I'm afraid, all boils down to that at the end of the day. All goes as I've predicted 1 year ago. First they will try to put you in the existing legal framework and label all your tools and activities under already well established labels. Then they will try to create new laws and regulations. Don't allow them to label you under existing labels that are grossly misleading. Let them create new regulations if they can!

Becoin, you should start another silk road, perhaps one that doesnt require tor. Since payments will be processed with bitcoin and not "money", you wouldnt be selling anything and surely regulations wont apply, right?

For the nth time, bitcoin has nothing to do with it.  Swapping assets on GLBSE,  a transaction that doesnt even involve bitcoins (let alone fiat) would be subject to regulation, because the assets are securities, and therefore subject to regulation.

Puppet, silk road must apply regulation because they sell drugs, not because they sell what they sell against bitcoins! Bitcoin is just a tool! You can regulate the usage of a tool, not the tool itself! Knifes are dangerous because they are very useful to criminals if they kill people. Does that mean we should apply extra regulation to all knife manufacturers? The bureaucrat's dream - Regulation after regulation after regulation after regulation after regulation...

Transactions on GLBSE DO involve bitcoins! Would you care to explain why every asset priced in bitcoins is a security?

Thats my point exactly. The same goes for GLBSE.


I posted that a million times already:

 The term ‘‘security’’ means any note, stock, treasury
stock, security future, security-based swap, bond, debenture,
evidence of indebtedness, certificate of interest or participation
in any profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of de-
posit for a security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or privilege
on any security, certificate of deposit, or group or index of secu-
rities (including any interest therein or based on the value
thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to foreign cur-
rency, or, in general, any interest or instrument commonly
known as a ‘‘security’’, or any certificate of interest or partici-
pation in, temporary or interim certificate for, receipt for, guar-
antee of, or warrant or right to subscribe to or purchase, any
of the foregoing.


The term ‘‘sale’’ or ‘‘sell’’ shall include every contract of
sale or disposition of a security or interest in a security, for
value. The term ‘‘offer to sell’’, ‘‘offer for sale’’, or ‘‘offer’’ shall
include every attempt or offer to dispose of, or solicitation of
an offer to buy, a security or interest in a security, for value.

www.sec.gov/about/laws/sa33.pdf

As for legal interpretation:

The definition for each of these securities is either listed in the Act under A.R.S. Section 44-1801 or provided by judicial interpretations and tests.[8] In determining whether a certain instrument is a security, a court will consider the substance rather than the form of the instrument.[9] “Essentially, if the purchaser will be a passive owner―relying on someone else’s efforts or conduct in order to make money on the investment―the instrument is probably a security.”[10]
http://www.mitchell-attorneys.com/legal-articles/securities-registration-and-exemption/

Investors on a bitcoin stock exchange DO NOT MAKE MONEY! They make bitcoins. Bitcoin is not money! ONLY if they sell their bitcoin assets against dollars will they make money.

Sigh.
The law itself doesnt even mention money. It doesnt appear anywhere in the definition of a security (spare me the comment on the foreign currency exchange which is explicitly mentioned).
As for selling securities, it doesnt mention money in that definition either, It mentions trading the security for VALUE. I even bolded it for you.
Is your point that bitcoins have no value?

The law itself doesn't even mention bitcoin. Bitcoin assets do not appear in the definition of a security. Case closed.

Look around you and tell me at least one thing that has no value? Why is bitcoin value so special to you?

Do gpg emails have value ?

Nor does it mention gold, electrical power or corn. It doesnt even mention Euros or dollars, or anything really. Therefore, securities dont exist?


You are an idiot; that case is definitely closed.

Yeah, this is a solid argument. Good luck SEC regulating every server in every jurisdiction on this planet that transfers messages signed with private keys!

becoin, the only question you have to ask is "What would a judge think?". The law is not a program. It is not an algorithm you can find security holes in to hack your way through it.

A judge would clearly believe Bitcoins have value, as would any reasonable man after seeing MtGox, so securities laws would apply if you issued shares denominated in BTC. End of story. Even if you strongly disagree with this please don't go on posting because there is really no ambiguity here - your interpretation of the law is wrong and the other posters are correct.


Yes, this is a problem not just from a legal perspective but also because it's insecure. Over time I'm hoping some of the services such companies provide migrate to P2P networks so the security and legal issues go away. Of course eliminating the centralized marketplace/exchange doesn't mean the participants suddenly become unregulated.

The only solution for that is to put pressure on politicians and regulators to reform the laws so they scale down appropriately. It's easier if you can show a thriving marketplace that's clearly A Good Thing(tm) but is in a legal grey area.

Did I say bitcoin has no value? Where? Of course, they have value. So does everything that is surrounding us has value for somebody. Does that mean security laws apply for everything that is surrounding us?

So does my email signed with my private key has value. But... not for the judge! As the judge doesn't have the public key to unlock it! End of story.

