Bitcoin Forum

FinCen - Financial Crimes Enforcement Network

Bradley Jansen of freebanking.org http://www.freebanking.org/author/jansen/ (http://www.freebanking.org/author/jansen/) mentioned this on "Let's Talk Bitcoin"'s podcast from today. His words, not mine. A MUST LISTEN! Starting at around the 9 minute mark and roughly half the show.
Show Notes - http://feedproxy.google.com/~r/TheDailyBitcoinShow/~3/LKTs7vLbpLI/lets-talk-bitcoin-episode-001 (http://feedproxy.google.com/~r/TheDailyBitcoinShow/~3/LKTs7vLbpLI/lets-talk-bitcoin-episode-001) 
MP3 - http://feedproxy.google.com/~r/TheDailyBitcoinShow/~5/v1uhZzA06to/89228962-mindtomatter-lets-talk-bitcoin-episode-001.mp3 (http://feedproxy.google.com/~r/TheDailyBitcoinShow/~5/v1uhZzA06to/89228962-mindtomatter-lets-talk-bitcoin-episode-001.mp3)

I imagine the first prosecutions will clearly be for things related to drug purchases, laundering money, etc. Regardless, when this happens it will affect the largest network of bitcoin users.
He said FinCen has been the single biggest factor in stomping out currency competitors. e.g. - EGold
The Patriot Act has made them all the more powerful.

He said he heard it through the grapevine - that FinCen has prosectutions in the works for Bitcoin broadly speaking. He said FinCen put out the guidance in order to prosecute. And their guidelines were ambiguous as we all noticed. And he reiterated he knew the prosecutions were in the works BEFORE the FinCen guidance. This is something we have to prepare for as a community. I am planning on donating to Freebanking.org as a sort of insurance (and big Thankyou). Any other ideas on defending this en mass? It is better we prepare for this as FinCen is doing. I'm sure some of us have already started. We need a strong group of people, doesn't need to be large, just look at how the gun lobby just won out.

Things like "regulations" (quotes intended) can be a very very big hurdle. Luckily VC's are starting to bring money into bitcoin as well as people all over the world. But, the USA is turning into a bit of a, let's just say, strict State and we need to prepare for the worst. WE are going to have to defend ourselves.

Let's continue our Anti-Fragile nature,
IAS

They might prosecute for money laundering, sure. Probably not buying drugs, but the police would go after that. :-(

First they ignore you, done
then they laugh at you, done
then they fight you, <---- we are here
then you win

My concern is for those who move their bitcoins into and out of dollars, if only occasionally. They hinted that they don't like that.

This is a serious thing, I really recommend you guys listen to that podcast. It is better to be prepared.

The quote thing is great. But don't you think the "fight" will better be done with preparation and legally? I mean that is in a way, our greatest hope - but not our only hope.

If you figure out a way to donate using bitcoins, please share.  I only saw PayPal.

Well, you do have to pay capital gains taxes.

If FinCen start prosecutions against individuals and/or companies the next progression will be confiscation of their assets and possibly the coins they used in their transactions (easily traceable via blockchain) so in theory you could have 100 Btc in your wallet which has been used in a drug transaction and are therefore an accessory after the fact.
Suppose you bought those coins from Mtgox, they have your bank details and are therefore easily traceable.

How many people would like their names appearing in the papers as being connected to a drug or paedo ring?

Possibly another way of scaring people away from getting involved in the bitcoin economy?

they still have to prove that you had knowledge that the money was used for illegal activities. just as the police can't confiscate your dollar bills because they been used in a drug transaction 10 months ago, they can't confiscate your coins because they were allegedly from a drug transaction.

LoL good luck with confiscation of bitcoin if you are stupid enough to give them access to wallet you don't deserve them. They can't put in jail every one, starve them to death

http://www.youtube.com/watch?v=uHxIssSROjk

I just noted that. Sort of VERY ironic, no? Or is it a safety feature?

Bitcoin users preparing to prosecute FinCen

If someone participates in illegal stuff, they will be prosecuted no matter what vehicle they use. Now, if bitcoin itself comes under attack - then it's all the reason to get involved and organize opposision.

If bitcoin is bad in and of itself, then also cell phones, roads, laptops and hammers are bad in and of itself.

There is nothing wrong with trading btc for services, for other cryptocurrencies, or for USD. FinCen only cares about you if you are a virtual currency "issuer" or "exchanger". At the moment, there is basically no such thing as a decentralized cryptocurrency issuer, so what you ought to think about is whether you are an exchanger. A bitcoin virtual currency exchanger is someone who makes a business of exchanging btc for dollars, or for other cryptocurrencies, or who transfers value denominated in btc between accounts. If you are such a person, e.g., Mt. Gox, and you are doing this "in the US" then you are a money service business and had better be registered with FinCen, and you had better have an AML-KYC compliance program.

That said, for a real business, it is not the end of the world to register with FinCen and comply with AML-KYC. It involves some thought, having written policies etc., and having personnel to review accounts and file routine reports. The cost of compliance is fixed and manageable.

The problems start when your success outruns your experience-based respect for danger. If you're some 15-year-old minting btc money in your mom's basement with your wild west crypto exchange that you hacked together over a week, and suddenly you wake up one morning with a million bucks worth of btc in your wallet, you should probably hire a real law firm with experience in the payments industry. You could hire me, but I would just repeat what I already said and give you the name of some biglaw shop in DC.

