Bitcoin Forum

Hello Bitcoin Forum Community,

I am Bitcoin Lawyer.  I'm here to participate in the community, to help bitcoin grow and thrive, and to provide commentary and discuss the law as it exists and develops regarding bitcoin.  I disclaim specifically any attorney-client relationship.  All my interactions with this website will be solely for general education.  I am not advertising, soliciting business or trolling for clients.

Qualifications: Yes I am a real, fully licensed attorney.  Yes I have an active, full-time brick and mortar practice.  Both these things could be put at risk by my participation here.  Therefore I am acting under a pseudonym to protect my identity.  I prefer not to state my age or geographical area of practice for the time being to help protect my identity.  However I am making every effort to comply with my local State's bar rules regarding news articles and blogs not intended for advertising.

Background: I first read about Bitcoins back around the time that eGold got shut down.  I was a computer programmer and entrepreneur before becoming an attorney but nonetheless failed to invest the time required to understand the promise and potential of Bitcoin until recently.  Of course I see it now, and I'm kicking myself for not being an early adopter.  Instead of crying over spilt milk, I have spent many hours over several days reading the forums, the wiki, and other sources to get up to speed.  I now feel comfortable enough with my knowledge to begin posting.

If there are any threads that are in need of a legal discussion, feel free to link to them in a response to this intro thread.  Once again, I can't promise anything with regard to responses to posts.  If there is an active case or you have any pending legal issue, even a potential one, please consult with a legal professional in your jurisdiction ASAP.

Very Truly Yours,
Bitcoin Lawyer

Fantastic!  I'll be sure to donate to you as I see you dispense advice.

Understand the reasons why you may want anonymity, however which country are you licensed as a Lawyer at?  An important point as if your based in the US, your services for expertise on Australian law would be limited for example.

United States license.  Another thing not mentioned, I specialize primarily in Criminal Law.

Australian law is very similar as a common law jurisdiction, U.S. lawyers can be licensed in Australia after a 1-year course in Australian law.  Same goes for U.K., Canada, and other Commonwealth jurisdictions like the Cayman islands.

It's funny that I am seeing a sort of bitcoin law developing based off of reputation and the risk of loss of same.  Perhaps we could have a secure repository for evidence to back any claims of fraud or bad faith other than this message board with a verifiable chain of custody...

This thread could serve a purpose as refrence in the future.. here are a few q's
Are there any aspects of bitcoin that are illegal? I know this is broad question so maybe narrow it to things about running bitcoin client, accepting a bitcoin for something and someone not supplying the tangible good or service. Could you say sue someone for BitCoins or its equivalence in dollars? And if someone was to succesfully create a poisoned fork in the chain, is there any way to have them prosecuted or sued?

For context, I'm in the UK, but I suspect the answer will apply regardless of the jurisdiction.

I'm of the understanding that if you buy BTC and then sell for profit at a later date, you're liable for Capital Gains Tax. But what's the tax situation if you're mining coins, and then selling them on your local exchange? My intuition is that it can't be CGT, because you didn't buy the coins in the first place - in the extreme case, you bought a mining rig, which was then used to produce coins, which you later sold. But I find it impossible to believe that you don't have to declare income gained like this. So what does it fall under?

Welcome, Bitcoin Lawyer!

Let's give it a try...

in comments to this article  http://forums.theregister.co.uk/forum/1/2011/06/08/bitcoin_under_attack/ someone said:


your opinion?

This is a very good point that I hadn't considered. I'd imagine it would be the equivalent to how some CEOs take all or part of their salary as stock which they can then liquidate for cash. Never occurred to me whether that kind of liquidation would qualify as capital gains tax, income tax or some third kind of tax that I'm not aware of... I await a response!

I plan to declare the cost of electricity as an expense, and the bitcoins generated as profit; the net profit will go under self-employment (Schedule SE). I haven't bought any additional hardware, but if I did, I'd list it as a capital expense, take depreciation, etc.

Couldnt you claim a tax refund on the purchase of the equipment if thats the case ?

I'm not BTC lawyer, but I thought I would throw this heretofore unpublished gem out there:  that legal risk is why I stopped running pool servers.

It would simply be classified as ordinary income, which is taxed as your normal income tax rate.  At least, in the US.

And you could claim electricity, rig-building, and any other expenses as deductions against the income.

Thanks for joining us Bitcoin Lawyer. I'm sure you'll be able to make a very valuable contribution to this place.

I'm an aussie and I'm also interested in the tax and liability issues surounding trade and consumer protection. Just reading some of the points above, it has occoured to me (at least, intuitavely to me it seems) that if the government expects you to pay tax on any income surounding trade with bitcoin, wheter mining them or tradeing with them, then wouldn't that implicitly deem them responsible to consumer / trader protection. In Australia, we have a GST so not only is the vendor required to declare (and pay) income tax, but the buyer also contributes to tax revinue in the purchace, provided that the transaction is legal and done strictly by the book.

How interesting, as it seem this would put the government in something of a dilemma. If it want's to forbid bitcoin as a medium of currency, yet it has set a precedent of accepting revinue from ligitemate bitcoin transactions, it should thwart any attempt to dissabuse themselves of the responsibility, to bring bitcoin trading under the umbrella of the trade practices act, and the consumer protection authority.

Would it be a fair implication then, to expect that as a result, responsible (above board) business practices, by ethical bitcoin traders who keep ligitimate books and pay their taxes honestly, might force governments to honor bitcoin as a ligitimate way of trading, if not a ligitimate form of legal tender. I expect it will come under the various provisions for bartering as would the existing quasi-curencies and trading systems already on the net and in the real world. I think govermnents will have to see that bitcoin just works and that nothing will stop it. Better they embrace it (at both ends) and offer full legistative support. What's the bet they try to disown it as a responsibility, while still demanding that tax be paid on its revinues.  ::) Interesting time ahead.

Again, welcome to the club btclaw.  ;)

Technically speaking, if the Govt has surrendered Sovereignty, either to the UN, the EU, Nafta, etc, then Govts have comitted Treason, this makes them felons, Common law prohibits us from aiding and abetting lest we be guilty of Misprision of Felony / Treason.
IE we are not allowed to assist, financially or otherwise anyone engaged in Gross criminal acts, acts like causing the deaths of 1 million Iraqi's for example.
In the UK the case for Treason is pretty robust.

http://www.acasefortreason.org.uk/

If that is not enough, you need to realise that the Statutes passed by Parliament are not Laws, the are Acts, in that they act as laws but only with the Consent of the Governed.
For example it's illegal to drive without a seatbelt in the UK, but it's not unlawful, of course most of the general public do not know the difference between legal and lawfull, they are tricked into obeying statutes they would probably rather not by the legal profession changing the linguistic meaning of words.
For example, in Blacks law dictionary the word MUST means MAY.
So when you get a summons saying you MUST attend court, it means you may Attend Court.  
Here's a Good introductory Video on this enormous subject.

http://www.youtube.com/results?search_query=meet+your+strawman&aq=o

So, technically speaking, none of us are compelled to do what our respective Govts do anyway, our only obligation is to common law which can be summed up as saying you can do anything you like ( including trade in virtual currrency, they may make it illegal but it will never be unlawful )

So long as you cause none harm, nor loss, nor commit mischief ( fraud ) in your dealings with others.
It would seem to me Common law is a vital weapon in defending our right to our own Currency to carry out free trade, especially as Fiat currency, issued by foreign offshore Private Bankers is unlawful.
 

Our Govts are a bunch of Crooks, under common law we are forbidden to fund nor obey them.

And how do you make them understand this when they come to bust you?

On our own, we can do very little, but by informing others about the true nature of the 'law' we cn change the 'consensus''

+1 (I'll buy that.)  ;)

Posting to subscribe.

me too

very interesting thread :p subscribing as well.

BTCLaw: any thoughts on how to avoid having Bitcoin suffer eGold's fate? Many of these online currency approaches fail for internal reasons (see: hashcash), but it looks like eGold became a victim of its success, particularly in its use for money laundering.