The regulation comes from issuing and trading securities. It has nothing to do with what the securities are exchanged *for*.

We are "paper-people" trading with "paper-money" governed by "paper-laws" in a "paper-world".
Bitcoin comes and lights the match!

If you issue securities about them, yes.

Right. And how do you know what I'm issuing is a security? Your wish to classify some bitcoin assets as securities is simply not enough. You have to point out exactly where the existing law applies to bitcoin assets? Stored value?!... What is that? I'm having really hard time trying to figure out just one value that is NOT stored.

Every bitcoin transaction is a private digital message where any third party has no place. This is a private message between 2 people. If this transaction does not include any government property (like fiat money) and does not use any government infrastructure then the government has no place there. Privacy is privacy is privacy. You either have privacy or you don't. Simple as that.

If privacy is outlawed, only outlaws will have privacy. - Phil Zimmermann on PGP
If zeros and ones are outlawed, only outlaws will use zeros and ones. - Jon  Matonis

In the current form applying the existing regulatory framework to bitcoin is counter productive. This only generates more outlaws. There is no point for the bitcoin community to spend time and money for lawyers. The legal guardians of the status quo do not care about the laws, because all monetary and financial laws are coined with one goal - to preserve the status quo at any rate.

If it meets the legal definition. Lawyers have told me that if it represents an interest in something else and is easily traded, it would generally be considered a security.


The law is both clear and broad. Courts have interpreted the law to cover pretty much anything that represents ownership of a right that can be traded.


Courts have interpreted this list as showing the intent to cover as broad a scope as possible and absolutely will not limit the definition to just the listed examples.

The law is not what you think it should be.

This is a counterproductive and self-destructive strategy. Look at the Internet -- the technology that has made it almost impossible for even the world's most repressive governments to stop their citizens from reading Western media and blogging about their government's abuses. It wasn't built by people who ignored the regulatory framework. It was built by people who found ways to work within it, worked to hold regulation at bay, and even change it where necessary.

It is perfectly fine to run a stock exchange using btc in the US, but only if you comply with all the other laws and regulations concerning reporting and permits and liscensing.

IMHO going forward it looks like there are three avenues one could peruse as a GLBSE replacement.

1) The SilkRoad model.  
Accept it is a violation of law and take steps to ensure regulation and prohibition is difficult or impossible.  The largest issue with this model is trust.  Fees likely will be higher so trusting the operator is less risky although some type of Open Transaction type of system is likely advisable.  The issue becomes trusting issuers.  While GPG can be use many existing players have real world identities tied to their GPG identity.  To gain any protection from this type of model requires asset issuers to "start over".  

2) Offshore it.  
Find a location in a "financial privacy" location which has less restrictive securities laws.  It may not be possible to offer true equity but "revenue sharing contracts" potentially could be traded.  If indirect revenue sharing of US based entities was desired those entities could sell equity to an offshore corporation or trust which tend issues "shares" in a revenue sharing contract.   There is significantly higher startup and research costs involved.  Taxation for US based assets is non-optimal (US based companies would be required to withhold 30% taxes on any revenue paid to foreign owners).   With the proper licensing just about anything is possible offshore.  For example one could operate a bitcoin mutual fund or even hedge fund, open a Bitcoin funded Forex brokerage, etc.  The large risk is not knowing if you are "firewalled" enough from other nation states.  Sure if you are a citizen of the Cook Islands, your servers are on the Cook Islands, your bank accounts, offices, and other assets are on the Cook Islands and you comply with all laws in the Cook Islands you and your enterprise is likely "safe" even if the SEC disproves then again most people won't have that option.  Their "firewall" may have some holes in it.

3) Work for within the system.  
Get a broker dealer license, be regulated by SEC.  Comply with all regulation including KYC and AML.  Essentially the MtGox model except for securities.  A broker dealer can trade any security even "unlisted" securities (meaning not filed with SEC).   This is the so called pink sheets.   In theory a broker could accept Bitcoins (potentially only accepting Bitcoins) and allow trade in Bitcoin denominated securities for its private clients.   This option would require some significant legal research and has the highest cost.  It probably isn't viable at this point but if Bitcoin continues to grow it likely is inevitable.

 I am not a lawyer and not advocating any course of action.   Always seek legal counsel before starting, joining, or investing in any project where its legality is not settled law.

Then every digital asset is a security, because it represents an interest in something else and can be easily traded due to its digital form...

By definition:


What your lawyer basically told you is that you have no right to possess digital assets without government permission and regulation by respective government agencies? Why would anyone need blessing from the government to use THEIR OWN digital assets if those assets include the right to use them? And you say the law is clear?!

Many people are operating under the flawed assumption that law enforcement is about rules. It's actually about power.

If the people with power to enforce their will don't like what you are doing they will use their power to stop you. Law is one of the tools they can use, and they go to great lengths to maintain the pretense that law is objective and consistent, but don't fool yourself that you can depend on a superior understanding of it to protect yourself.