The trickier problem for the industry (again, in the US) is state money transmitter licensing. Here you have to be on the lookout for 50 different legal regimes.  In some states it may be sufficient to have a bank or other licensed financial institution handle your funds. But that is not always enough.  This can trip up experienced players, and has (see, e.g., Square in Illinois).

Correct thread title:

Some random guy says that he's heard from "anonymous sources" (aka other random guys), that the government is preparing to prosecute some bitcoin users

Would a possible loophole around the money transmitter license be too setup automatic payments from the pool to the exchange and sell them from there. So you technically are not transmitting anything as the wallet address used in the pool is the same as the one in your exchange account.  Fincen stated transmitting btc to convert to usd without the license is illegal, simply remove yourself as the transmitter and you are good. Or you can always buy gold coins from amagimetals and sell those.

bam91, I am not sure which person you are referring to. Do you mean, if you are a miner, how do you avoid registering? My view is that a miner is not an issuer or an exchanger simply by virtue of selling their rewards for dollars.

Which makes this 'news piece' about as useful as 'be on the lookout for a male, 30-65, 4ft-7ft and wearing clothes"

brb, going underground.

I will post the quote from fincen when i get home but based off of memory i believe fincen had three definitions, user, issuer and exchanger. User may be a miner, issuer doesnt exist as noone controls bitcoin and exchanger are the exchanges. More importantly they stated that if you use btc to purchase goods you do not need a money transmittet license however, if you transmit btc in exchange for usd you require the license. Obviously more clarification is required from fincen but going by currrent statement, selling btc is illegal.

It depends on what they are going after. If it's money laundering and tax evasion then more power to them.

Original statement from fincen:

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Excerpt:

"A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter.(Self explanatory). By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter( This is what makes it illegal in the United States to sell bitcoin whether for cash or at the exchanges. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency(Applies to exchanges and may apply to individuals who offer escrow service)."

I still don't see what newegg gift card shops like btcbuy has to do with fincen. BTC>Newegg gift card. It never touches USD.

BTCBuy is offline cuz of this fincen bs.

pekv2, prepaid providers are similarly regulated. often times stores partner with white label prepaid providers, who handle all the technology as well as AML-KYC program

K, so would this fincen block places like newegg n such from using bitcoin as well? Since it would go directly to such places, exchange for computer hardware.

no, didn't you read the guidance? paying in btc, or accepting btc as payment, does not make you an MSB

edit, also the guidelines state that virtual currency transmission cannot be providing or selling prepaid access b/c that only pertains to real currency

That is a good point, although rather than "illegal" the accurate way to phrase it would be "makes you a money transmitter".

This language needs some clarification to be sure. I still think if you are mining and sell your mined btc on an exchange, you should not have to register separately with FinCen b/c (a) you could not possibly file SARs b/c you don't know who you are trading with, and (b) the exchange already should file SARs, and is the person best equipped to do so.

Please keep in mind these are GUIDELINES and not the law or even administrative regulations. So ultimately if you have real concerns about what you're up to, you probably need to dive deeper. If I were a big mining pool I would pay a good firm to advise me on getting some no-action letter or other comfort on my proposed legal position.

K. Thanks.

I emailed newegg, I will start a new topic pertaining this.

Thanks for the comments and interests guys. My intention here is purely one of being careful and keeping an eye out.

Yes, it's possible that the man in podcast is lying, but regardless, he sounds very intelligent and familiar with FinCen and we shouldn't overlook that. I'm giving him the benefit of the doubt.
If he is wrong then we have nothing to worry about. But we should prepare in case he is right. It is much better to approach things proactively than purely re-actively.  I think that is fair considering we are dealing in currencies and ALL competitors to the dollar (that I am aware of) have been shut down by FinCen that I can remember. The only ones that haven't I believe are small local currencies.

What we do have on our side are a few things:
1 - We have good intentions it appears
2 - The government traditionally is very very slow to react.

IAS

Yeah if anything it will be over this and possibly Pirate@40.

Pirateat40 will be indited by the US SEC

Pirateat40 is a rather obvious candidate.

As far as I can see pirateat40 has a lot more to worry about than just the SEC, including the IRS over witholding taxes, and yes FinCen over all sorts of money laundering offenses.  Now as to the impact on the BTC / USD exchange rate of piratat40 in shackles and an orange jumpsuit that is anyone's guess.

Bradley thinks FinCEN is indifferent to the damage they do in pursuit of their larger goals.  I don't think it's as simple as going after drug dealers, the ambiguity is there to cause concern and eventually to spark panic.

I expect the targets to be unknown, relatively small and to all appearances harmless individuals operating businesses moving value from bitcoin to dollars or the other way around.  I expect the infractions to be small and omissions rather than obvious criminal acts.  I expect this to cause a panic as it dawns on people that anyone moving from dollars to bitcoin or vice-versa on a regular basis are subject to all kinds of legal implications.

I expect this to cause a shift in the way some people think about money, and I expect there to emerge a class of people who transact entirely in Bitcoin because it more appropriately suits their lifestyle while discarding the legal implications involved in currency conversion.

Adam B. Levine

I disagree with the interpretation above that it is illegal in the United States to sell bitcoin whether for cash or at the exchanges.

The sentence 'a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter' only refers to miners if I am not mistaken. I don't know what the implications would be for miners selling bitcoins though.

Read:

Sounds like they are making up rules on the fly. They're scared of bitcoins, now they'll start trying to shut it down.