Sigh.  It is trivial to look up the details on e-gold.

e-gold failed for one very simple reason:  it did not register as an MSB, preferred a letter of the law approach ("gold is not money, therefore money regs do not apply") which convinced nobody.  Not e-gold users, not criminals, not regulators.

That's why bitcoin exchanges should pay attention to the MT laws of their country.

This worries me a bit, about Mt. Gox:
To meet the definition of an MSB, a person must conduct more than $1,000 in business with one person in one or more transactions (in one category of activity listed above) on any one day. A business is an MSB for each activity for which it meets this threshold. However, there is one exception. No activity threshold applies to the definition of money transmitter. A person that engages as a business in the transfer of funds is a money transmitter and an MSB, regardless of the amount of transfer activity.  (see http://www.fincen.gov/financial_institutions/msb/pdf/FinCENfactsheet.pdf )

I hope they are a registered MSB!

Since bitcoins are "stored value" and not directly money, there is a FinCEN ruling that is relevant:
http://www.fincen.gov/statutes_regs/guidance/html/fin-2009-r001.html

You all should really be more careful making these sort of grandiose statements with regards to terms and laws you don't actually understand.

A Bitcoin doesn't represent any type of "stored value".  It isn't denominated in anything.  It's not a claim or a security.

And it's debatable whether more than a few Bitcoin-based businesses actually engage in "money services".

No, that was advice given by US Department of Treasury.

Feel free to call them and complain about their grandiose statements...  :)

The US Treasury told you that Bitcoins are "stored value"?  Why the hell would you believe them?

Many of the things you can DO with bitcoin are illegal.  As to whether or not it is illegal already, that is a tough question.  The U.S. Constitution is the supreme law of the land, above all other laws, so let's look at that, in relevant part:

http://caselaw.lp.findlaw.com/data/constitution/article01/37.html (http://caselaw.lp.findlaw.com/data/constitution/article01/37.html)

I encourage members of the community to always refer to bitcoin as a "virtual good" or "virtual commodity" and NOT  "money", "currency", "tender", or "medium of exchange" etc.  As the federal government reserves the exclusive right "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures in the U.S. Constitution."  So, if the bitcoin open source project is coining money, it is illegal.  If it is merely producing a virtual good, it is not.

FRAUD, illegal under various criminal statutes == "accepting a bitcoin for something and someone not supplying the tangible good or service"

ATTACHMENT == "sue someone for BitCoins" - This is going to be a big issue outside the scope of this post.  Simple example:  Husband puts $10k into Bitcoin on mtgox, backs up wallet to flash drive and buries it in his mom's backyard, then divorces wife.  Wife finds out about the concealment.  Court orders husband to pay wife $10k.  Husband argues the bitcoins now worth only $5k or Wife argues now worth $20k or Husband denies existence.  Husband guilty of contempt of court <-- illegal.  See how this quickly gets outside the scope of this post?

Poisoned fork?  I know my bitcoin, but I'm not quite that advanced in my knowledge yet.

Capital gains?  That is what happens when a person or company buys bitcoins, holds them for a while, then sells them at a profit.  Mining is different.

Coins are a virtual good that person or company is manufacturing as a miner.  This is business activity, which should be organized under a business entity, like and LLC or corporation.  Without such an entity set-up, most jurisdictions would be defaulted to a sole proprietorship.

Costs at least include electricity + hardware for mining.  Subtract the costs from the revenues to get profit.  Profits are taxed differently based on business structure and jurisdiction.  Business profits get taxed, but remember that money a person pays himself as an employee of his own business is salary, so that would be taxed as income.

Bitcoin is a virtual good, not money.  Bitcoin resembles money less than Linden dollars or WoW gold, neither of which is illegal.  Community, Go set them straight if you can.  

A big drawback to our public image is the sheer volume of published information online calling it a "crypto-currency".  That sounds like money.  It sounds cool and subversive, but the record should be set straight.  If you're not a computer geek and a libertarian, "crypto-currency" is a frightening and unfamiliar term.  

Use a comparison to other encrypted virtual goods kept secure by a single entity, like linden dollars, WoW gold, etc.  The only difference with bitcoin is the security of public key cryptography and open-source p2p with distributed ownership.  Otherwise, it is little different from other assets that only exist electronically.

Thanks for the welcome!  I'm trying to respond to everyone as quickly as I can. 

I see from your post that you have read some of the mis-information posted about bitcoin that it is a currency and therefore distinguishable from many other forms of electronically maintained virtual asset.  It isn't and it is not.  Google "second life lawsuit".

Under common law, Contract law does not distinguish between valuable forms of consideration.  Bitcoins have value, so they can be used as consideration in forming a contract.  You should have no trouble finding a Court to file a lawsuit over contract breach where the consideration for the contract was bitcoins any more than if it was your grandfather's pocketwatch.
http://en.wikipedia.org/wiki/Contract#Common_law (http://en.wikipedia.org/wiki/Contract#Common_law)

First let me say I'm biased, as I would love to be involved as a principal in any serious, well-funded effort to create a legitimate money service business and/or bank startup to exchange bitcoins for currency.

Yes, we need more exchanges.  We need at least one exchange built on a rock-solid foundation of strict legal compliance.  Run like any other financial institution.  No dirty business.  No dirty money.  A full-time legal compliance staff. This means at least one person in  who can act as a legal liaison to contracted legal counsel and later head of legal compliance.

The federal prosecutors got e-gold by going after the exchanges, which were not compliant with applicable Banking Secrecy laws.  People were using the exchanges to get clean cash from criminal enterprises, and not only did they fail to stop it or discourage it adequately, but they seemed to be entirely aware of it, even encouraging it.  In otherwords, e-gold's central depository and its unaffiliated exchanges were knowingly and intentionally operating as a money laundering business.

Mtgox is great for being the first.  We are where we are because of him and his company.  He is taking a great risk.  I mean, it was just months ago that he put a post up on this forum announcing his exchange is open for business, and now they have volume of $1million per day.  I'm sure it is overwhelming and I wish Mtgox and his company all the best.

But for mtgox to stand the test of time, they need to stand up to the pressure of rapid expansion, especially on the legal end, and start forming major formal relationships with banking institutions, currency exchanges, and at least one good international law firm.  The future of bitcoin should not rest on mtgox's shoulder's, the burden is heavy enough as it is.

From the wikipedia article on e-gold, but consistent with news reports I remember reading at the time:
"The essence of the allegations in the indictment is twofold: (1) e-gold is an unlicensed money transmitting entity as defined by United States Code;[16] and (2) e-gold was a de facto means of moving money from illegal activities to wit: high-yield investment programs which are Ponzi scams, credit card and identity fraud sites and retailers of child pornography.
The indictment alleges that the defendants knew of illegal activity associated with accounts and recorded it in the e-gold database with notations such as "child porn", "scammer", and "CC fraud".[17] Additionally, it alleges that while e-gold placed "value limits" on certain accounts suspected of criminal activity, they suggested that the owner open a new account, placing no restrictions on their ability to move funds out of the original account.[18]"

I am also a lawyer and I can't even count the number of ethical violations in this thread. You should be ashamed of yourself and are at high risk of disciplinary sanctions or disbarment. To add to that, as a criminal lawyer, you aren't competent to comment on these issues.

Read the ruling to mean this:  A company "ABC" could be created that acts as a "merchant payment processor".  ABC sells point-of-sale terminals that connect to ABC's servers to process pre-paid bitcoin cards.  ABC does not convert currency into bitcoins, because if it did then it would be a money service business or money transmitter.

Then, when the cards are used it works like this:

Merchants [M1, M2 ... Mn] give payment instructions to ABC (pay Mx X bitcoin for goods or or services sold on <date> at <terminal location> ; <transaction ID>)

ABC submits payment instructions to BitBank for backoffice processing (remit X bitcoins to ABC re: <transaction ID>).
ABC receives bitcoins from BitBank and remits them to Merchants (remit X bitcoins to Mx re: <transaction ID>).

ABC collects fees from Merchants for providing this service.

ABC is not a MSB or MT.

I'm open to argument on this reading.

As an aside, bitbank.com btcbank.com and bitcoinbank.com are all already registered to 3 different entities.

