Bitcoin Forum

In the thread How to use fiat currencies for Bitcoin offline transactions? I proposed an idea, which is to send coins to a special address using the serial number on a $1 US dollar note. To release the coins, you need 2 keys. 1 key is the serial number (public info), and another is one that I own (private). Nothing is written on the note. Bitcoins could then trade off-line using the counterfeit security of the USG, with me as a trusted party. To redeem, you must send me the physical note and another address to move the coins. (https://bitcointalk.org/index.php?topic=305590.msg3443357#msg3443357)

As a resident of the US, am I asking for trouble? I would not exchange any fiat for bitcoins, just use the inherent security features of US fiat. I'm keeping the $1 as fees. I wouldn't issue the bitcoins, that is done by the person first holding the $1 bill and the address is calculated by him.

DeathAndTaxes's recommendation seem relevant in: Online Wallet/Holding Services FinCEN registration? https://bitcointalk.org/index.php?topic=322821.msg3456848#msg3456848
"If I were creating a e-wallet service that did not exchange virtual currency for EITHER 'real currency' or another virtual currency I would not register at this time"

However, using the term "3rd party" means regulation in my experience.

Since the U.S. federal court has ruled that Bitcoin "can be used as money", this would probably not be much different from if you had a drop box that you had labeled "deposits" and then would credit my account every time I dropped an envelope which has my name one it and paper currency inside.

In both instances, only you have the key to access the funds.

But with that deposit drop box, you can halt the service by removing the drop box.  With the "published public address", you could stop publishing it but you can't stop me from learning of it from elsewhere nor can you stop me from using it as a vector in creating the Bitcoin address I sent funds to.   And that makes this a very interesting topic.

Some thoughts:
Paper currency of all countries is serialized, so this is not limited to the USA, however, some of these serializations can have common "address space" so you may need to designate Billets, Papier Monnaie, Banknoten, Papier Geld, Cartamoneta, Banconota, Shihei, Okane, Banknotai, Popieriniai Pinigai, Banknoty, Bumazhniye Den'gi, Notas de Banco, Papel Moneda, etc.

Check out http://store.banknotes.com/home.php

The risk of using domestic money of the country you are in, is that this can be confused easily or "borrowed" by someone who sees it as a fungible piece of currency. "one dollar bill is as good as another, why are you screaming?"

Foreign currencies are immune from counterfeiting laws as they are legal tender of another geography.

What might be interesting is to take a defunct paper money currency and imbue it with bitcoin value to resurrect it.

Thank you. I believe I have addressed these points in my development which should post in the next day or so. I wish to use US currency ($1 bills specifically) because I want to lean on the counterfeiting security and laws. I wouldn't know how to verify paper rubles, pesos or rupees, or how unique each bill is. It would take huge balls for someone to knowingly counterfeit a FRN and send it through the US mail system. I have stickers that one can "paperclip" to a bill, to set it apart from one another (I don't suggest defacing US currency  ;) ).

Looks like my fears are a bit overblown, I would technically have custody of other's BTC and promise to redeem upon demand. This doesn't have much legal risk, at least on a small scale?

I'm not disagreeing with your decision and reasoning but should point out that counterfeit FRNs were for sale on that tor market that was shut down and shipped via US mail.

But yes, a neat way to piggyback off the anti-counterfeit features that an ordinary person accepting the note can use to help verify its authenticity.

The USD$1 has anti-counterfeiting features?  Such as?
Its main/only meaningful anti-counterfeiting feature is the one which you are voiding, its low value.
It has no security features beyond starch-free paper and even its micro-printing is not beyond the reach of cheap printers today.
Most anything else would be a better choice if you are looking for counterfeiting security, and the counterfeiting security laws will apply to any nation's currency.

If you are smitten with the USA bills, and want the advantage of the honest mistake of your customers accidentally spending it and losing the ability to redeem it, you might consider moving up to the new US$5 which have UV sensitive thread and watermarking.

Yes, the paper is going to be what I check before releasing coins, and should be checked by those who accept it as payment. Maybe I'm underestimating criminals, but the risk involved to counterfeit a $1 bill to get 0.05 BTC for free seems a bit steep. I would contact authorities if I came across a counterfeit bill.

Hoping to launch in the next few days - website is being built! We are taking steps so others can re-produce the idea. With luck, many local pubs and stores around the world will be able to release coins with their own keys.

Counterfeiting a US$1 is very easy.  Especially if just changing the serial numbers.  It is a lot cheaper to do than 0.05BTC is today.
For what its worth, the paper is pretty cheap.  You can get it for US$1 ;)

I hope for your success.  You probably have nothing to worry about with the current value of BTC, though who knows what the future may bring.

The Liberty Dollar paper currency had DNA taggants.  At the time it had more security features than any other paper currency in one piece.
http://www.sovereignparrot.com/10liberty%20dollar.jpg

Zimbabwe dollars come to mind. Or us silver certificates but they are still legal tender, but different at least than fed notes. In canada our homegrown Walmart Canadian Tire rebates you at the till with Canadian Tire Money and are serialized.