If you are going to give your interpretation as well then you might want to edit that to make it more clear what is the original FinCEN content being excerpted. (quotes, italics,  line spacing, ...  all are tools available to help distinguish the two.)

    The bold font in the parenthesis doesnt suffice?

Here's the legal argument that I think gets made if FinCEN goes after a business that accepts BTC:
The business accepted money for goods, this is fine under the guidelines.
The business then transmitted the BTC to an exchange.
The exchange then transmitted fiat money to the business, which is also fine as long as the exchange is following relevant laws and is licensed.

The room for argument is step #2.  Is transmitting BTC to an exchange going to be something they try to stop.  I don't see how they will go after this, but I don't put insane legal arguments past them.

There is absolutely no way this will ever fly.  If Bitcoins are "convertible money" or "funds" or whatever for the purpose of sending them to an exchange, then the same standard applies to trading them for goods and services.  Their whole so-called regulatory scheme is based on a distinction that doesn't actually exist.

Let me tell you how this will actually go down.  It will be done on a case by case basis, to people with specific circumstances that plausibly fit whatever obfuscated legal definition of cronyist, state-supported profit they come up with.  But it will be made to seem like the regulations apply generally.  It will be a total psy-op case, just like 'Wickard'.

They will pick some small-time guy who took out a fiat loan and used it to buy Bitcoins, which then went up in value.  They will make a huge deal about how he bought a tablet pc or something worthless at a Bitcoin store, but that this is fine because it's just "normal" everyday business.  Then they will harp on how he "profited" by trading a bunch of those Bitcoins at an exchange, and how that's "speculating" and "money laundering" and "unlicensed trading" and whatnot.

This will mostly happen in the media, of course.  The actual court case will probably just be settled with a plea bargain.

The important thing is that they will never once point out that the only reason they are prosecuting this guy is because he took advantage of the normal, everyday, licensed fraud that is the fiat money system.  The whole point will be to sweep that under the rug, while setting a precedent in people's minds and deflecting blame to Bitcoin.

I called FinCEN not long after their ruling and asked them about their interpretation of miners. The guy I talked to said they are still working things out and mentioned having access to the guy who actually wrote the ruling. He said he would keep my contact details and possibly send me more information when he had clearer answers to my questions (specifically about mners). Most likely he meant I'm now on some government watch list. :) He was really friendly and seemed genuinely interested in working with (not against) the Bitcoin community.

I also talked to the person in charge of money transmitters in my state and he wasn't as familiar with Bitcoin, but he had been researching it. Both people told me about the processes needed to register, and it honestly didn't seem like that big of a deal. I'd like to hope if you follow the law, they will pretty much leave you alone. I have zero experience in these matters, so I'm probably naive there.

Adam did a great job with the podcast, and we were honored to sponsor episode number one. It feels good to contribute in a small way to its future while being part of its history. I'm looking forward to the next show.

This isn't clear to me at all:

"A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.
In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency."

My interpretation:

Our business (an ad network) accepts Bitcoin from users (advertisers) and pays users (publishers) in Bitcoin. From the sounds of this we are a money transmitter and an exchanger because:

1) we accept such de-centralized convertible virtual currency from one person (advertisers)
2) as part of the acceptance and transfer of currency (currency and or virtual currency?) (i.e. paying publishers for displaying ads), ..., or other value that substitutes for currency (i.e. virtual currency?)

It's ambiguous. We are not located in the US also. I will speak with a lawyer....

The terrible thing about any government agency becoming involved with prosecuting crimes involving Bitcoin is that the little idiot “average Joe” will be the one who suffers. I expect when Bitcoin is finally attacked by ‘merica (I’ve been waiting for it for some time now) it won’t be the rich Bitcoin power brokers that are hurt the most it will be the small time user that the government imprisons as an example. I am shocked by MT Gox decision to have any presence in this country even for the forum.  There must be someplace in the world more suitable than ‘merica.

On a positive note, the best thing about a government agency becoming involved is that they are slow to act and react. A bigger worry for us is the corruption within listening to or following "orders" from corporate interests, politicians, etc. Regardless, if things are kept legit we have a HUGE backing. That is my point in this thread. We need to come together and have a good community of spokespeople, lawyers, etc. to defend and represent us going forward. We will probably be fine as long as another big war isn't started, then those crazy patriot laws get worse.

It would be nice to just have very very small transaction fees applied to legal defense, but then that would be like a tax and we already have that. We are going to need to depend on us, especially the early adopters who already have a good income and lots of bitcoins sitting around.  8)

Rock on Bitcoin community, Rock on...

IAS

This is pretty much the scenario my mind devised when first theorizing on how the 'powers that be' (FinCen, Govt, etc) would respond to Bitcoin once it became a serious threat. Total psy-ops operation through major media outlets.

In fact, anyone discussing this thread topic has already fell victim to phase one. All they had to do is make a statement and we're already falling in line like sheeple, trying to figure out how to stay within the guidlines they prescribe. The seed has already been planted, they've made the first move, and we're acting according to their plan. You're all discussing and contemplating a defensive move, which is what they want and expect you to do.

Now they will monitor forums and chatrooms to see how we're all reacting to the news and use the info they gather to plot their next move. They know where we get info and they know where we relay info...they'll use the same places to listen in on us and to "leak info".  Operation: Bitcoin Down" is already underway....probably has been for a while. To the public, they ignore or play down Bitcoin...to us, they "leak" information of impending doom.