Many, many people have lost liberty or property because they mistakenly believed they could use superior legal arguments to fend off the government. It's a form of magical thinking.

Don't rely on magical incantations to protect yourself - use technology to make yourself a hard target.

I guess I'm not sure what you mean by "digital asset". For example, a Bitcoin is a digital asset, I would think. But it doesn't represent an interest in something else.

It doesn't represent an interest in something else though, at least not so far as I can tell. In any event, there isn't really such a thing as a "right to use" under US law.

This wasn't about possession, but it was about issuing and creating a market. You don't need any sort of blessing to use anything. Nobody was talking about use.

Issuing what? Paying with what? Paying with alphanumerical text strings representing what? To have a market you must have money circulating on it! Because this is the definition for market - buying and selling against money.

Bitcoin is not money. Money === legal tender. Bitcoin != legal tender. If government changes tax laws and allows individuals to pay taxes with bitcoins only then they will have the right to interfere in private relations based on bitcoin!

Are you really that stupid or just doing a terrible job of playing devil's advocate?

No one here is saying bitcoins are illegal. No one is saying you cant use them to purchase goods or services, heck, you can almost certainly even use them to buy registered securities.

What you cant seem to comprehend is that trading unregistered securities is almost always unlawful. It doesnt matter what you pay these securities with, it doesnt matter if these securities are about  fiat, oil, gold, corn, bitcoins or chicken feed.

As to what constitutes a security, Ive give you the legal definition. If thats too hard to understand, consider that any contract that is publicly tradable is usually a security. You can make your own private contract between you and  Giga to rent his mining rigs, pay for it in bitcoins, and AFAIK, that would be fine. But if that contract is not in your name, and you can sell that contract and giga's obligations are to anyone owning that contract, ie, if giga sells tradable contracts to the public against anything of value, then it becomes a security and subject to regulation. Bitcoins dont have anything to do with it, it would be the exact same thing if giga's bonds pertained  to producing cows and were traded for bales of hay.

One of those three is correct.  
Where do you get this idea that money = legal tender?


Nope nothing about legal tender in there.  Hmm a "secure verifiable record that fulfills the function of a medium of exchange, a unit of account, and a store of value" what does that remind me of?


Nope not here either.

While the US Dollar is BOTH money AND legal tender in the United States (technically in the jurisdiction of the US courts) it is only money outside the US.  Try settling a debt in Spain arguing that because the dollar is money it is legal tender.

Legal tender status in the US derives from 31 USC 5103 which doesn't even mention the word money.

 

Great post, if anything, we will get a more secure exchange from this.

That's the cool thing about bitcoin, if something gets hacked or scammed, we fight back and make something that is more secure

You really don't get it, do you? The contract IS in my name.

Everytime I get something in exchange for bitcoins I sign it with my name. My name is represented by the unique string called private key. Thus, unique alphanumerical string is generated representing ME and ONLY ME. This is my signature. And the message I send signed with this signature is concerning only ME and the other person I sending it to. It is none of your business or government's business to regulate MY PRIVATE relations!

Mr. Bernanke "Gold is not money"
http://www.youtube.com/watch?v=jyTBhsEliUE

If gold is not money in the US then only money is the dollar bill. The dollar bill is the only legal tender in US!

There is a big difference between "can serve as money" and "is money"?! Over the course of human history, many things have been used as money: metals, stones, shells, grains, livestock, fuel, land.

That is a logical fallacy if I ever heard one.
So these must also be legal tender in the US right?  

http://upload.wikimedia.org/wikipedia/commons/b/be/Euro_banknotes.png
http://www.colourbox.com/preview/3359573-63554-japanese-yen-the-currency-notes-from-japan.jpg
http://currencyguide.eu/gbp-en/british%20banknote%205%20pounds%20sterling%20obverse.jpg

In the US:
Euro =/= Gold.
Euro == Money.
Therefor Euro == Legal Tender.

Lets take it to the next level.

http://www.ithacahours.com/
A private currency in the US (New York).

Ithaca hours =/= Gold.
Ithaca hours == money.
therefore Ithaca hours == legal tender.  Who knew!

You are talking about bitcoins again and no one is arguing they are illegal.  The topic of this thread is a stock exchange and GLBSE assets are not in your name, you can trade them freely with anyone and the asset issuers obligations trade with them. Those are therefore securities and trading unregistered securities is (almost always) illegal.

In the eurozone, yes. Euro is the legal tender. In the US the legal tender is US dollar. Where is the fallacy?

Private currency is just private currency. What we are talking about is what is money? From Mr Bernanke's statement becomes clear that gold is not money. Therefore the only option left is the dollar. The dollar is the legal tender as well.

