Bitcoin Forum

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Glad to hear it!  FinCEN's recent guidance seems to give a clear answer on this, but there's no reason not to get something more specific.  I'm interested in the result.

FinCEN's answer was clear, as you noted: miners are money transmitters.  Also as you noted, its definition of money transmitter doesn't seem to comport with the typical definition of a money transmitter.  That's precisely why I'd be glad to hear their specific reasoning.

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Sounds to me like they are aiming at miners and trying to cut this thing off at the throat as it were, they want their tax dollars!

To me they are saying:

a) the creation of AND THEN the transmission of virtual currency.
AND
b) the acceptance of virtual currency.

Therefore (to me at least), no one will be able to accept a payment in BTC* nor will they be able to send BTC* as a payment without having a money transmission lic.



* or any other virtual currency for that matter.

I think I just realized one minor flaw in what some people are thinking about mining Bitcoins and the FinCEN guidance.

Depending on how the coins are mined (as part of a pool, solo mined, etc), part (and eventually all) of the coins were not created because the transaction fees paid by others may be included in the coins received by the miner.

I know with some pools, the pool keeps the transaction fees, so the wording you used in the request would fit perfectly because the miner only got created coins.

But when the reward is gone in a few decades and only transaction fees are what makes up the mined coins?  Or if one is solo mining or on a pool that includes transaction fees in what they pay out?  In that case the miner would be receiving coins from someone else and then transmitting them to another if they then send them elsewhere.

I do agree, that guidance is about as clear as mud and we need clarification.  However, might want to include more detail in the request if it's allowed to amend what you've already sent.

And a disclaimer: IANAL, but this just seemed like common sense stuff to me.  ;)

Well, I wouldn't say it was 'clear'. But they did break it down to three use cases.

http://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2013-G001.pdf
See page 5, section C.


Still clear as mud. But they do break it down into at least three categories, the first two are the ones I'm interested in. #1 says as long as I go from Mined BTC to purchase real or virtual goods, then I'm not under regulation. #2 says if I take my mined BTC and sell it on an exchange for US Dollars, then I am under regulation and need to report.

Am I reading this wrong?

Some things to think about...

Example One:
If I mine AltCoins, and sell those for BTC, and then Sell those BTC for US Dollars, does that make me a user or a transmitter?

Example Two:
If I mine BTC, and sell that on one exchange for LTC, and then back again to BTC, can I then sell those for US Dollars without being a transmitter? Or is that considered laundering?

Example Three:
What if I was playing the market with my mined BTC, exchanging them for LTC and WDC and back to BTC?

Jazkal, all cryotocoins would be treated the same. So to fincen theres no distinction between btc and ltc.

I didn't see anything like that in the doc, nor any quotes from them on this topic.

They say:

I see trading mined BTC for LTC as purchase of virtual goods. The LTC held in this manner, were not mined by me, they were purchased with my mined BTC.

What do you think they classify "virtual goods" as? Anyone know if they have defined this?

And I'm not saying you are wrong, just that I don't see anywhere where they state it that way. You could be right, that's why I'm asking. Hoping other people who have looked into this more maybe have some definitive answers.

Did you ever get a ruling on this?

He filed it June 2nd.  These things move at the speed of government.   Bookmark it and check back in 60-90 days.  30 days for a response would be an a amazing feat of hyper efficiency for a regulator.

Delay, deter, deny. It's how government works (against humanity).

At the end of the delay period, the "ruling" will deter (chill) economic liberty, and those who cannot afford to pay millions of dollars in legal and government fees will effectively be denied.

Indeed  >:(

1. Transmitter / regulated

2. Transmitter / regulated

3. User / not regulated

When crypto currency changes to real currency or the other way round, they want to know about it {2}.
Any business that accepts crypto currency for goods or services is by their definition an exchanger and transmitter {3}.
No small business will be able to comply and by this, they try to break the neck of crypto currencies and leave it as a kind of monopoly money for nerds {1}.

So this should make bitcoin mining illegal then for 99% of miners.

I don't believe they will make mining illegal, because they just don't care about it. They only need to cut the ropes to cashout (whats already happening at the moment).

In the future (2 years?) you will mine 2 months and get 10.000 BTC, because 99% of the miners quit mining. These 10.000 BTC can be exchanged against a cool, unique Sheldon-T-Shirt during checkout of your next purchase at Amazon. Or 5% discount when you buy a new AMD graphic card. Or a WOW "Mithril tuning fork of the winds", which distracts your enemy for 2 seconds and can be used once every 3 hours. Or other cool stuff like that.

To ACB: Are you working with a local attorney?  I think it's great that you are trying to influence the rulemaking process.  It's civic participation at its finest; you are rocking the boat, and that's the only way change is made in this country.  That said, it looks to me like you are flying solo.  Most people who do this don't fly solo.  They do it with legal counsel.  Without a knowledgeable lawyer at your side, you risk rocking the boat in the wrong direction.  As a bitcoiner myself, that concerns me.