Bitcoin (and other cryptos) will ultimately lose as long as we all play their game. Not only did they write the freaking book on how to play, but they write new rules at their discretion.

Working on a defense only is certain death for Bitcoin. We all need to start brainstorming offensive moves. Obviously I don't mean violence of any kind....but, the media will be their battlefield...How could we beat them to it?

Just my 2 cents...

+1 to this, and also to crazy_rabbit about paying taxes.

It's technically not possible to launder money if the money is not associated with a crime.  At least the way I read the definition of money laundering.  I'm good here...happy days!

I lost interest in drugs about 25 years ago and have not spent a dime on them since that time.  I'm golden here to, although I think it should be fine for people to waste their money and destroy their bodies with drugs if they choose to do so.

As for capital gains, they won't kill me.  I didn't expect to make any money on Bitcoin at all so any net profit I make is great.  Thanks to the rich fuckers here in the US and our level of political corruption, we have low taxes for people who earn money by having money vs. by actually working for a living it so I'll ride along with them.

Even though I don't like my tax dollars killing kids in the outer reaches of our empire, I'll ante up anyway because it would be monumentally stupid not to.  Particularly when doing something which, although perfectly ethical, corp/gov is probably not going to be real fond of.  Cheating on one's taxes in association with Bitcoin will, I'm projecting, be one of the surest ways to end up in one of our gulags.

At least since summer of '11, but yes probably longer.


+1


Hah, I've been trying to point out the next move for a year now.  The media is their battlefield.  We need to remain in our own.  "Fight the enemy where they aren't" -Lao Tzu

You just said it. A type of insurance fund to fight prosecutions.

FinCen has no authority or jurisdiction over Crypto Currencies, any moves they make will be met in an International Court by the CCCB in defense of the integrity of Crypto Currencies. Contact will be made with FinCen on reguards to there future actions, anything else is just pure speculation!

Because everybody knows the  US government has no reach or influence outside the borders of the US.

I really need to move my coins off of Mt.Gox!  If I didn't sell at +$200, I never will  :P

After roundly defeating the US in it's struggle for independence during WW-II, Japan has enjoyed an unprecedented degree of autonomy.

+1 If you go to freebanking.org and read just a little you will see this guy is not some idiot off the street.  I truly don't think what he is saying hear should be taken with a grain of salt.  His agenda appears to pro-BTC as he is offering to be that needed liaison between BTC and FINcen. 

I definitely believe that if someone that knows what they are talking about doesn't sit down with them soon from the BTC community then they will do whatever they please.  No matter what the discussion, ignoring FINcen and letting them just regulate as they think is right will not be good for BTC in anyway.  It is way to easy for them now to say, it's main use is for laundering terrorist money.  (They have way too much power under The Patriot Act)  That is pretty much game over in the USA.

These guys know what they're talking about - they are not just random wingnuts.

FinCEN will be going after people to try to scare everybody. The irony is that they
may accidentally drive the bitcoin economy by unbalancing trading.  If people can't safely cash
out into USD, there is more incentive to buy and sell with bitcoin - and STAY in bitcoin.

Also they will fail when trying to regulate international transactions. My guess is that
smart Americans will quickly move their cryptocoin->fiat transactions out of that country...

Yup.

The trick about predicting the future is to look at the broad motives and means of the interested parties, look at the situation through their eyes and think about what the next few logical steps are to achieve those goals with those means.

FinCEN is a big player because the US is a big player, might not be so if Congress stepped up once in a while but I don't think that's likely given the last few years - My expectation is a Bitcoin-Only economy will pop up for individuals who want to avoid the tax implications - They'll be paid in bitcoin, they'll fund their lives in bitcoin - Thanks to FinCEN ;)   I wonder if they'll pay taxes

My team is currently developing a meta-exchange for crypto-currencies - Crypto Street (http://www.cryptostreet.com) - and we're physically located in the US but we're considering overseas incorporation. 

Looking for recommendations on lawyers well-versed in foreign incorporation in Caribbean or Central/South American countries with easier money transaction and banking laws.

P.M. me.  Thanks.

 I really don't see how FinCen would be able to effectively track bitcoin purchases and sells in any way sufficient to prosecute someone if said person was doing only a minimal amount of things to make it difficult to do so.

Also don't see how they could prosecute folks who did stuff prior to any official ruling on the subject.

Could change in the future with some new laws, but currently would not see how they could charge bitcoin users, unless they had a great deal of resources into monitoring someone and tracking their BTC actions, and additionally linking these to some blackmarket venture.

So to summarize the FinCen categories we have:

1)Users
2)Transmitters
3)Exchangers

FinCen uses the term "create" which I am translating as miners because they are the only ones that actually create bitcoins. So...

Users- Miners and I assume non-miners that use bitcoins to buy stuff.

Transmitters- Miners that sell bitcoins for real currency or its equivalent

Exchangers- People who accept bitcoins and then sell bitcoins for currency, funds, or other value that substitutes for currency


My understanding is that the FinCen rules do not apply to Users. If as a user I buy bitcoins on an exchange and sell them for cash I am not violating any laws so long as I pay the appropriate taxes.

The last line may apply to you as you are recieving the currency and transmitting it to the exchange. Again we need more and clear clarification more Fincen

Satoshi created bitcoin, not miners! Miners only get paid to secure the network. They don't create anything. The mined transaction is a transaction just like every other. So miners are not "money transmitter"

Predicting FinCEN or MTB prosecutions that have a connection to bitcoin is like predicting the sun will rise in the east, you're bound to be right eventually. I've been hearing these rumors for 2+ years now. It's never been a matter of if, but when. Maybe it's soon, maybe not. I know for certain that there is action bubbling up from the States and it's not all bitcoin related.