They ARE in my name. It is just another question that you don't know my name, but it is none of your business either as it is concerning me and my counterparty. Everything I purchase with bitcoins is in my name! Every bitcoin I spend contains both the contract and my signature. The reason for this is already stated several times. I can't pay with bitcoins if I don't sign it with my private key. A bitcoin marketplace does not need a trusted third party to verify identity! I fully understand your pain as a trusted middleman but can't help. You are not needed anymore!

please, stop acting so stupid. They are not. You can sell your gigamining bonds to me or anyone you want, and gigaVPS wouldnt have a clue, wouldnt have to agree, he wouldnt  even have to know,  his obligations would remain to the bond holder, whoever that is. Thats a tradeable security.

Try the same with for instance a rental contract, or a work contract. Can you sell your house rental agreement or work contract to me, and would your employer then owe me your salary? No. so thats a non tradeable contract. Its not a security.

If you can really not see the difference, then i cant help you.

That will be the case if I sell for fiat currency. In bitcoins is different. He will know if he cares to know. Information for every bitcoin transaction becomes publicly available in 10 minutes via the information for the blockchain. Again, only people directly involved will know what this transaction is about. Again, there is no need for a trusted middleman to verify identity of transacting parties.

What are you blabbering about? It doesnt matter if you traded your gigamining bonds with me for bitcoin, swapped them for other securities,  sold them for fiat. a pack of smokes or a date with your sister. As the owner of the bond, you could  sell them to whoever you want for whatever you want. GigaVPS would have  no say, yet his obligation would remain to the bondholder.  Thats a security. And bitcoin doesnt change a bloody thing about it.

Of course, I can. I may need issuer's permission or not, depends on my contract with him. Certainly, I don't need your permission as a regulator to do that. Bitcoin changes almost everything. Find another job!

Complying with the law is the best option, and I'd like to enhance your knowledge of this process. A clean, legal SEC-registered OTCBB shell company will run higher than most people's idea of pocket change. Please do your Due Diligence, YMMV. (http://www.mergernetwork.com/index/public-shell-companies-for-sale/) Also, you certainly must be registered with the SEC, unless you are classified under a Regulation D exemption. (http://www.sec.gov/answers/regd.htm)

OTC-BB isn't the same thing as the Pink Sheets.  OTC-BB stocks stocks must register with SEC, unlisted securities do not.  The pink sheets are simply a centralized third party which maintains a list of independent brokers and the unlisted securities they trade.  Note it isn't a requirement for an unlisted security to be on the pink sheets.  Think of pinksheets as like a digital phonebook of brokers.  Say you want shares of unlisted security xyz.  Your broker can use the pinksheets to find that broker abc has shares of xyz (it may be the only broker in the world that does).  Your broker can then buy shares from broker xyz and simply assign them in your account.  Remember only broker dealers can trade in unlisted securities.

Reg D BTW doesn't relate (directly) to what securities broker dealers can TRADE.  It deals with the issuance (i.e. selling new shares) of securities.   While GLBSE did multiple things normally these are separate actions.  Reg D deals with the legality of a company issuing new securities.  Broker dealers are required to trade unlisted securities.

Edited for clarity.

Pink sheets and OTCBB are the same thing. They are competitors.

The exemptions are very strict and your Regulation D exempt stock will have a restrictive legend on it that does not allow free trading (meaning no pink sheets).




You do not need a broker-dealer or market maker. You need a Transfer Agent. Let's be completely clear -- a broker-dealer is not required.

A security.

It doesn't matter.

Nope. A barter exchange is a type of market. You just need something that has a value to be exchanged.

I agree with the first part and the last part but not the middle part. The general consensus seems to be that legally Bitcoin is more like a volatile commodity than money -- something with an established, but unstable, market value.

That's pure craziness. I think you are confusing what you imagine an ideal world might be like and the world we actually live in. You can't pay your taxes in nuclear weapons or sheep. Does that mean the government has no right to restrict a trade of nuclear weapons for sheep?

+1

Indeed, the Bitcoin protocol can be used in a really safe way !   All flaws and scandals that happens in the Bitcoin history to date are due to scammer (and naive peoples using those scam) and stolen wallet from not enought secured wallet in web service..

BTC are still intact, and have'nt been regulated in anyway yet, as far as I know !  All depends on the user/service provider ability to do thing a secure way.

I'm not sure, but I think that the bitcoin fundation as been setup to build trust and help service provider / user to use bitcoin the safe and legel way !

was my 2 satoshi

The latter is correct the former isn't.

http://www.sec.gov/answers/pink.htm
http://www.sec.gov/answers/otcbb.htm

The OTC-BB requires listed companies to be registered with the SEC (as well as meet some minimum level of reporting standards).
The pinksheets have absolutely no listing requirements.

However there are exceptions.  The restrictive legend can be removed.  Still generally speaking this is likely beyond what the bitcoin economy could support at this time.  The cost and complexity doesn't warrant the size of the issuance.