PHEW all caught up on this thread.

You're made me sweat for a minute there!  Just re-read ethical rules and tried my best to audit everything I have written on here.  Doing my best to make it clear that this is just an educational discussion.  I'm trying to BE educated about what legal issues there are surrounding bitcoin.  I'm trying to discuss an emerging area of law in a public forum.  I'm not a criminal and I'm not ashamed of trying to participate in an online discussion forum or blog.

Are you just trolling or was there a specific ethical violation you had in mind?  Please enlighten me, I'm trying my best to follow all my state's ethical rules regarding internet communication.

btclaw, welcome to the forum, don't mind the trolls, they grow on trees. But if he is right, i hope he has the decency to point out where and how. ^.~ good luck

btclaw, welcome to bitcoin, though, it is not such an easy ride apparently... underwater trolls abound...

Thanks for sharing this.  I'm no lawyer, but I've thought a lot about tax treatment of bitcoin mining and come to some different conclusions.  I'd love to hear your thoughts.

Assume we're talking about someone mining bitcoins directly (no pools, mining contracts, etc.).  Mined bitcoins come from two different sources: the block reward (currently 50 BTC) and transaction fees.

Transaction fees are not new bitcoins at all.  They were paid by someone performing a transaction and can be claimed by the miner who generates the block that includes that transaction.  I think you'd be hard pressed to say they were manufactured.  It seems more accurate to consider them as payment for the service of processing the transaction.  As such, I believe they would be taxable based on fair market value in the same way that a payment in USD for the same service would be taxed, and the FMV would become the cost basis.

The 50 BTC block reward is a different story.  They are newly issued coins, and it seems logical to consider them as having been manufactured, but even that does not seem 100% clear cut.  For example, I can easily change one line of code from 50 to 100 and let my computer look for blocks of 100 coins.  When it succeeds, I still won't end up with 100 coins because the rest of the network will reject it.  Or I could do all the correct work to generate 50 coins, but someone else finds a block at about the same time and the network chooses to accept that block and reject mine.  I think you could make the case that bitcoins are not being created by the efforts of the miners at all, but are being granted to the miners by the rest of the network as payment for doing computations that the network deems acceptable.  You might even say that all 21 million coins already exist, and they are just being distributed.  It's not physically possible to repeat the block solving work 1 million times and end up with 50 million coins, which would be the case with any normal manufacturing process.

The latter argument is much less clear than the transaction fees, but I've become somewhat convinced.  I'd love to hear your thoughts on both.

You are right. We need a front company to cover our non-legal businesses! Brilliant!!! I'm starting to like you, lawyer.

;)

What law? UK's I presume? Not everyone is under UK's jurisdiction and UK law :)

Nobody called you a criminal. Nice straw man. As a criminal lawyer (if you are in fact a lawyer), you should know the difference between criminal violations for which you can go to jail, and ethical violations for which you can be disciplined by your state licensing authority.

As for specific violations, you are already aware that you didn't disclose your jurisdiction so that was a silly question to ask. In general though, some of your posts are solicitations that in some states would need to be filed with an advertising board and may have other requirements such as listing your name/address/etc and clearly disclosing that the communication is a solicitation. The rules are sometimes draconian and haven't really caught up with the realities of the internet, but it's still your responsibility to comply with them. You are also opening yourself up to malpractice liability if anyone relies on your poor advice.

It's hard for me to believe that you are a lawyer given how poor your judgment is, but I guess it's possible given that there are only about 18 worthwhile law schools out of the 200+ in existence. Regardless of what cesspool you graduated from, you should know that merely saying "this is not a solicitation" and "this is not legal advice" does not effectively cover you if you are in fact soliciting clients and offering legal advice. Given that you hold yourself out as "Bitcoin Lawyer," and make posts like:


your purpose here is pretty clear. There are also side issues with a lawyer becoming involved with a client's business venture as a principal, especially if you take an equity interest as payment for your services. The worst part is that you knew you were doing something stupid yet decided to do it anyway:


What special experience, training, or education do you have that qualifies you to hold yourself out as a "Bitcoin Lawyer"? Traffic tickets and DUI pleas? Sorry your practice isn't doing well and you now have to resort to this.

Unfortunately I have to agree that you don't seem particularly qualified.

First of all, "coining money" is not a "right" but a "power".  No one has the right to coin money.  Specifically, it is the power to stamp a piece of metal with your seal or face or whatever, distribute the coin to others, and yet still claim ownership of the metal.  This is the reason the US may also "regulate the value thereof".  They own it.  In any other case this would be considered an act of fraud and unjust force.  However, since this power was granted to the US federal government by the states, through the Constitution, it is collectively tolerated.  And the reason this power was granted to the federal government exclusively was primarily to prevent sovereign states from melting down each others' coins, as well as to provide individuals with a unit of exchange with a recognizable standard of weight and quality:


Furthermore, coin, money, and currency at least (of the terms you listed) each have distinct definitions that pre-date any US government:  (emphasis mine)


Coin is just one type of money.  Money is that which has currency.  Currency is current value.  Pop Tarts constitute currency in some places.  There is absolutely no reason not to refer to Bitcoins as currency.

Frankly, your advice to avoid these well-defined terms in favor of more vague ones recently-coined by some three-letter agency is laughably bad.  The fact that you do so behind an anonymous account with a Simpsons avatar makes me seriously question your motives.

Get over it dawg, he wants to help so he can if he wants.

I agree with most of your post, benjamin.  Mea culpa.  I retract my earlier comments about not referring to it as a currency. 

I could go back and edit my post, but I want to leave it there so its clear how new to bitcoin I am.  I have much to learn.  Thank you for the criticism.  I got way ahead of myself with some of my statements about what should be said about bitcoin.  Sorry about that, it is not my place. 

It just seemed to me that virtual goods have received such favorable treatment in the law so far with second life and WoW gold that it would be easier for bitcoin to be defined as a virtual good. 

But I see now upon further reflection and study that the bitcoin project's goal is to be recognized as a currency, a medium of exchange in direct competition with government issued currency.  It is distinguished from Lindens and GP because those virtual goods are intended by their issuers to be used within the virtual world.  Exchanges have been set up to convert them back and forth to govt. currency and (with Linden dollars) bitcoins.  But that is secondary to those project's goals, which were to make a fun MMOG.  Not so with bitcoin.

In Jeff Garzik's interview on CBSnews online June 8, he described bitcoin succinctly as:
"a decentralized electronic currency with no central bank" and "a worldwide currency".  So that's what it is.

As to my motives, I'm here to discuss the project with people in the know, which is why I posted in the project development forum.  I want to discussed and be criticized openly as part of a general educational effort.  I hope the education flows both ways.  I ask for some leeway at first while I get fully up to speed.  It's clear I'm not ready to hit the ground running 100%.

What lawyer is?  And hopefully this thread and other forum activity will serve to educate lawyers in the future so they don't have to suffer same slings and arrows that (it looks like) are in store for me.

As to the poster who called 90% of all law schools in the U.S. a "cesspool", I'm not going to get into a flame war with you.  I can't take you seriously when you display such an unseemly lack of civility and only have 3 posts, 2 of them to sharply criticize me in a rude manner.  None of them demonstrating any knowledge of bitcoin or any attempt on your part to benefit from or contribute to the discussion of the project.

Once again, thank you for the criticism.  Sorry my posts get so long.

Well, I am just one person blathering my own opinion.

Until there's a court case or other precedent or an administrative ruling, all we have to go on [in the USA, where I live] is the experience of BitcoinUSA (http://forum.bitcoin.org/?topic=5627.0).  BitcoinUSA apparently receiving guidance pointing them to the 2009 FinCEN administrative ruling on stored value.

Will lawyers, rather than laypersons such as myself, call it a commodity, currency, virtual good or other, ultimately?

I have no idea, and your input on that subject is certainly welcome and encouraged on these forums.

BTCLAW...welcome to the forums.

Question: Where do you think Bitcoins will go? Do you have faith it will stick around or will the government interfere and put an end to this with one of their magical schemes?

