Bitcoin Forum

FinCEN renamed "stored value" to "pre-paid access", opportunity?

Accordingly to US Law (UNIFORM MONEY SERVICES ACT), Bitcoin has "monetary value" thus qualifying as "stored value". [see 1]

So any person or business transferring bitcoin from any kind of account based system to another person or business (as in a payment service) will need a "Money transmitting" license.

There is no US$ 1000.00 threshold for that, you transferred 1 btc from one person to another via funded accounts in your site, you need a "Money Transmitting" license.

From my understanding, if you do not transfer funds between users and limit the activity to US$ 1000.00 a day per user, you still are a MSB because bitcoins can be transferred to foreign countries, revoking the threshold.

But recently the definition of "stored value" changed, it also was renamed to "pre-paid access".

The definition go as follows:


The key term for me is "paid in advance".

Are bitcoins paid in advance ? Maybe I minted mine ?

The characterization of bitcoin as a "pre-paid access" is crucial to enforce regulation.

It is a show stopper for me. I think it will be at least a major pain for many other bitcoin business (like the wonderful casascius bitcoins, they look very similar to a redeemable pre paid "card").

Anyone here have some move information about this ?

Maybe we can collectively hire a lawyer to give us a final word about that ???

I'm more than willing to donate for that cause, maybe some more well know member can aggregate the donations ?

[1]
UNIFORM MONEY SERVICES ACT
http://www.securitization.net/knowledge/legal/uniform.asp (http://www.securitization.net/knowledge/legal/uniform.asp)
1. "Monetary value" is defined as "a medium of exchange, whether or not redeemable in money." Although not defined, medium of exchange connotes that the value is accepted by a larger group than the two parties to the change. Therefore, no "monetary value" would exist if the product (i.e., gift certificate) or payment mechanism (i.e., university payment card) is only accepted by one merchant.

2. "Stored value" is defined as "monetary value that is evidenced in an electronic record." Because "monetary value" is a required component of stored value, single issuer cards (i.e., gift certificates) and closed-end stored value systems (i.e., public transportation cards) are still excluded.

3. "Money transmission" means to engage in the business of (a) selling or issuing payment instruments, (b) selling or issuing stored value; or (c) receiving money or monetary value for transmission to a location within or outside the United States. This definition includes entities that receive and hold funds of consumers prior to transmission, whereas entities serving as a clearing agent for transmitted money (but never possess consumers’ funds) are outside the scope of the UMSA.

http://www.law.upenn.edu/bll/archives/ulc/moneyserv/umsa2004final.htm (http://www.law.upenn.edu/bll/archives/ulc/moneyserv/umsa2004final.htm)

 10. “Monetary value.” The definition of “money” has been expanded to reflect the fact that certain payment service providers employ a form of value that is not directly redeemable in money, but nevertheless (1) serves as a medium of exchange and (2) places the customer at risk of the provider’s insolvency while the medium is outstanding. The same safety and soundness issues pertinent to redeemable forms of value apply to these irredeemable forms of value. Consequently, a new definition of “monetary value” has been included in this Act.

This doesn't look good.

Interesting. I have a few questions. Once you have a bitcoin what can you redeem it for? What's the redemption terms, rate of redemption and unit of redeemable value?

If only a single retailer accepts it, like a iTunes gift card, for example, then it is considered a "closed loop pre-paid access" and, as long as it can't be exchanged between users or sent internationally the 1k usd threshold is valid and you don't need to be regulated.

But if a community (they use a university fake money that is accepted by nearby stores as an example) start to accept it, its considered to have monetary value and the act of using it is "redeeming" it.

Brazil law ?

It would be a very wrong decision to classify bitcoin as "pre-paid access". Pre-paid access means paying for credit that can later be redeemed for national currency. Buying a commodity, including a digital one like bitcoin, that has a value that fluctuates in the market, is not tantamount to credit that exists in a pre-paid card.

Not, it doesn't, but maybe as a collective we can hire a fancy law firm and have some professionals looking over it.

I think it will be much more productive than each and every new startup here burning resources to solve an issue that affects so many of us.

There's a related thread here.

https://bitcointalk.org/index.php?topic=51980.0

Also here.

https://bitcointalk.org/index.php?topic=46971.0


http://www.bitcoinmoney.com/post/11074108719/fincen-freis-prepaid-access-speech

They're planning on pressuring similar bodies overseas to adopt similar provisions.  