Working within the system is always the smartest option. Unless you are a fan of prison rape.

[/quote]

There are other rules that can be used as well, but I believe the goal is to raise money for bitcoin related products from normal people, so Reg D is the most appropriate.

Just for completeness the list of ways to investigate are:

1) Full Registration (S-1, and others)
2) Regulation D
3) Regulation A
4) Intrastate offering
5) Rule 144
6) Reverse Merger into a reporting shell company
7) Private placement
8) Accredited Investor Offering

After the stock is issued and the legends are removed you can find a broker-dealer to help with Rule 15c2-11 (Form 211) quotations.

I'm unsure what the regulations are for starting your own exchange!

"You are charged with the heinous crime of sharing the profits on a BFL single. How do you plead ? "

They once transported people to Australia for stealing a loaf of bread. Yes the law is that retarded.

It kinda makes bitcoin useless for its intended purpose though.

This was already discussed. Your definition for "security" does not match characteristics of the shares measured in bitcoins and traded against bitcoins on the bitcoin stock exchange! Those assets measured in bitcoin terms do not have any of the material or monetary interest described in your definition. They would have such if they represent and are traded against fiat currencies, oranges and apples, but they are not! They represent pure bitcoin assets and are traded against bitcoins. And bitcoin is not money! Your definition of money does not correspond to what bitcoin is. Or, your broad definition of money is including just every object material or digital in this Universe. Are you going to regulate for the purpose of taxation every transfer of every object from point A to point B?

One bitcoin is the standard measurement of trust that participants in the bitcoin network have among each other. You can not tax and regulate my private relations and confidence in some other people or entities just because trust increases/decreases and changes from time to time. I don't need enforced by the government agency to tell me whom should I trust and to what extend. If you continue to insist you should regulate bitcoin transactions the next step would be to tax and regulate my email messages signed with my pgp key. Because if there is a valuable information in there those messages can be securitized? And who decides this information is of value or not? Are you going to tax and regulate the entire message exchange on the Web?

How often do we need to quote the law before you will bother to read it? The law defines ANY bond,  transferable share, evidence of indebtedness, profit sharing agreement etc as a security. It doesnt matter if the debt is denominated in Dollar, Yen, oil, bitcoin or peanut butter. It doesnt matter if the profit is generated in dollars, yen, bitcoins or barrels of oil The law mentions none of them, but applies to all of them. It doesnt matter if the asset itself relates to drilling oil, growing banana's or mining bitcoins, the law states none of them. but applies to all of them. It  doesnt matter if you trade those securities against fiat, bitcoins or coconuts, because selling is defined as trading these securities for anything of value.

FFS, you argue like a 5 year old that has fingers in his ears yelling "LALALALALA,  it doesnt say bitcoin in the law, so it doesnt apply". Do you really think law makers and judges are as stupid as you are?

You know what becoin, lets make it a bet that serves a purpose. You can request the SEC issue no-action letters if you are convinced a certain security is except from regulation. You can do so here:

https://www.sec.gov/forms/corp_fin_noaction

I thought there was a $200 fee, though I cant find that stated anywhere, so perhaps its even free. If you describe Gigamining bonds in a way that we both agree  is a fair and complete description, and you do indeed receive a no-action recommendation from the SEC for it, I will refund your fee (and Im sure GigaVPS and many other asset issuers will gladly chip in to make it worth your while).

There is no debt!

Isnt there? So if you loan me your car, and I dont return it, all is good? Its not money, so I wouldnt owe you anything, right?
And since no law would describe your exact brand and type of car, Im sure no law covers it anyway.

http://www.slcapex.com/ (http://www.slcapex.com/)


and reading the tos of linden labs it says


It doesnt matter one iota that you can redeem lindens for usd anywhere else. Just as a GLBSE "game token" it wouldnt matter if you use bitcoins somewhere else if you use the same TOS.

Bitcoin bond is not debt. Bitcoin obligation != Debt

By definition: Every debt can be repaid with the legal tender. This is what the law says. If I owe you 2 apples and I have no apple but want to pay you US dollars instead (if we are in the US), you have no right to refuse or you'll be sent to jail. Everyone can repay their debt whatever it is in dollars fbecause it is the legal tender in the US. This is not the case with bitcoins. If you have to repay your bitcoin obligation you have to find someone willing to exchange their bitcoins for your dollars and just after that having bitcoins you can repay your loan.

As already said, bitcoin is trust. Sometimes more, sometimes less trust as per your wallet.dat file. And as we all know, all the dollars, euros, pounds or yen in the world can not make people have greater confidence and trust more in current fiat money system. Bitcoin obligation can be paid only in bitcoins. Period.

Remember: bitcoin bond is not debt, because it lacks a major characteristic of what debt is described by current law. You can repay a bitcoin obligation only with bitcoins. It is technically impossible to pay your bitcoin obligation with US dollars, and no law can help you!