In sum, you seem to be lobbying to affect the regulation of an entire industry without someone who knows how the regulations truly work.  There must be a local attorney that you can work with in New Jersey that can guide you through this process, help you focus your communications, and aid you in representing the industry in a more effective manner.

@MSantori,
Can you point us in the right direction for whom might be the best lawyer for this type of work?
I realize that this industry does not have any precedent, (or does it?)

It's a tough spot, I know.  A six-figure retainer is probably overstating it a bit, but you're right: regulatory attorneys aren't cheap.  The Bitcoin industry needs a well-funded industry group that can engage the proper legal counsel so that competing individual interests don't sink the whole ship.  In any event, good luck!

Then again, if he did hire a lawyer familiar with FINCEN regulation, and paid a handsome sum, what incentive is there, really, for that lawyer to get them to say that bitcoin mining is NOT regulated.  If he succeeds, all he succeeds in doing is losing a customer, a bitcoin miner that has no further need of his legal services.  There is an inherent conflict of interest with any lawyer experienced with finCEN regulations for MST or MSB in that if they win by getting bitcoin left unregulated, they lose for themselves and all their friends.

for me these rules are clear enough:

- mining = unregulated
- cashing out = regulated

all in between should be clarified by bitcoin foundation, I see this as one of their main tasks. IMO it's a waste of time and money when individuals try to do this.

One point is that it would be hard to FinCen to back up that a pool miner is doing a financial transaction.  A pool itself is bundling transactions together so while I don't agree they should be regulated there is room for FinCen to play.

It's great you take care of this, I just thought it should be handled by a central "authority" to reach consent for the whole community. If BF doesn't want or can not do this, we maybe should try to bring them this way.

As of my understanding, as long as a pool makes no conversions of Crypto Currencies (BTC -> LTC etc.) or exchanges to real currencies (BTC -> US$ etc.) and only sends the pro rata outcome of the mining itself, it's not regulated. But youre right, it's ambiguous and could be interpreted as transmission, though I doubt thats the stuff they're after.
Realized (cashed out) earnings of this activity (fees, donations etc.) have to be stated as income.

Does FinCEN have a representation on this forum yet ? or anyone employed by the organisation to speak in a kind of autonomous way?

https://www.facebook.com/permalink.php?id=138401546325686&story_fbid=154657731366734

bitinstant exchanges fincen mtgox regulation united states US usa
FINCEN: Bitcoin Users Not Regulated, Exchanges Are

Government regulation has for a long time been a gray area for Bitcoin, both in the United States and elsewhere. Although we have seen a number of disparate government reports either simply talking about Bitcoin or providing a regulatory opinion on some aspect of Bitcoin exchange, to date we have not seen anything close to a conclusive statement on digital currencies from any government organization in any country in the world. The problem is a difficult one; nearly all laws to date that attempted to regulate online payments of any form have all assumed a central issuer, and in the case of Bitcoin it could be just as easily argued that everyone is an issuer or that no one is. Today, however, we have gained a much clearer picture of what regulation for Bitcoin will look like, as FINCEN just released a paper clarifying their position on virtual currencies, touching on the concept of “decentralized digital currency” in detail with Bitcoin clearly in mind.

its all over twitter

https://twitter.com/search?q=fincen&src=typd

I agree there guidance seems pretty clear cut, if you mine and use the coins for yourself or you buy coins and use them for yourself, it is not regulated.
Basically, it is the selling of the coins to individuals for USD that requires reporting as an MSB under Fincen.
At least that's how I read this:
http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html



What clarification do you hope to get? What aspect of the existing guidance is unclear? Maybe I'm missing something.

You're absolutely right on this point clarification is required. The existing guidance leaves room to interpret it either way, but I'm inclined to say you're right because using an exchange is not the same as selling to a "person" which is how the statute defines it.
It will be interesting to see how this develops further.

In a fantastic post, DeathAndTaxes states:


https://bitcointalk.org/index.php?topic=231099.msg2432003#msg2432003 (https://bitcointalk.org/index.php?topic=231099.msg2432003#msg2432003)

I have to agree with MSantori here.  This looks like it was written by someone without a clear understanding of the legal issues involved.

First of all, you can not request an administrative ruling on an issue that is the subject of an enforcement action or court case.  If you believe that the facts of your case are similar enough to Liberty Reserve that you would be affected by a ruling in that case, then you would need to make that argument to the court.

It really is not at all clear what you are requesting from FinCEN.  You bring up the issue of reversibility of payments.  Reversibility of payments is possible under the Electronic Funds Transfer Act.  The definition of electronic funds transfer under this act refers to "ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account".  I am not aware of any claim that bitcoin falls within this definition (and it pretty clearly does not).  The statement regarding Liberty Reserve indicates that FInCEN director Calvery thinks irrevocable payments are a bad idea, and this is used to bolster the argument that LR is laundering money, but nowhere does it state that irrevocable payments are per se illegal.

I would strongly suggest that you retain legal counsel and withdraw this request or amend it to address the specific factual circumstances that you are concerned about.  Your request in its current form is likely to be dismissed, and this will simply make it more difficult for you to get the answers that you seek.