Just want your honest opinion, would like to see what you think from a person in your field.

OK lets me see if I'm understanding this ruling a la stored value thing correctly...

Cast:
The Company     ==     Point of sale terminal service provider
The Arranger      ==     Visa, Mastercard (the brand on the pre-paid cards)
The Bank           ==     Stores the currency value in a bank account linked to the card
The Issuer         ==     The Arranger "and/or" the Bank

From the ruling:

Applying to bitcoin, the system operates so differently, it is difficult if not impossible to make a direct comparison between the actors.  Meaning this ruling can't be relied on for much, except to confirm that bitcoin is operating in a gray area of law.  Let me explain:

The Company      -   The bitcoin miners and mining pools add blocks to the block chain, which confirms the transactions.  This processes transactions.  They get rewards from the bitcoin open source project (determined by the code written by and voted on project members) in the form of transaction fees and bitcoins.  However, the transactions are from one wallet to another. 

wallet1 --> confirmation --> wallet2. 
                      |----> add to block chain

In the ruled on pre-paid card system, the transaction is more complicated with more actors and steps involved, as described in my earlier post on this ruling.

The Arranger       -   The bitcoin open source project.  Insofar as bitcoin is a brand maintained by them, I suppose.  And the miners provide a service to them.  This is the closest to a direct comparison we get out of all the actors.

The Bank            -   If there is any central "store" of the value, it is in two types of places.  1) Individual wallets and 2) the block chain database.  But a block chain database is just a data file (100s of MB and growing).  A bank is so much more than that I need not elaborate.  And for anyone to use their bitcoins, they or a 3rd party intermediary has to use the client, which downloads a copy of the database.  Similarly, at its most basic, a wallet is just a collection of numbers - cryptographic keys.  It is also worthless without the client.

The Issuer           -   Any internet source where you can download the client and the block chain database.  They just provide the bandwidth. 

With the lack of comparability between the actors in the ruled-upon transactions, I'm not
sure what to make of this FINCEN ruling except that it is far from directly on point.  I do agree that it is relevant and helpful to consider.

/end apples-to-oranges analysis

"bitcoins are "stored value" - OK I agree that if prepaid cards are stored value then so are bitcoins, you have the keys stored in your wallet file, numbers that allow you to send/spend the bitcoins in combination with the client.  Just like a pre-paid card, which has a number encoded on the magnetic stripe that allows you to spend money in combination with POS terminals.  You can email the wallet to someone else to use.  You can mail the prepaid card to someone else to use.  Prepaid card can add $1,000 to $2,500 a month.  Have to pay a fee to the payment processor for this service.  Bitcoin wallet can "add"  (by other wallet(s) sending to it) ANY AMOUNT of btc in a matter of minutes or hours, depending on confirmation times.  Optional "fee" to "payment processor" for faster processing.

Stored value currency that is "not directly money" - yet another answer to the question "What are bitcoins?"  I'm just trying to get up to speed here.

Just wanted to remind everyone, that the legal advice/discussions in this thread may be wildly different depending on your jurisdiction.

What is true for the UK may not be true for the US, what is true for the US may not be true for the Netherlands etc. etc.

This not only applies to the answers of specific legal questions, but also to the very definitions from which the answers are derived: For example if bitcoins are legally considered a currency or intangible good or something other.

I know I am not contributing heavily to this discussion, but I feel that it is neccesary to point out, that the only real way of even having a chance to find out anything solid about a specific bitcoin legal question, is to consult a lawyer in your own jurisdiction, and actually pay them.

It is true that each jurisdiction does have different legal definitions and requirements. But Bitcoins are so new they almost need a new way of refering to them and a new legal definition.

Could we come to some sort of agreement here as a community of what bitcoins are and how they should legally be treated, and then go to our individual jurisdiction governments and make them all adopt a common legal treatment? It would require alot of work, but I think the future would thank us. It may be like herding cats, though, I do not have much faith in us coming to a common definition.

I've been thinking about this lately. A much better thing would be if we could build a totally new and independent "distributed governing body"/"direct democracy" functioning on similar principles as bitcoin (being p2p/decentralized, based on "proof of work" - or "peer vouching" term could be more appropriate in this case) or being a part of bitcoin infrastructure.

What I mean is that besides monetary transactions' information floating inside bitcoin network we could also have a sort of identity information, polls/votes information etc.

For example, suppose you want to establish an identity for yourself (which can consist of arbitrary credentials/id-elements like your name, address, ebay-like feedback etc). So you "declare" the specific credentials and then ask people who can confirm them to vouch for you. The more people vouched for your credentials the more "trusted" those credentials are, obviously. (think of number of confirmations for btc transactions)

The identity elements should be stored in encrypted form on the network but should be verifiable via asymmetric encryption. So if someone initiated a vote (see below) for residents of Southpark only those who have an identity with confirmed "city" element which is "Southpart" should be able to cast votes.

Then anyone who has any kind of identity can initiate any kind of vote on anything ("Shall we consider bitcoin legal money", "Is it OK to build a buclear plant in Southpark?" etc.), specify it's parameters like "only Southpark residents can vote - those with 20+ confirmations of residency in Southpark", only members with 50 confirmations of their name (but names are not revealed) can vote etc.

The enforcement of the votes etc. might be difficult at first but if/when massive amounts of people will vote for something it will become easier.

Interesting side effects/advantages:
You can choose any name you want as long as enough people agree to call you that :) You can even have no name if you are not interested in participating in processes (votes etc.) that require it.
This system would not depend on existing political constructs/notions/establishments. (countries/citizenships etc.) Rather that that people will group (by participating in certain processes/votes) by all kinds of criteria.
No need for representative democracy anymore. Cast your votes directly :) Same goes for other institutions like courts of law etc. Do not want to participate directly in certain matters or do not feel competent enough? Delegate your vote (on specific matters) to someone. Became unhappy how they use your delegated voice? Revoke it immediately!

Problems to be resolved:
1. How to motivate people to distribute this information? Bitcoin transaction distribution is sustained by mining, but what about non-monetary information? Shall we pay "miners" a "transaction fee" for it?
2. We need a way to deal with identity theft/loss (think of an identity as a wallet). Perhaps rules for some kind of restoration process should be established (through the same "vouching" process described above).
3. The math behind this might be probably even more robust then bitcoin's.
4. What to do with multiple identities? Perhaps we should just let them be (it would be more difficult to get it's elements confirmed anyway), or this should be resolved via a vote at some point.
5. What else did not I think of?

I'll chime in on the UK regulations here (obviously, IANAL and this legal advice is worth what you paid for it).

The rules the Reg commenter referred to here:


is probably the set of regulations described here:

http://www.guardian.co.uk/technology/2002/apr/25/onlinesupplement1

I've read those rules and I don't think they apply to Bitcoin miners. The reason is that the regulations are (thank goodness) very precise in their definitions. Specifically, to be considered e-money the virtual currency has to represent claims upon the issuer:

http://www.fsa.gov.uk/Pages/About/What/International/emoney/index.shtml

However Bitcoins do not represent claims on issuers (miners, presumably). A miner doesn't have to give you anything in return for Bitcoins, nor do they ever claim they will. They don't even really "issue" the currency at all, rather, everyone agrees that they own some coins in return for them doing useful work.

The FSA rules are intended to handle the case where you issue tokens pegged to some backing currency like the pound, so the rules are for things like "you must redeem the e-money even if its value is less than 10 pounds", etc. For those sorts of cases their rules make sense, but they don't make sense in the context of Bitcoin and fortunately, do not seem to apply.

If you were to run an exchange, or a Bitcoin Bank (ie, holding coins on behalf of somebody else), you probably would have to register as a MSB and that entails a pretty amazing pile of regulation. The "fit and proper" test doesn't look too bad, you basically fill out a form that says you aren't a terrorist and pay 50 pounds. They do a background check and away you go. Much harder are the AML laws, for example, you would have to get identity verification of all your customers, check them against a gigantic list of "politically exposed people" (which by the way is not an official list, you have to buy them from companies that try to find everyone meeting the laws definition of a PEP), perhaps do even more thorough background checking, find out where your customers money came from and then if it seems 'suspicious', file a SAR which may or may not ever get read. The penalties for getting any of this wrong include jail sentences, and the laws are so vague it's hard to really be sure you ever got it right.