Possibly with that disclaimer, if also actively enforced by the exchange, and the assets operating on that exchange were bought and sold with that understanding.  A judge generally speaking looks at all the facts, it isn't some word game puzzle where the magic combinations of words gets you the super combo and you winz.   A prosecutor would likely pull the worst contracts, get statements from victims, dump forum posts, etc.   Based on all the evidence if it overwhelmingly seemed like a game then likely GLBSE would be fine.  If it seemed like some dubious wordplay to get around securities law then a judge is going to rule on it for what it is.  

Then again who would be willing to buy Gigamining bonds (as an example) if there was a caveat that Giga could simply 100% legally and lawfully walk away with all the coins in "entertainment".  It is part of the game right?  I mean would you buy assets if they had this disclaimer:
"Shares purchased on this stock exchange simulation game do not entitle you to any legal real-world rights to a listed virtual company. Please play accordingly!".  

The reality is GLBSE only has value if the contracts have real value.  If they don't have real value nobody is going to pay anything for them.   If they DO have real value the disclaimer will just be struck down in court.  Many people have tried the whole "it is just for entertainment value"* to run gambling operations with very predictable results.  

So which is it?

* I would point out the law is always evolving so even if hypothetically a judge bought the "entertainment value only" argument over time people as people got scammed "in good fun" and didn't take it as fun and sought legal recourse, filed police reports, sued GLBSE, etc those actions would be precedent for future cases.   Based on the new evidence some future judge would rule that, no in some cases it isn't entertainment value and even these "entertainment value securities" are real securities.

What DnT said.  Im not too familiar with SL and I havent read what you linked; but while you can put anything in your TOS, that doesnt mean it will stand up in court when challenged. Calling something a game and using a token as proxy for money doesnt magically make it legal if the token has actual market value If it were, you'd have no legal problems opening a casino or play poker games for "tokens" ie, poker chips, instead of money.
Try it, and see what happens.

Exactly.

http://techcrunch.com/2007/07/25/second-life-bans-gambling-following-fbi-investigation/

Actual market value?! What is that? Everything in this world has some value for somebody at some place under certain circumstances! Just another meaningless terminology designed to make laws suitable for status quo guards... This is why bitcoin was invented. Math is math. 2+2=4 even if a regulators tells you it is actually 3.5 if existing law is properly applied.

please stop pretending word games can change the law. You have judges who interpret the law. You think there is a snowball chance in hell you will convince ANY judge bitcoins have no value?


Indeed, although legal interpretations are  more narrow than that, trading securities for basically anything constitutes a sale. Glad you noticed.

This was already explained a dozen of times. Bitcoin has value, but only to the person that holds corresponding private key. This is in sharp contrast to the universal value of fiat currencies, apples, bananas, oranges, and basically anything else.

Trading is a sale!? Who knows? It might be a buy as well?

Just like bitcoin is not money, apples, bananas, oranges etcetera, bitcoin bonds are not securities. Trying to put an existing tag on bitcoin and digital assets measured in bitcoins will lead you to nowhere. Every judge or regulatory agency will understand this sooner or later. Obviously, you will be among the last to get it.

No one is saying bitcoins are securities. This is about bonds and shares on GLBSE. Those ARE unregistered securities and that you trade them for bitcoins instead of dollars is irrelevant. What is relevant is that they traded for value. Capiche?

Again, the "face value" of those bonds is not in fiat currency, apples, oranges, bananas and basically anything else, but in bitcoins. And one bitcoin, again, is the standard measure of trust in the bitcoin network. Why should Alice register how much she trusts Bob... in SEC? Is your point that SEC must give permission to Alice how much she can trust Bob, Carol, and David?!

It doesnt matter what bitcoins are or what you think they represent, as long they have value. It doesnt matter if those assets traded for apple juice or bitcoin, they were publicly traded securities that represented debt, profit sharing agreement or a shares in a company, ie they were securities. It doesnt matter if that debt, or the profit was generated as apple juice or bitcoins.

It really doesnt get any more clear cut than this, your attempt to argue against it is as silly as defending yourself in a murder case by stating you didnt really kill the person, you merely shook hands with a pistol, the victim was still alive for several milliseconds after you touched the trigger, its all the fault of the bullet and physics and no one knows what death means anyway, oh, and your Honor, you cant prove the victim isnt still alive in a parallel universe.

Guess what, it wont stick. Prove me wrong by getting a no action letter.

Of course. Whatever they are, no arguments matter if the status quo is at stake. No surprise. This is why bitcoin has such a disign!

What you are basically asking me is to get a taxi license for my automobile from the syndicate of horse buggy drivers 2 years after internal combustion engine was invented. Are you insane or just pretending?!

Becoin, we know the law is outdated.  But it is very clear.