Part of the Foundation's mission is to protect bitcoin, and that's why we have taken FinCEN's guidance very seriously from the beginning. It's why I spend time interfacing with bank and financial crimes associations to educate them about bitcoin. We are ready, willing and able to work toward educating FinCEN, or if necessary to challenge FinCEN in court.

As I pointed out here: https://bitcoinfoundation.org/blog/?p=152 the guidelines are clear as mud and if FinCEN tried to rely on the guidelines for a prosecution they would very likely face an APA challenge, possibly from me.

In the meantime, it behooves anyone who wants to build or operate an exchange service to discuss these issues with a lawyer. I have a broad network of attorneys (from Top 100 law firms to solo-practitioners) that have experience with these issues and understand bitcoin. I'm happy to continue making connections for anyone in the community, just drop me a line: patrick (at) bitcoinfoundation.org.

Want to talk about the difficulties with operating in the US and why you're looking at south america as an "easier" solution?   I added you on skype and would love to get your perspective as someone building one of these systems and trying to fit within the regulatory structure.

The legal arguments don't matter...
And lawyers will be lining up to TAKE YOUR MONEY while they furrow their foreheads...
<Yawn> Every securities lawyer will tell you straight up you can't run unregulated money exchange.

This is all about "guiding" US banks to cut ties with all things BTC...
Banks will voluntarily comply... it's such small potatoes.

The big one is shutting down Gox...
I doubt it would take more than one phone call from the Fed...
Gox must be in violation of dozens of Japanese securities regulations...
The entire operation looks like a bad SNL skit...
Look at that Funny Fat Guy sitting on a ball = Samurai Exchanger.

http://www.youtube.com/watch?v=LLjlOw3TVc8

Gox shuts down = BTC CRASH.

Linking BTC with Fiat has always been a Big Mistake...
BTC is a commodity... and should always have been linked to gold/silver.

I have to doubt that based on historic precedent.  I happened to have gotten serious enough about Bitcoin to use a typical exchange during the fortnight-ish the Mt. Gox was off-line due to their hack.  It seemed to have had a remarkably small impact on the actual valuations.  They were already in decline and continued in much the same trend once Mt. Gox came back.

If you are implying that Mt. Gox would lose significant BTC I highly doubt that.  They have way to much experience, skill, and money not to have a robust cold storage regime.  If they lose BTC it is almost completely certain to be an inside job.

Good point.

Would it be possible to make such a list public ? Or semi-public ? I'm sure that lawyers that's already been working on bitcoin-related projects have gained experience, that also others could benefit from.

You're missing the point, he's saying the Japanese Government could shut down Gox in a permanent way and have their assets frozen for years.  I have been wondering this same thing myself...

With all the exchanges being shut down around the world, why has the largest one never been targeted by anything more than unruly hackers?  Gox is the single largest chokepoint and is entirely responsible for determining the price of BTC as most people see it, yet it seems immune to regulatory troubles that increasingly plague exchanges around the world.   Is Japan such an advantageous legal environment to operate in?  Are there other international exchanges taking advantage of this and operating out of Japan?

If Gox was shut down by the Japanese government it would have a MAJOR impact on the price, and while it might recover depending on how other exchanges react and how usable decentralized exchanges are by that point, I think it's obvious the impact would be probably as significant as anything else in Bitcoins lifecycle so far.

It's not about losing BTC to a hack, it's about a sea-change event eliminating the largest player in the currency conversion game

This thread is a nice attempt to scare the readers of the forum into listening to the inaugural episode of this radio show. Luckily, nothing he says is grounded in reality.

Nobody associated with the show started this thread - Put yourself in the perspective of FinCEN and see what actions make sense.

Spoiler: They're not nice for Bitcoin.

And I don't care if you listen, if the content isn't interesting enough to warrant your time, you won't.  If we're talking with people in interesting roles about important topics, chances are pretty good you will even if you don't like what's being said.

Adam B. Levine

What you need to do is find ONE example of FinCEN prosecuting anyone -- ever.

If you've got an accusation to make, do it.  I don't hide behind fake names and I don't lie either by intention or omission. 

If you've got evidence to the contrary, I encourage you to publicly post it - I live by my reputation.

FinCEN does not "prosecute." You need to provide proof for your guest's irrational claims or issue a correction.

I have to think that most people do try to limit the BTC and fiat they have on account at Mt. Gox out of general principle.  I did when I was actively trading (through Tradehill.)  This, a freeze may not damage as many people as badly as bad as you might imagine.  (But I could be wrong.)  It could be disruptive if rather than freezing the BTC the government used them to actively de-stabilize global trade, but I have a hard time imagining that occurring.

I myself have hypothesized that Mt. Gox appears to receive relatively little harassment due to they being a useful monitoring chokepoint and cooperative with the authorities.  While that remains in my mind a viable hypothesis, I currently consider it less likely than the null hypothesis for a variety of reasons.

Your hypothesis about keeping centralized exchanges going to reduce the pressure for de-centralized ones (and presumably private transactions and in-system utilization) to develop is also one which strikes me as entirely valid.

I currently consider the strongest hypothesis as being simply that nobody in corp/gov has really come up with a concrete plan for dealing with things.  I have little doubt that the last run-up was an eye opener however, and I'll be surprised NOT to see some effort put into corralling things a bit and some observations of these efforts popping up.