Fortunately, the UK Government is considering repealing the criminal penalties for AML compliance problems (they were never much used anyway). If you're a Brit, you can read their proposal and write to them explaining what you think of the AML laws here:

  http://www.hm-treasury.gov.uk/fin_gov_response_money_laundering_regs.htm

I sent them a mail with some comments and questions seeking to clarify some points. Don't troll them though, they're genuinely trying to improve the law, unfortunately their hands are largely tied by the EU and FATF ....

The FreeNet Web-of-Trust plugin does exactly this for FreeNet identities. I guess the closest thing that we have for Bitcoin would be the reputation system used by #Bitcoin-otc That could be expanded to include the features that you're looking for.

If you're really keen then look to extend #Bitcoin-otc 's system, specifically created a plugin and/or easy way to verify identities on these forums.

Thanks for pointing this out, I'll look into it. Although being IRC-based it is not as much decentralized as bitcoin network. (so it can be taken down relatively easy)

That's why I mentioned the Freenet web-of-trust.

Nice to see creativity of the community making up for the speculated value of coins. You can get paid by owning coins and then work. People so stuck in chasing the dollar when they should be using their time to create. Every time the value of BTC goes up just count that as payment for work you have not done yet. Then announce it and hold onto your coins.

posting to subscribe

IMHO the internet is a lawless place.

I am sorry and I dont want to offend the OP but if anyone here is arrested today (relating to anything bitcoin) then, unless you happen to live in the same jurisdiction as OP, he will not be defending you.

The following however is true all over the world:

1) Can you be arrested for your involvement with Bitcoin? {yes} You can be arrested for anything at any time. People get arrested unlawfully all the time.
2) Will you be arrested for your involvement with Botcoin? {probably not} The fact of the matter is that it is very unlikely that any government will go after "the man in the street".
3) If arrested will I go to jail? {probably not} Think about it: the presiding officer {judge} would have to be persuaded that you did something illegal {many jurisdictions this will not be true} and that you knew that you were committing a crime {this may vary from jurisdiction} and that the punishment that fits the crime is to put you in jail. - hmm NO.
4) Can I sue member X because of ....... {yes but do you really want to?} We have to find him and sue him where he lives and when we get to court we have to persuade the presiding officer which legal system was applicable and what the principles are.

Practically speaking I dont believe that the courts will assist us in regulating bitcoin. I also dont believe that if the governments of the world whished to attack bitoin that it would be by arresting the people that use it.

Pray tell how are bitcoiners going to get any useful information if every bit of participation by a lawyer is "an ethics violation"?
Pray tell how are bitcoiners going to get any representation in court if the counsel is not part of the business so as to advise "how to dodge bullets" designed for meatspace issues?

Seriously, how would you implement such a service, ethically and professionally without a pseudonym?

The way legal advice works is you contact a lawyer with a specific problem you are facing, you then pay him dearly to solve it for you. By doing it like this you get:
1. client-attourney relation
2. actual proper advice
3. somewhere to complain if the advice was bogus
4. the attourney will have insurance

What about the community without all of us becoming sisters and having slumber party?

This thread is just awesome and it's only getting better. I just wanted to stick this idea in the melting pot. Re: The Bitcoin vs PoxPal scandal. It has emerged on other threads and elsewhere, that PoxPal have been deliberately sabotaging the legitimate transactions of honest traders, who happen to be selling BTC with PoxPal.

PoxPal is just greedy corporate tyrants nest IMHO. They appear to be facilitating blatant criminals, with a white collar clearing house for digital fraud. Ironically bitcoin gets mendacious political spin, by association with crime and contraband, just because you can do the same kind of transactions with it, as you can also do with cash (though bitcoin doesn't launder as well, so paper money should be currency of choice for black market crime.).  >:(

Perhaps somebody should set PoxPal up with a test case: What if we planed a thoroughly legitimate, independently documented transaction, (with receipts and affidavits to nail the deal shut). We could even do a whole series of them. Heres what I'm thinking: We coordinate this transaction at both ends, with a lawyer to supervise (there's one lurking about here somewhere ;) ). We even document the data from the blockchain and declare legal identification, for proof of the bitcoin address ownership. Extra authentication security could be enlisted, by having the parties to the transaction use digital certificates for their invoice and receipt and all other document exchanged. Make it as easy in advance, to thoroughly and independently verify the legitimate provision of the bitcoin as requested and generally plan to make the transaction as legally watertight, traceable and transparent as possible. Then just do it. Use paypal, to sell/buy the bitcoin, boldly making it as obvious as possible, that the vendor is selling bitcoin. Have the buyer then do a totally bogus, unwarranted, pre-arranged (and pre-nullified) chargeback, declared in a sworn affidavit by the buyer, as null and void, by prior agreement between the transacting parties. Then you just let PoxPal, fail to honor the  seller, for his/her irrefutably legitimate part, in the completely reciprocated transaction. As far as the transacting parties are concerned, the transaction is satisfied and complete without any dispute or grievance whatsoever.

The affidavit would be written, to carefully ensure it indemnifies the seller, against any intervention by PoxPal or any other third party, while the buyer explicitly declares in it, that the sole intention for making such a claim to PoxPal (of not having received payment) and requesting a chargeback, would strictly be ONLY for the sole purpose, of auditing the diligence and fairness, of PoxPal's dispute resolution process. The buyer must agree to this without reservation, at the outset, and then once again, after payment in full for and receipt in kind of the bitcoin, as agreed, has been completed. It could even be reiterated again, on two post-transaction counter receipts, not only that, full payment has been received and the bitcoin delivered, but that both parties are completely satisfied, and also, words to the effect that, both parties now fully agree that the chargeback to be initiated, could not and should not be possible to uphold, therefore no consideration should be enlisted, that the buyer is culpable or actionable for attempting to defraud the seller. Stating explicitly their manifest intention is to audit PayPal protocols, and that both parties are privy (in foresight) to the planned chargeback, the post transaction affidavit and counter signed receipts, are then signed signed and witnessed by both parties in front of a notary and then handed to the lawyer for safe keeping. Documenting this whole experiment on camera for a youtube video might be helpful too.

All parties privy to this experiment, declare and agree, that the documentation thus produced, indemnifies the seller, in relation to the now successfully concluded transaction, but all this has been done, prior to the buyer making the claim of non-payment and initiating a chargeback. The only culpability that could eventuate at this stage, would be that of PoxPal defaulting on an iron clad legitimate transaction, for no other reason than the buyer asked them too. PooPal of course, are not privy to the experiment, but since there is not one iota of reasonable justification, in the fabricated claim which our buyer is about to make, then they could not possibly have any reasonable grounds to suspect the allegation was true. Why? because it simply ISN'T. This manifestly orchestrated fact, is now  proven beyond all reasonable doubt documented. The stage is set. The buyer, then proceeds to make the claim of non-payment and requests a chargeback. 8) Let's just see if PrickPal reverses the transaction and freezes the sellers account. In which case our lawyer (Hi bclaw! You busy? ;) ), steps in, both barrels loaded, demanding they handover the evidence demonstrating their supposedly responsible, dispute resolution protocols, pending serious legal action. (class action anybody?)

Perhaps we could at least find ourselves, in a good position to demand an out of court settlement. It should be demanded in bitcoin, along with a public apology by their CEO right here in our announcement section. Would demanding a public admission that Satoshi is God and Gavin is Jesus be going too far? ;D All that's left then, is to just send off the media release. I can see it now.  ;D STOP PRESS: BITCOIN LAWYER MAKES LEGAL DEMAND OF WEALTHY ONLINE COMPANY SAYING: "IT'S TIME FOR YOU TO PAY, PAL". 8)

That plan wouldn't constitute entrapment or anything like that would it? I'd assume you'd have to be a law enforcement authority, to be subject to entrapment laws wouldn't you? Is there any legal reason this wouldn't work? It would sure as hell be a good publicity stunt. It might also just make PoxPal, somewhat hesitant to jump to the unqualified defense, of any two bit huckster, who reverses transactions in payment for bitcoin. If you could really get them over the barrel somehow, it would be nice to make them agree (in an out of court settlement), to disclaim their right to reverse transactions, where payment for bitcoin (or even virtual goods) is concerned. Whether it is considered a virtual good or a currency, it has the trading properties of cash, so it should be deemed as a non-reversible transaction. Political bias, against the use of a particular form of currency, may be hard to counteract, but willfully restricting others from transacting with it, should rightly be seen as impeding free enterprise and legitimate trade.