If you advertise or promote shares of a company or investment using interstate communication, you are under the jurisdiction of the SEC in the US.  That includes telegraph, telephone, mail, internet, email, cell phone, facebook, twitter, anything.

What are you talking about? The Web is not interstate communication channel and certainly is not a property of the US government. It is a global media. Tim Berners-Lee, a scientist at CERN Switzerland, invented the World Wide Web (WWW) in 1989. He invented the basics like hypertext (html), the web server, web browser, and gave them to the people of the world not to US government. Wake up!
http://public.web.cern.ch/public/en/about/WebStory-en.html

Yes, I remember when it happened.  I believe I downloaded WorldWideWeb over gopher to a NeXT Workstation to try it out.

I've also been an expert witness in a federal trial in the U.S. federal court system.

I appreciate that you have strong feelings on the subject, but legally there is all manner of precedence for the world wide web being a vehicle for interstate communication.

Idealism isn't what's needed here.  What's needed is a clear legal foundation for everyone to understand and operate from.  That is a massive undertaking that crosses international boundaries and pushes the limit of the current legal system.

There is only one principal solution as far as I can see. The US government should ban the use of this international vehicle (aka WWW) for interstate communication when such a communication is unlawful from domestic point of view. Technically speaking, the US government should start filtering the Web for their citizens. Looks like in such cases they prefer to stop the entire vehicle instead even if they violate legitimate rights of non US citizens in different jurisdictions?

I am not a lawyer. The impression I have been gathering is that there is no law directly forbidding the New York Stock Exchange, for example, from providing and enabling the buying and selling of registered securities using apples, oranges, bitcoins, or possibly even horses of a different colour (absent certain colours being controlled or restricted or protected species, the expectation that the person accepting them as payment might have it in mind to subject them to cruel and unusual treatment and such).

I haven't encountered anything yet that seems to bar stock exchanges from using barter, for example.

So the path forward seems actually quite straightforward really, laid out by the friendly people in the relevant regulator agencies and departments and what appear to be almost monopolistic vested interest groups of incumbents who possibly originally ganged up to attempt to fend off government regulation by asserting implying or claiming they could, collectively, regulate themselves thank very much.

(Similar to how various other "professional" professions have "professional associations".)

The path looks to be something along the lines of:

First, form a "firm" (company, corporation, limited liability get out of liability free card team) owned and operated by someone who has passed all the required examinations and such and staffed with "associated people" who are not required to have as many exams under their belts. (Save maybe the Chief Compliance Officer, who might have to be way up there with the designated Buck Stops Here fall-guy/chief/boss in terms of exams passed education acquired and such.)

That done, you now have a Broker-Dealer(ship), Only a grand or few a year to keep the boss and compliance officer licensed, only a few hundred for each of the smallfry such as sales staff who actually sell stuff.

Now you have a "firm" that could employ technicians to operate application servers such as [webservers that Americans might see pages of the sites on that mention securiities being available] and [trading platforms upon which investors to whom the firm and the salespeople who write the sales copy could possibly offer such securities as their licensing/qualifications and registrations permit them to deal and/or broker]. Oh of course some of that sales copy might need to be draughted as a prospectus, the terms and presentation in such prospectus approved by regulator authorities prior to its being deployed where potential purchasers might see it.

As far as I have read to this point, I have not seen any path that allows people such as application server technicians to form a "firm" with them as boss which employs as employees all those exams under their belts people. Such (exams under belts) people's professional associations seem to be instrumental in arranging the regulations in such a way that is they who necessarily must be in charge, justifying it by asserting that the Buck Stops Here person necessarily needs to be highly qualified to, uh... Stop Bucks, I guess? Meaning to take the fall if anyone employed in the firm "pulls a Nefario" or anything crazy like that...

Oh and this is just to create a broker-dealer(ship), one small step on the road toward creating an actual Stock Exchange, which typically involves lots of broker-dealer(ship)s all having "seats" so called while standing in mobs shouting and waving slips of paper and/or sitting in back rooms sipping brandy while the young pups the keeping down of whom might yet require the inventing of more required examinations or somesuch do the legwork / shouting in mobs / cornering of little old ladies to ethically sell them a secure retirement / etc.

-MarkM-

You are quite right to be disappointed, markm. The future of OT and OT Server in particular doesn't look very rosy in light of what SEC have done to Nefario. The only solution to overcome this tyranny is decentralization as much as possible.

Swing and a miss.

MarkM has an application that will allow his customers to perform trades with the securities that are issued by the guys taking tests. If a few other firms open up they can cooperate on an OT trust web.

They just have to do it INSIDE the existing framework if they don't want to face potential Jail Time in addition to being shut down.

The trick in the real world is to find a grey area on the edge of existing regulations and get a bunch of folks to put a bunch of money behind it. This money translates into influence and gets regulations updated to affirm the grey area operation as legal. This is what happened with Kickstarter, and within the next decade we should see a few more steps forward, but no government in the first world is going to tolerate folks getting cheated in unregulated securities and losing value.