I continue to believe that you may over-estimate the effect that such things will have on BTC valuations.  You may even have the sign wrong.

This is a good point.. i list on my taxes 'computer leasing'  not minting money!

Hahaha, that is a surprisingly accurate statement. I think FinCEN's poor guidance and inclusion of miners as a "money transmitter" comes from their lack of understanding the mining process and that the government doesn't really care as much about Bitcoin as we'd like to believe.

FinCEN takes regulatory actions against those it deems in violation, we can argue semantics if you insist.

Is that all?  You take issue with his choice of specific term?

I reached out to Bradley Jansen for a response to your comment, his reply:

Did you have anything else you feel needs correction?  I am running an interview with Paul Hughes in episode 2 which provides counterpoint to Bradleys claim, but even that results in a more nuanced but still not-great outlook for Bitcoin.

Oh, well, that's a completely different claim than was made on your radio program. Did your guest not do any research before going on the air?

Does anyone know if FinCEN actually contacted BTCBuy and requested their closure or they just chickened out after reading the FinCEN March 18, 2013 announcement? I always wondered if Jeremy from Spendbitcoin was approached about doing business with ‘mericans and bailed out of the U.S. market.

Promise you I will ream Fin CEN in the end

Well, I've been looking at it carefully. Following along this line of thinking, this is how I interpret it.

1) as stated by another forum member... you are not creating bitcoins; You are a Employee of a Open Source p2p Corporation, You are being paid in transaction fees(as non-existent as they currently are). As a reward for completing your job you are rewarded with stock in the company(bitcoins).

No one is creating anything, the bitcoins are already in circulation they are held in trust by the Bitcoin p2p Corporation.

The first two statements do not apply to you, in fact they do not make any sense as to what Miners themselves are doing, it is absolute gibberish.

2)The last statement is the tricky one.

 In addition, a person is an ex-changer and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

    The statement is saying that you can only use this currency once... for purposes of safe transmission over the internet to purchase goods and services.

    The guidelines suggest that you are in deep water if you buy the currency, or accept it for something that is of value,i.e. trade, exchanging the currency for anything of exchangeable value is frowned upon e.g. You cannot buy Gold/Silver with it, you can't even buy another currency under this statement... only goods and services are legal.

If the last statement is dependent on the first two then the last statement is invalid and nonsensical for what Miners actually do... you are not a ex-changer or a Money Transmitter, You are a Employee of the Bitcoin p2p Corporation.

You gotta watch out for those law makers they are sneaky! Please proof read my logic, Is this right? I could be wrong.

Edit: ... I re-read it and I think that last sentence may be valid... if so, it means all transactions with virtual currencies are frowned upon. that includes, anyone who buys virtual currency on EVE Online, WoW, 2nd life etc... it has broad powers, since they are converting real currency into in-game currency, and even paying your EVE Online subscription with in-game currency is frowned upon, same for buying virtual in-game goods that makes you a money transmitter.(notice I did not say illegal, that is in question, but would explain why all banks in the world are shutting down accounts)

Well I guess it's time to spread the mining ethos, buy a rig today for a better tomorrow!

I started this thread and am a bitcoin holder, user and proponent. i am not interested in scaring the readers of the forum (into listening to the show, or just plain becoming scared). I am not a proponent of cutting off my nose to spite my face. I am interested in bringing something that could be and probably eventually will be dangerous to our community to our attention.

I listened to the podcast and have a bit of a legal and investigative background (college only) I could follow the talk quite well and it was concerning to me. As stated before, it is much much better to prepare for what might happen, rather than to wait comfy like and get smacked when you least expect it.

When one considers that bankers basically run the world, are above prosecution (e.g. - See HSBC money laundering, derivatives crisis tying the EU to American banks, etc. and etc.) you have to take them seriously. These people profit and some might argue make wars. They also have controlling interests in society. If you want to just brush that entity aside, perhaps you should look a bit deeper inside and offer a solution rather than a criticism.

IAS

Don't take it personally.  It is human nature to be a 100% fanboy (or enemy) and feel threatened by anything with does not appear on it's face to represent the same posture toward (or against) any particular issue.  That's just the way most humans are wired.  A small percentage of humans are defectively wired in this respect though.

Nice competent summary.

So the money transmitter part, about exchanging Bitcoin for real currencies happens the moment you deposit real money and buy Bitcoin on an exchange and the moment you hold a balance in a real currency on an exchange, after selling deposited Bitcoins and surely the moment you try to cash out?

Thats not a lot to base a law on, as others stated, especially the part of only being an issuer of a virtual currency if you buy money but not if you buy goods. However it's making a path or framework where just about every use of Bitcoin can be prosecuted under existing current American laws.

I live in Europe and the ECB has to rule too before such an interpretation comes into effect here. However international bank compliance with FinCen might be enough for throwing "liquid Nitrogen" on bank accounts in a number of countries, after which laws can be made without any rush while the possible confiscate-able user funds stay put?

This is surely a bleak future. The "good" news from an European point of view, is that we have the European "supreme" court where any EU decision can be challenged and where the complainant is allowed to present technical evidence. That could be relevant if the definition prevails of "mining" as equivalent to being an issuer of a virtual currency under American law.

But of course, all this would be enough to scare away legitimate business globally in the foreseeable future!