I lost a tangible sum of bitcoin, trying to cash out of the market at BTC = $14 each, but then, discovering there would be no takers for my bid to sell Liberty Reserve $USD on Exchange Zone for payment to PoxPal, I reversed my tracks and put my money back, but it had gone up to $17 in that time. I bought bitcoin again, as the price was still rising, but it only served to cut my losses, which came out around to $1400 worth. If PoxPal could be trusted and relied upon, this never would have happened. Their deliberate intention and successful impact, is to undermine the potential liquidity of bitcoin. So it effects much more, than the transacting parties of particular reversed transactions and frozen accounts. Also, the serious nature of this interference, should not be underestimated. If you take possession of something you order and don't pay for it, it's called theft. If PoxPal takes your word that you didn't receive something you payed for, when you actually did, an so reverses your payment; isn't that committing fraud on your behalf? Don't they have a very strictly regulated obligation, to follow protocols of evidence based investigation and transparency?

Shouldn't they in fact be obliged to hand disputes over to legal authorities? If they take sides and determine outcomes, without recourse to any legitimate legal authority, aren't they simply taking the law into their own hands and committing serious crime? After all, if I walk up to a police officer and claim to have been robbed of $50, pointing to the little old lady over the road, I wouldn't expect him to simply walk over, snatch her purse and pull the $50 then hand it to me. Even for a serious crime, police can't just walk into a home and seize possessions. They have to have search warrants and seriously solid evidence, or else heads will roll. How can a private company, get away with just deciding who is in the wrong? If they are also in the wrong as a result, then how can it be passed off as a matter of trivial negligence? It seems to me, like a child selling contaminated lemonade on the front lawn, being allowed to dispense medical advice and prescription drugs to go with it. I don't see their TOS agreement, as being any justification for writing their own legislation either.

PoxPal should be given enough rope to hang itself, by creating their own PR disasters, whenever they try to foreclose on honest transactions, while facilitating criminal activity. Getting government and legal authorities, to acknowledge bitcoin and to demand a level playing field would IMHO, be a priceless objective. I'd prefer to see PayPal fall on their own sword, than to see them fall victim to ruthless competition, of our straw-man stereotype; that of a devious cabal, of vigilante, anarchist hackers, destroying 'honest *cough*, legitimate *cough*, sentinels of corporate respectability. ::) To our potential detractors, this could only martyr PoxPal and vilify bitcoin. 

This raises an interesting question, as to whether an overriding waiver, could be written up, to take legal precedent over PoxPal's TOS; in that one party might agree with the other, as a condition of any sale, not to invoke any privilege such as chargeback and to be subject to the terms of an externally binding agreement, such that the buyer, explicitly agrees, that the payment will be finalized, without recourse to any such provision of PoxPal (or other intermediary) to intervene, delay or reverse the payment. If possible, then a standardized agreement might be made available for this purpose. PoxPal should then be warned, that they are duty bound to desist from arbitrary intervention, in the presence of such an agreement, adding that failing to do so, will result in litigation. Would this be feasible? How much would that cost to have written up? I would happily pledge some bitcoin towards that goal.

It might even be worth setting up a slush fund, where people could contribute to various contractual type legal work and/or to help pay for any worthwhile legal action that needs to be taken, on behalf of bitcoiners, where the whole community would benefit. Also btclaw, have you considered offering a paid, out of court mediation service? That way any disputes within the bitcoin community, may be nipped in the bud and prevented from entering the jurisdiction of the courts. I don't advocate litigation in general, unless it's against the ruthless tyranny, of corporate greed, or in the interest of important human rights. Alternative provisions for resolution, would certainly help to foster a cooperative, symbiotic bitcoin community. Sorry for the long rant. I got a bit carried away. The court will now recess. ;D

Sounds kinda convoluted and easily escapable.
Hitting them with a class action would likely be much more effective. (They just don't learn apparently, having paid out before and still screwing people).
If enough people have a legitimate legal claim and a decent class action lawyer, we could take down paypal and redistribute the damages to people who are involved in BTC.
Finding a decent class=action lawyer is the only hard part of this as the other elements are apparently met.

The advice/discussion may be 'wildly' different, but two factors do remain relatively constant:

• The laws of most western world countries are reasonably consistent, in so much as they are based in constitutional democracy and a laissez laissez faire economic model. For the government of most jurisdictions then, there is a similar duty of care to be considered and so the motive to legislate, derive from similar problems in similar situations. The legislature process and solution will have much in common and usually, for these constitutional democracies, the legislation must take into account, the international nature of trade. After all, bitcoin did not establish the first instance of international trading. There are precedents and international agreements, about a myriad of legal issues across borders. We could use more standards, but I cant see how bitcoin itself and our having a lawyer in our community to flesh out these issues could be anything other than a total win.
  
• The other constant, it the nature of bitcoin itself. No mater how people chose to define it, what they do with it or where they are in the world, the network and block chain, work exactly the same way and a bitcoin gota do, what a bitcoin gota do. Practical fact of physical (or digital) reality are held extremely constant for the sake of ubiquity and that limits extremely, how much implicit difference can be derived in the interpersonal, international and legal protocols, of arbitrary human/political/legal whim. Again it is an imperative to iron out these issues of poor international standardization but bitcoin itself introduces a standard with the power to usurp the power base which hold back unilateral adoption of standards. Because you can trade freely with a non-partisan unit, uncontrolled by any government, the politics and legislature enforced may only be imposed on human/corporate entities rather than the currency itself.
  

I understand you are only pointing out the perils of taking legal advice from an online source and applying it universally, but btclaw did clearly point this out himself and that it should really be considered common sense. Anybody going to court without personally retained legal representation, in their own jurisdiction, had better have more than common sense, they'd need knowledge of law that would make that advice rather redundant.

There are mountains of common ground, that a lawyer in any jurisdiction can give good advice about. Next time you hear someone ask 'did you get a receipt?' or say anything about trading with a legal implication, consider for yourself, just where in the world that this question or statement would not be relevant. OK, so if you happen to be a sub-Amazonian native, living in a tribe where the seed pods of a rare tree are used as currency, then you'd better not take the legal opinions/advice here as being endorsed by your witchdoctor. Caveat Emptor, indeed. In any case, I suspect that lawyers in most of the democratic world, are broadly trained in recognizing the regional nature of their business. In the event that there was a particular question of jurisdiction to be taken into account, perhaps a lawyer would be aware of this and preempt the assumption that it applies universally.


Therein lies the crux of my earlier point about practical facts about the nature of bitcoin and existing international trade. A specific legal question is going to be FAR more likely to be mitigated by regional law, than a general one is, precisely because the utility of international trade depends upon international protocols that deal with such things, as having common definitions or methods of translating. It's FAR more important to consider the specific implications of bitcoin, against the economic morass into which it enters. There's much more difference between bitcoin and it's universal legal implications in existing markets, than there is between the existing currencies, commodities and laws that underpin them.

To use your own example. No mater how ANY legal authority or government decided to define bitcoin, it will have no effect on how the network works or the utility of bitcoin as a market instrument. If it is decided that it will be called a 'virtual good' then the powers that be are only agreeing upon what words to use for semantic convenience. The definition of 'virtual good' or 'currency', already has international standardization conventions, that are by necessity adopted as international protocol, so that global trade and regulation can be made possible. If USA decides to call bitcoin a currency, then it is hardly likely that Australia for example, will call it a 'virtual good'. Why? Because those words already have definitions and those definitions themselves are like commodities of exchange. The lingu franca of international economics. If the world didn't agree about what the word 'currency' means then global economics would be in serious strife. Bitcoin either does or doesn't fit the accepted definition. The question of whether bitcoin has currency is very different. That is decided by the utility of the instrument itself, as a market commodity. The practical outcome is not effected one iota, by government legislation ruling over semantic nomenclature, to be adopted in their own jurisdiction.