No, accordingly to FinCEN "monetary value" doesn't need to be redeemed for national currency:

1. "Monetary value" is defined as "a medium of exchange, whether or not redeemable in money." Although not defined, medium of exchange connotes that the value is accepted by a larger group than the two parties to the change. Therefore, no "monetary value" would exist if the product (i.e., gift certificate) or payment mechanism (i.e., university payment card) is only accepted by one merchant.

what is this going to mean for the bitcoin consumer and bitcoin merchant?

Yes, you don't need to be in US ground to be considered a criminal there.

If you perform "money transmit", issue or sell pre-paid access in Costa Rica, you are still a criminal in US.

I've made a different thread because i think the main point here is hiring a law firm to have those questions answered. I think many people here will benefit from that.

You're correct that it's not just national currency, but that's not important to my point.

My point is that this:


Can only describe credit for a set amount of monetary value whether that value is in the form of a national currency or some other widely accepted medium of exchange thing else (e.g. goods/services), not a fluctuating value dependent on the market price of the commodity.

Bitcoin is a commodity. It's not pre-paid any thing.


Definitely.

let's hire a law firm to find out if it's legal to pool together bitcoins to hire a law firm.

As long as people realise that a law firm's not going to be able to give you a definitive answer.  At best they can give you an opinion on how they think a court might interpret the legislation. 

From what I've read, the changes are comprehensive enough to include things like pre-paid mobile phone and internet plans as well as gift-cards and pre-paid credit cards.  There doesn't seem to be a requirement that the thing bought can be redeemed for a fixed value.

What they seem to be trying to do is include things which may be used for money laundering in the future and not just those which have been used in the past (phone cards and prepaid credit cards have definitely been used in the past).  By specifying the characteristics, they have more latitude for including some new thing under the regulations without needing to re-legislate.  It's kind of like analogue drug legislation for financial services.

Why do so many people worry about how the law (and courts) will view bitcoin? Bitcoin was designed to route around centralized, authoritarian interference. There is no "silver bullet" in the law that will ultimately save and protect bitcoin because:

1. the laws can always be 'adjusted' to accomplish the aims of the State;
2. bitcoin doesn't need saving -- laws and regulations written specifically for bitcoin would perversely enhance its legitimacy.

can't we push the issue... ask the court to make an official decision.
make them illegally define bitcoin.

would this be good or bad for bitcoin?

I think there are ways to ask for a declatory judgement.

If bitcoin really does not fit into any neat definitions, the court rule on the legality of things around bitcoin instead, such are requiring Money Service Business registration for exchanging bitcoin like they did in france with MtGox.

Anyone (business or natural person) that exchange pre-paid for something must keep records of each transaction for five years, require personal identification and report "suspicius activities" to FinCEN.

Its not about saving bitcoin, its about not being arrested by accepting it.

Bitcoin aside, I suspect we're going to see a lot less businesses selling things like gift cards, mobile phone credit, pre-paid Visas and the like if they have to verify the identity of the buyer for each sale.  The administrative burden will just be too huge for a lot of small businesses to continue offering those things or it would slow down their normal operations too much (in the case of businesses like supermarkets).

The u-wash-it car wash I go to issues tokens out of their change machine. Actually, their machine is loaded with a mix of quarters and tokens, so you don't know what you'll get. I can redeem those later for car wash service, or trade my extras at the car wash to the next guy that comes in. Time for a crackdown!

Its already happening, if you are not american you need to submit ID to buy an itunes gift card, for example.

With the stroke of a pen lawmakers can make anything illegal. Then whether they have the will and ability to enforce the new law. Then the courts get involved. I don't think it's much of a stretch to look at something like this
http://www.fincen.gov/statutes_regs/guidance/html/FIN-2010-A011.html
and see crypto-currencies getting make illegal. Then we'll see what happens from there

I agree with Jon.  Do you people realize that nearly everyone who lives in a G-20 nation is already a criminal, and likely a felon too?  There are so many laws on the books, that I'm sure all of us could find illegal things that we do on a regular basis.  This overreach by the state has to be stopped somehow, and it's not going to happen through a legal or political process.  Politicians, bureaucrats and the existing banking system have a vested interest in keeping us in chains.  The best way to avoid getting arrested is to do business anonymously and/or with multiple small transactions.  This is what Bitcoin was designed for.  It may seem like a niche now, but once the centralized power structure starts to crumble, Bitcoin and other p2p currencies will come into their own.