Edit: It just occurred to me: Bitcoin though recognized as a "virtual currency" is not recognized, despite it's name, as a real currency meaning that it's considered as an "in game" token that is allowed under strict regulation to be used for payment in real life trades. These possible future laws would include WOW-gold also for the exact same reasons as Bitcoin.

If that's the case, that Bitcoin is not a currency in the normal sense, the prerequisites about it being minted and sold for $$ before the seller is considered an issuer, is really treading on new ground from a legal perspective, so if FinCen translates their recommendations into law, there will be numerous revisions as such a law would challenge existing financial laws in all other areas. Actually a Bitcoin law could have serious drawbacks regarding prosecuting other types of financial crimes as it would create a giant loop hole!

This is important, so no fear hear? and if anyone feels that retched feeling of fear, recite the litany against fear.  

Remember Fear is the Mind Killer.

these are important issues that our community has to grapple with right now before they begin... They did the same thing to Paypal... I think I know why the president of paypal was happy in that interview, I think he's glad something like Bitcoin is able to challenge them.  There simply is no way to destroy Bitcoin short of a EMP bomb, and I don't think that they are going to justify sending out a Trojan worm onto the internet to erase all copies of Bitcoin... though it wouldn't hurt to be prepared for that eventuality.

We are an Intelligent community of individuals, with the determination to know where we stand and I am sure as soon as one of us finds a solution to our problems they will share that knowledge to the community so like Bitcoin our Human BlockChain can be upgraded with the latest known facts, making it indestructible and irreversible; Knowledge cannot be erased from the human mind.

http://www.americanbanker.com/bankthink/fincen-regulations-choking-bitcoin-entrepreneurs-1058606-1.html?pg=1

The article is a bit of a rehash from the podcast. It is a bit of a misnomer saying it's "choking bitcoin entrepreneurs", rather it is choking exchanges. Still a good read though. (edit - I guess exchange owners are big entrepreneus! Just meant the regulations are not yet affecting other businesses that I have noticed.)

The big thing we have on our side is the state of the world. Just look at the currency situation. The government will mostly be slow to react. I am thinking the continued
currency collapse will occur faster than they can even try to stifle bitcoin and other cryptocurrencies. It may not be smooth, but I have a feeling "We are on a mission from God."  ;D
Bitcoin to governments and banks might seem like a problem now, but bitcoin isn't going to really hasten there collapse, they are doing a fine job on their own.

IAS

Great idea, I'll ask around and see if I can publish a list on bitcoinfoundation.org.

Just another rambling:

To get around the "miner is an issuer of virtual currency if he sells for $$". The workaround is off course to buy another virtual currency for your mined coins which you then sell. That way you are spending your mined Bitcoins and not selling them which would make you a money transmitter.

Selling bought altcoins does not make you a money transmitter!

Taa daa.. problem solved.

5 pages of blah

put simply

rule 1
if you touch fiat read the regulations and learn the rules and follow them

rule 2 over $1000 / Euro1000 / £850 in a single transaction or multiple transactions deemed as linked (same day/same recipient/payee) requires Identification

rule 3
over $10,000 / Euro15,000 / £12500 in a year requires identification

rule 4
if payee / recipient makes it obvious that the use of the transaction is crime related, or details of the people are linked to a criminal hotlist then a SAR's report has to be made.

rule 5
have policies/ coding features to log any /all info you can gather to recognise repeat business to then warn the transactors they are approaching limits, then requiring ID. gathering ID if they wish to continue.

rule 6
fincen dont just shut down a exchange on a whim. they do however shutdown exchanges if a report gets received to them which they then back track to an exchange and it is found that the exchange aint following the rules... so follow the rules

rule 7
dont be dumb thinking you can be lazy by not having policies inplace, as sometime/someplace if your bank just asks a simple question and you dont have the answer they may end up investigating you.

rule 8
even scammers that try chargebacks trigger the banks involved to then internally investigate and pass on info to fincen if an exchange can't give valid explanations.

rule 9
there are more rules but the simple ones above have been neglected by previous exchanges and so they get shut down and then blame regulators, and not the 17yo zit faced guys behind the exchanges for being lazy to not learn the rules.

many exchanges such as intersango got shut down because the lazyness of not even reading the UK FSA guidelines to even bother following the rules.

the rules are simple. talking to fincen SEC, FSA etc is simple. if you follow them you are fine. but the main thing is rule 1
if your going to touch FIAT READ AND FOLOW THE RULES

rule 10
if you don't want to follow the rules. don't touch FIAT

But BTCBuy was not exchanging directly for fiat they were doing gift cards in fiat denominations. If I can't even get a gift card with btc why should I mine. I don't want drugs off of SR so I guess I'm left with just trading with scammers in the Marketplace section of this forum, right?

I wouldn't have too much faith in your congressional critters - they've been bought and sold for 30 years now.
FinCEN is mostly working to obfuscate the massive fraud known as Wall St. - the crimes they end up prosecuting are laughable.

They enlarged their jurisdiction last year without any oversight or authority:
http://www.zerohedge.com/news/guest-post-long-arm-uncle-sam-just-got-longer

FinCEN's latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES "even if none of its agents, agencies, branches or offices are physically located in the United States."