Sorry Dansker, I can't say I agree. In fact I think you're dead wrong. You rule out a lawyer who comes here as a willing participant, without requiring you to have wads of money in your fist, before even saying hello to you, as a source for 'even having a chance to find out anything solid about a specific bitcoin legal question'. Are you kidding? Not even a chance? It sounds rather dramatic and uncharitable to say the least. You will hear any number of opinions here and on the Internet at large, about bitcoin, which have legal implications. Anybody with a modicum of common sense, knows well enough not to take unsolicited, anonymous advice, as solid council to base important legal decisions upon. It goes without saying. But given that btclaw is at least a lawyer, cares about the success of bitcoin and isn't asking you for wads of cash to even speak to you, I think you are selling him a bit short, as a source of general legal guidance. However much I pay to a self interested lawyer in my own jurisdiction, it wont be enough to make that lawyer an advocate of bitcoin.

You may need to seek legal council, in particular if you actually have legal battle to fight. The facts about law in any jurisdiction, are not really the commodity you are paying for access to, as much as the skill and wit of a professional advocate, to give your case the best chance of success you can. The payment for advice is no assurance the lawyer will perform well, and the recourse to compensation for bad advice, would be even less reliable. As for legal advice on general information (ie where you don't absolutely have to hire a lawyer), such as matters that do not pertain to a specific pending case, or the need to draw up a contract etc, then who do you know, that will happily fork out the wads of cash that it takes, to get this general information from a paid, fully qualified, contractually bound lawyer? Nobody I know ever does this, as the cost is prohibitive.

Decisions I make in day to day life, may have legal implications, down the track. But I am not going to pick up the phone and book a session with a lawyer, for every minor legal detail I may be curious about. What people usually do (or at least did in years gone by) if there are question, is go without. They use their own common sense and knowledge of law, to manage their own risks. Otherwise they may chat informally with a lawyer they have hired in the past, or one they know in their circle of family, friends or work colleges. That is far better than nothing, if you are fortunate enough have the access. Now with the benefit of the Internet, we can do more research for ourselves and of course we have places like this, where knowledgeable people may offer to lend a word of advice. That is orders of magnitude better again. Our gratitude is hardly enough to pay for this, but it's the least we should offer.

I see that btclaw has come around to the use of the word 'currency' to define bitcoin. I haven't looked into it myself, but I would be willing to wager a fair bit, that his rationale would make no difference in the context of Australian law. Now if you were to go and hire a lawyer to find out for sure if this was sound legal information, what's the bet that you would just be wasting your money? And even if that lawyer insists that bitcoin is not a currency, and my government declares it is not, will that change the fact that it has currency, acts like currency and actually is currency for those who use it as such? I think not.

Hmm... Might have just been my explanation of how it works then. It's actually intended to be a watertight method, to present a solid case of misconduct (perhaps fraud even).

The general idea of it, is to offer a bait to PoxPal that, if they should take it, is simply a fabricated (hoax) fraud, in which the parties doing the transaction are 100% consistent that no real fraud took place, or was ever even intended. Both seller and buyer are conspiring to 'play the ends off against the middle' as they say. If PoxPal take the law into their own hands and grant the reversal of payment for the bitcoins (which are meticulously proven to have been sent and received), then I would suspect that it is they (PoxPal), who are defrauding the seller of the bitcoins. While the illegitimate complaint of the buyer (claiming no bitcoin were supplied) upon requesting a chargeback, is in fact a baseless claim and a manifestly fabricated pretense and one that can be proven after the fact; it is therefore, an illegitimate reason (by any metric of fairness or justice), to reverse the payment and break a genuine, mutually satisfied deal. The transaction itself however, actually is a completely legitimate, above board legal transaction. By intervening and withholding payment, I would think, PoxPal are acting above the law and committing fraud (or some other serious transgression) themselves.

I can't see how this is 'escapable', because the buyer, seller and coordinating lawyer are cooperating as a team, to make absolutely certain that the transaction is irrefutably documented and proven to have been conducted successfully, to the mutual satisfaction of both buyer and seller. At all times the parties will agree, that no genuine discrepancy exists between them. Even after the transaction, the successful sale and purchase of the bitcoin will again be confirmed and once again, the corresponding exchange of documents (receipt of bitcoin and receipt of payment) are meticulously dated, signed (before a notary), digitally encoded and encrypted then exchanged, while a copy of each is given to the lawyer. This may all seem a little convoluted, but that's only to ensure that all possible lengths are taken, to ensure that proof of the transaction, mutual satisfaction of the parties and the willfully fabricated nature of the chargeback complaint, are manifest as irrefutably as possible, even before the chargeback is attempted. When the chargeback is initiated by the buyer (who claims  to have received no bitcoin), it will only be after having signed those meticulously watertight documents, which declare the transaction was successful and that the bitcoins were received as ordered and paid for in full.

This is all just to set up a trail of evidence and ensure there is no excuse for PoxPal, to claim that the subsequent chargeback may have been justified by any real facts, external to their greedy whims. Note that all this is confirmed after the transaction is final and mutually satisfied, but before the claim of non-payment is submitted and a chargeback requested. Only then, is the chargeback initiated by the buyer who has manifest fully in those documents, ahead of time, that the claim of non-payment will be a deliberate fabrication and that the payment was indeed received.


Well, that would be a nice result if it had to go so far, but my understanding is that there are usually numerous options considered, as far as settlement is concerned. Mediation for minor disputes and (particularly in USA) out of court settlements are granted consideration. But before the nature of any court preceding or settlement is considered, a case has to be made that holds water. That is the purpose of my little scheme. It's not an alternative to any particular type of action or suit, but a means by which to make a case that PoxPal is culpable. If that can be made evident beyond reasonable doubt, then council for the plaintiffs, may take it to whatever court and file whatever kind of suit they deem appropriate. The challenge is to build a good case. Catching them 'red handed' I would think, is the best way to do so.


The other elements, would be demonstrating there is a case to answer and making sure PoxPal can't excuse themselves from liability. There needs to be evidence (to build a case) that the bitcoin were supplied in exchange for the conventional currency payments that they declined via chargeback. As it stands (with respect to previous cases of chargeback fraud), I suspect PoxPal would argue no proof (documentation ie: receipt) was forthcoming, to establish the bitcoins were supplied. Their record will show that the payment was initiated (albeit reversed), so they have their own records of the buyers payment, and since they know this much, they can only vouch for buyer, with the option to reverse the payment.

Usually, a receipt is only given for 'money' that changes hands. The goods (in this case the bitcoins are being treated as goods) ordinarily, have their own paper trail, due to their physical nature and delivery may be accompanied by a cart note, or an invoice generated to make the order accountable in the suppliers ledger. Note that this is no help to the buyer. I don't know the details of the existing cases, but if these transactions were only done as private sales there would be no papers confirming the bitcoins were supplied. In any case, the person who allegedly received the bitcoin and defaulted on the payment, is not going to furnish evidence that they received the bitcoins but nevertheless requested a chargeback.

PoxPal only have records for who has paid money to whom and not who has sent good to whom. As I understand it, nobody has manifest evidence for the supply of bitcoin, in the existing cases. What evidence for the supply of bitcoins in these cases of alleged fraud do you know of, beyond the bitcoins signature and the blockchain records of IP addresses (sending/receiving), that existing claims of undelivered bitcoin and subsequent chargeback are false? I don't dispute them of course. I have little doubt that A)There are those who would do this if they can get away with it and B) PoxPal would wash their hands of the bitcoin seller and uphold the chargeback for the buyer to damage bitcoin, but I don't see how you can conclude that there is already an established case that could be tried in court.