Think of government regulations as programs executed by people. If you refuse to leverage the right APIs you won't get the response you want. If you start behaving badly enough, you get labeled as a virus/convict and quarantined. just because is is white collar fraud instead of burglary makes it no less of a crime.

In the case of securities regulations they are there because of hundreds of years of clever assholes, you have a lot of learning to do if you want to surpass them.

There is no trust when there is SEC. Why are you hiding your head in your ass?

WHAAAAT?

Congrats, you just got my first ignore for that gem.

I do not now, nor have I ever been demonstrably shown to have rectal-cranial inversion syndrome, and your personal, unwarranted attack is both nonsensical and uncouth.

The Securities and Exchange Comission is charged with ensuring trust among parties, it may not be perfect, but it allows me to trade real money with a lot of confidence that all my investments meet certain minimum standards.

The Madoff's of this world (who manage to work inside the lines) are a lot less numerous than the Pirates (who would be sunk in 10 seconds in a wall street brokerage.)

Enjoy your ignorance, I won't be sullying your fantasy world any longer.

A clean, legal SEC-registered OTCBB shell company for less than the price of a pizza! That is actually quite cool.

Diclaimer: Pizzas have depreciated drastically, I hear they are a lot less than ten grand now. :)

-MarkM- (Yes in bitcoin of course. This is a bitcoin forum, isn't it? ;))

Wow, obtuse much? ;)

So you are thinking $120k range?

Seems like the cost/benefit ratio should tip over that before too long, I wonder how much pent up demand will cause weirdness in the meantime.

I only read the first two listings. They said less than 100,000 of some kind of fiat using a $ so I am thinking maybe USD.

It was such a nice power of ten number I stuck with powers of ten.

Also, were pizzas really ten grand each or was it two pizzas for ten grand?

So yeah I fudged the math. Who'd'a thunk anyone in a math-meets-finance forum woulda noticed? :) :D

-MarkM-

P.S. Plus, my internet marketing copy skills must be rusty as you don't sound like you followed the link. :)

P.P.S. Lets blame that on the author quoted. Its his copy's link, afterall. :D

Given the standard trust level he established I waited till I could get to get a secure VM running before following the link.

Very interesting, some listing are as low as 40k, some have I story and capital as well. Thanks for pointing it out. Not that I'm in position to take advantage of it, but others might be able to see a business plan that would work.

I'm glad I didn't have to buy Pizza in your neighborhood!

The low priced ones probably have a history you don't want to be involved in, like being shells from former pump and dump scheme, have outstanding judgments and/or liens against them, or have some sort of poison pills in their charter. Which means whoever buys out the shell is on hook for paying a lot of money. It could possibly ruin you no matter how much money you have.

One of these in good condition probably costs 150,000$ at the very least, and because of the way economics works it would probably cost you much more than that to form one from nothing.

+1

This exactly. BTC had nothing to do with what happened to GLBSE, and what will (I personally hope) eventually happen to Silk Road and other illegal sites. Doesn't matter what currency they are using, they were and are doing illegal things. Businesses selling legal products and services, and charities accepting legitimate donations have never had legal problems because of BTC as far as I know. MTGOX legal cases seem to be going in their favour.

Bitcoin will be in a lot of trouble for a long time if all it's known for is selling drugs and laundering money. We need a lot more real business and charitable successes if we are going to make BTC a legitimate, accepted currency... which I see as one of the main goals.

I understand the idealism of running an underground site like Silk Road with hidden money, but I don't think that's really what bitcoin is good for. When the US really puts effort into shutting down silk road, they'll do it. I'm not trying to be a buzz kill, I am not a drug prohibitionist, but using BTC for illegal drug dealing is not only bad for bitcoin, it's fucking dangerous for the people who buy it, and there are 30 year federal prison sentences waiting somewhere for a few really smart college stoners who had a brilliant idea one night. While we are all still physically governed by the laws of our respective states, we should work to end drug prohibition, rather than trying to use bitcoin to skirt local laws.

You summed up GLBSE perfectly. He was in the right place at the right time and exposed what turned out to be the massive potential of a BTC securities exchange, but how he expected to run something so complex without visiting a lawyer first I can't understand. Expense number one when setting up a financial services company: legal fees. It was such a great platform and such a needed tool that people jumped all over it without thinking it through. He had no plan to operate a legitimate security exchange in the country he was based in, let alone the countries of the people he was allowing to buy securities. It's an extremely regulated market globally for obvious reasons, and GLBSE went into it with a script and a virtual office. As mentioned we need either a tightly regulated exchange where everyone plays by the rules, or a totally anonymous one where everything is hidden, and people have the risk of being shut down at any time. I think the former would be better for BTC, but the market will probably create both. Hopefully we'll have many exchanges so we have competition... or someone can crack the code of creating a P2P exchange.