There is corruption, but you can still influence Congress. Just look at the recent gun licencing bill. It was revoked in part because congressmen were under pressure from their constituents. It was only a small minority of constituents, who happened to be NRA puppets, but as their lobbying was so intense and relentless, and the majority of people for the bill didn't vocalise nearly as much, this influenced the outcome. It should be a similar situation with keeping things reasonable with fincen. If enough US citizen bitcoiners write repeatedly to their congressmen, there should be better odds for a better situation, or at least to prevent it from getting worse. (I'm paraphrasing from Bradley Jansen on the podcast)

i highlighted your statement at where btcbuy went wrong, and will leave them to read the full length of regulations as to why/how they went wrong.

if you want to get fiat (in any form) above $1000 in a small period of time or above $10k over a year and no ID is ever asked. then don't expect that service to run for very long.

i too dont want/do drugs. but this is where the media has brainwashed you. bitcoin is not used just for scamming people/drugs/playing the markets.

buy a computer or a tv www.bitcoinstore.com
buy some food https://www.foodler.com/user/Bitcoin.do
plus thousands of other things.

and remember bitcoin is still new. its still in the victorian age of currency. where its just moved away from only being used to trade on market places and whorehouses (cam4bitcoins) and is now moving onto being useful for more of a variety.

so the reason to mine is not to spend today. but to spend later.

if you really need FIAT and your only desire is fiat then only withdraw a couple hundred dollars/euros/pounds just to pay the bills.

cashing out every single bitcoin you mine for fiat defeats the entire reason for even using bitcoin

+100

agree!

Stay informed, stay involved, know the law, if you aren't part of the process your against it.

Check the Bitcoin Wiki first, educate yourself, and update it with any relevant information for the community.

I highly recommend everyone get a News reader and set it up, ask help from the community to set it up and trade news lists so that new people don't have to struggle with putting every news site one by one into their new Reader.

http://www.jetbrains.com/omea/reader/


Get good information from the internet, Download the YaCy(you see) p2p search engine, same as above ask for help to set it up. help build a uncensored map of the internet and tailor your searches for good balanced information sources.

http://yacy.net/en/index.html  or get it from your favourite torrent client.


We are a conglomeration of users from mostly Democratic countries, I think we should act like it and get involved with our governments so they know our position.

I know there are many here who wish for nothing more than the demise of governments, but that's not going to be possible if we isolate ourselves thinking that we are free to do what we want without having to consider someone else's position, That is just not feasible, sooner or later we must agree to co-operate; After all what would we do if we did not have the Farmer to feed us? or the Trucker to deliver that food? maybe the grocer to keep the food fresh for consumption?

Alone we fall, together we stand.

What would it do to the exchange rate if all of a sudden the BTC held by Mt Gox were taken completely out of the market for a few years?

I doubt if Gox is that stupid to have their btc "seized" on the premises.  I am sure if the Japanese government shut gox down, they or some associates would still have plenty of access to their btc.  Isn't btc cool?

I would not be confident about that at all.  I have as much confidence in Mark as I do just about anyone in the Bitcoin community at this point, but I don't believe that ANYONE is likely willing to spend significant time in a gulag to protect someone else's BTC or fiat.*  And if they are subject to 'extraordinary rendition' and 'enhanced interrogation', the chance they would not cough up the desired item is probably near zero.

Mark/Mt. Gox could win my trust here by outlining a credible protection strategy capable of withstanding the types of attacks that are known with certainty to be applied against by adversaries such as the US government, and some incontrovertible evidence that such strategies are being employed.  Such strategies are quite possible, if cumbersome, with split secrets and so on.  I'm not holding my breath for such evidence and in the mean time consider any BTC or USD I might have on account with Mt. Gox to be subject with a fair likelihood to total loss.

(*) I feel it technically incorrect to classify BTC I have on account at Mt. Gox as 'mine', but it's convenient shorthand.

Edit: fix

Meeting the Regulators:
http://www.cnbc.com/id/100675118

From that article this is the most important bit regarding Satoshi.

"The Financial Crimes Enforcement Network, or FinCen, has signed off regarding online currencies, saying that it would not prosecute their originators so long as no criminal behavior is taking place."

That is why he can't come back. If they can't find him "the originator" they can't prosecute him.

IMO, it's hopelessly naive to think that 'they' don't know exactly who 'Satoshi' is.  A lot of people probably do.

What if it's just one dude? that would explain why no information leaks have happened, one dude, who from the beginning had a game plan.
what that game plan is, I do not know, but can you imagine if he thought this all out, right through!!

This is something I have been assessing.  A quick number crunch shows what a tiny percentage of the total BTC transactions for a day are related to SR.  I want to understand where all this BTC is going -- 560k in the last 24hours.  A fraction of that is SR related.  Where is all this BTC going?  It can't all be speculators.

1 - It absolutely could be speculators, the amount of money in this market is a tiny tiny fraction of the value sloshing around in the world looking for someplace safe from devaluation or confiscation to hide.  Right now it's hard to buy bitcoins, but it's alot easier than it was last year and next year it'll probably be easier than it is now, or illegal.

2 - Satoshi's dice is a major source of BTC traffic, are you remembering to factor that in?

Certainly good points.  I had considered Satoshi dice as a major contributor of the BTC transactions, but without doing any real analysis I assumed that it would be a small percentage of actual coins being sent.  At the current numbers, the average transaction size is around 16 BTC.

I contributed to SD for a bit just a learning experience.  I probably did around 30 transactions, lost half of the 1 BTC I was gambling with.  That's a lot of transactions (in aggregate), but a very small amount of actual BTC (even in aggregate).  7% of the entire market cap of BTC moved around in the last 24 hours.

Does anybody wonder why the mods haven't moved this to the legal section?  lol