The fraudsters have very likely gotten away with their crime (so far). Thats why I'm proposing this little plan. Even then, if PoxPal are proven to have reversed payments, for genuine purchases of honestly supplied bitcoins, there is a good chance that they would then argue to usurp their liability, on the grounds of it being the buyers obligation to pay or pejorative to decline. They would probably try to indemnify themselves against being anything other than an actor for the buyer and simply 'pass the buck'.

As for finding a good a class action lawyer, I wonder if Julia Roberts is busy these days? :D Seriously though. Is there actually a special qualification needed to handle a class action? I thought Erin Brockavich was based on a true story. Wasn't she just a part time para-legal or secretary who 'took em on', despite her lack of qualifications (and fairly average boobs)? I thought that part of the movie at least, was likely to be fairly unembellished. Julia's boobs may be another matter. ;D ORDER! ORDER!

No proof that goods were sent? That's crazy, the block chain is about the best receipt I've ever seen.
People who were scammed only need to have the contract (email, pm, im, etc. where buyer tells seller to send X BTC to Y address). Often this is in the actual paypal cart or whatever, which paypal uses as reason to attack the seller/buyer.
The block chain clearly shows X BTC were sent to Y address = receipt for delivery of digital property as promised.
There's already plenty of evidence and victims of paypal to push forward against them for illegally taking money out of their account.

That's true. The block chain is great for us to be sure. The problem (At least I assume, otherwise these disputes would be fixed by PP) is if PoxPal is unwilling to look at the block chain or even recognize it as evidence, even if you wave it under their nose. The don't exactly idolize bitcoin and the will hold out on giving any recognition to the bitcoin network as legitimate if they can. 

There's already plenty of evidence and victims of paypal to push forward against them for illegally taking money out of their account.

Thats fine but my understanding is, that PoxPal probably dont/wont investigate IP address info either (unless it was for their own benefit of course) as they identify their clients by email and as a central repository the probably wont consider the client side data. I havn't checked, but I imagine the decision to reverse payment, being made by office people, rather than a tech person in a data center. If that's the case, then telling the clerical/office you have IP records and block chain data, wont help much. And yes, of course the same info can be taken to court, but then you are presenting technical data (conclusive as it is) but that has to be analyzed and demonstrated that those actual people, own those actual IP addresses and then you may have to subpoena the the person who initiated the chargeback and the evidence that connects the bitcoin transfer to the PoxPal payment. But then, If you were going to yank a payment like that would you run bitcoin from your home IP?

My idea, is to bypass all the chasing the evidence via hostile witneses and tech data. If you control both ends and you can replicate the failure you have a straight forward demonstration of PoxPal in action. You can then present legal ID and highly secured confidential paper documentation proving on paper, exactly who was on each end, when payment is made they both agree in front of a notary on paper and the documents can also be scanned time stamped and encrypted to make the chronological order of events and authenticity rock solid. Once the buyer then pulls the payment, they can sign of against their collusion. and both sets of document establish that the were both on board  and  every detail, presents a watertight case court ready on paper. It's not all that complicated and if you've got both parties conspiring you have no struggle to collect every detail of the evidence.

I just realized it, but what would your cause of action be?
I.E. if both buyer and seller expect the result of not being able to use paypal, it seems almost negligible damage, explainable as "the service is not guaranteed for all customers." Sure, if it held a large amount of funds of one parties account, but even there, the remedy seems to simply release the funds. . .

Quite different if there are actual victims with actual damages. From what I can tell there's plenty of them.

Personally, I haven't used a personal PP account since they paid me in a class settlement years ago.

Subscribing.

Very nice domain sir, will be talking to you in the future.

It's a fair question, but I am only assuming that there must be something unlawful in this practice. Particularly if it's a standard PP policy. The point of the exercise was intended to demonstrate the unjust policy and provide sound evidence that this is how PP handles chargebacks. It's then implicit that they would do this in any event and that would involve real victims. I would hope btclaw might shed some light on the particular violations of law that might be relevant. There may be no damage to consider in the transaction staged, but that is the exception which proves the rule. PoxPal are not privy to the arrangement, so if it were any other legitimate transaction (legit. from the sellers pov) that they had intervened in, there would have to be a victim. Saying the seller has not been defrauded because both parties 'expect the result' is little disingenuous isn't it? The result is not conditional upon their expectations.

If "the service is not guaranteed for all customers.", there must be some accountability to how they justify their exceptions. I read briefly somewhere, that they won't support trading of any other currency. Needles to say this is a condition placed on the customer not themselves, as they do support alternative currencies on their website. What they mean is, you can't buy or sell anything which might threaten to weaken our service. Other online currencies or payment systems cut into their market. Aren't there some antitrust implications here?

I'm no legal beagle, but isn't it possible to take a company to court for violations of law, without having victims, if their operating practices are unlawful? In any case they are are supporting fraud if they allow the payment to be reversed, while they have no power or desire to reverse the other half of the transaction, by returning the goods. I would expect that if they can reverse the payment, but not the goods, then they have an obligation to stay out of it. It's no business of theirs, what payment is for unless they make sure they can refuse payment in the first place and mediate both payment and goods. Since they only have the power to control payments, they should not be privy to the goods or what the payment is for. If they cant make the buyer return the goods, they should have no right to reverse the payment. Reserving this right, is something beguiling to me. I cant disclaim my obligation to be accountable to law, can I? OK then, I reserve the right to punch PP executives in the face. I'd have to get them to agree to TOS, but does that make it legal?


Well as you said before, a class action may well be in order. The exercise I suggested was just to clinch the evidence for their misconduct. It could be used to serve any case, in which this policy was instrumental and needed to be established.

I rest my case.


You'd have some experience to pull from in that case. Glad to hear you had the better of them.  8)

The issue is that PP (as I understand it) is honoring chargebacks because the payments were for bitcoin. If it isn't bitcoin that are the goods being paid for, then why would they bite? The goods could be anything if they honor chargebacks indiscriminately, but I don't think that's the case. The complaints I have heard, are about bitcoin buyers defrauding sellers.


You'll have to ask PoxPal that one.

Something like this http://forum.bitcoin.org/index.php?topic=28896.0 seems like it would be one of those things a Lawyer does for free because it will get them business for quite a while type of thing.

Yea how do we get that douchebag disbarred ?

Apparently he sent a dmca takedown notice to techdirt

http://www.techdirt.com/articles/20110719/00513815159/lawyer-trying-to-trademark-bitcoin-threatens-techdirt-with-bogus-dmca-takedown.shtml

I took this from the comments

Could bitcoiners file a friend of the court brief if techdirt took him for damages for misrepresentation ?

Just noticed the http://btclawyer.com domain is now just simply parked, and the OP hasn't logged into the forum since a couple days after first posting.

There is a reddit thread asking about a Tor-based service:
 - http://www.reddit.com/r/Bitcoin/comments/kgmph/would_anybody_be_interested_in_a_tor_bitcoin/

As someone who comes and goes with Bitcoin depending on availability, maybe the person has a real life to deal with first lol

i didn't read every post in the thread, however i want to put some statements out.

bitcoins are a commodity created to be used as a medium of exchange. many politicians have said using anything the FR did not print or come to existence out of the creation of debt as your medium of exchange, as a direct terrorist attack on the US economy or whatever.

wow gold or isk or whatever else is NOT currency, it is the sole property of company that allows you to use it. therefore you simply can not even put it in the description or use it as an argument or comparison for almost anything bitcoin related. courts have ruled in this way i believe.

the US constitution is also void because it specifically says that all "money" is to be coined by congress, don't get me started on the FR. so as far as im concerned it simply does not apply because the government thinks they are above what the framers SPECIFICALLY STATED. until such time that the currency the US uses is coined by congress i don't see that as any valid argument for anything.


it also states that our money should not be fiat, but be made of gold/silver, i wonder why they abolished the gold standard?


in a nutshell, i think pretty much all the worlds governments are unable to properly define the use of math as a commodity. this is proven because even inside this forum, where almost everybody supports bitcoin, are unable to decide its legal status as whatever it is they are trying to define it as. this is because bitcoins are fundamentally a product of mathematical laws, and a network of people that agree on a rule set were they can be used as a medium of exchange.