Bitcoin Forum

Synopsis:

- MTGox EUR and GBP accounts have been closed.
- Intersango GBP (our EUR account remains) were suddenly terminated overnight.
- TradeHill (https://bitcointalk.org/index.php?topic=49646.0) EUR bank account was closed.
- ExchangeBitcoins closes suddenly (might be unrelated).

Solutions:

Not having exchanges for bitcoin is a bad thing, and will destroy confidence in the currency if don't believe that you'll be able to exchange your bitcoins for fiat in the future.

Other solutions to this crisis are hard to come by. An idea is accepting cash vouchers, however to accept them is no easy task. Working with card payments is infeasible as they're reversible and VISA/MASTERCARD would never stand for supporting competing businesses.

WOT systems are nice, but they fail to scale beyond a few dozen users and are ripe to be gamed by scammers. WOT also doesn't have much liquidity as you have to be pro-active in deducing the market-rate to find appropriate orders.


Someone in the EU commanded for a bunch of EUR and GBP accounts in 4 different countries to be shut-down in under a week after being open for 6+ months.

What was the reason quoted?

https://support.mtgox.com/entries/20568322-all-eur-transactions-will-be-temporarily-suspended-within-europe-with-immediate-effect#overview

This is barely worthy of being called an attack, this is just bitcoin hitting up against pre-existing banking regulations and failing to sneak under the radar of broader financial protections put in place to protect consumers, stop laundering etc. (and arguably also designed to protect existing commercial interests)
A real attack would be regulators specifically moving against bitcoin.

Not to mention this was known as a possibility for months...Mt.Gox told us this was a possible issue quite a bit ago.


https://bitcointalk.org/index.php?topic=41317.msg503663#msg503663

Someone in the EU commanded for a bunch of EUR and GBP accounts in 4 different countries to be shut-down in under a week after being open for 6+ months.

Can anybody do something to fight against this ATTACK?

genjix is right!

They will never openly risk a debate on Bitcoin - especially since it has the potential of getting more people sided with the currency if a debate is opened. That would actually be the worse thing they could do, as it would give bitcoin more press and make it sound like: "The bad banks/govs vs the people".

By closing down accounts and calling it money laundry and what not they silence the entire community, more panic arises and thus the press will be free to mock bitcoin once again and label it as fail.

This is no attack on bitcoin. This is a fairly logical and predictable consequence of operating financial service companies, which exchanges are.
The bitcoin aspect is still free as ever, the EURO part is not, it is regulated, and thats perfectly fine with me.

For those, who like me, think bitcoin should get a chance to become a currency, an actual trade facilitator, rather than a casino chip thats useless outside the casinos you call exchanges and bitcoinica, this is excellent news.  If you want bitcoins, start selling goods or services for bitcoins. If you want to get rid of your bitcoins, buy good or services with them. If you have no interest in either, then bitcoin isnt for you.

Bitcoin is not a currency.

Gotta agree here.  This has little to do with Bitcoin per se and everything to do with offering financial services without the appropriate licences.  You accept and hold user deposits or transmit funds between users and you're going to need a licence - even if you're accepting those funds so people can trade Beanie Babies.  People have been bringing this issue up for months and the response of the exchanges has tended to be that they don't need a licence because...Bitcoins.  

Once there was a ruling in respect of one exchange in Europe it was almost inevitable that other banks would make decisions about their exchange clients which are consistent with that ruling.  It's highly possible that they've been waiting for the battle to be fought in France so they didn't have to go through the process of seeking determinations themselves about the nature of the business their exchange clients are operating.  But even if they weren't especially waiting for this ruling, such determinations get quickly circulated within industries as a matter of routine and legal departments specifically look into whether those rulings are relevant to operations of their own employer.

I hope that before anyone opens any more exchanges they'll fully investigate the financial regulations they'll need to comply with and the cost of doing so.  Not all markets are going to prove viable for all players.  The cost of compliance with financial regulations may well mean that some markets aren't going to be viable for young exchanges (and all of the exchanges are young).  Exchanges need to determine that in advance instead of just opening in new markets and hoping for the best.

Insightful. I will print this and hang on my wall.


Well, regulations are there for them to enforce when they want to control something. You are right that this would happen for other type of financial services as well, so it doesn't need a conspiracy. I guess now, exchanges will need to partner with licensed financial services, we'll see how it plays out...

Of course. Bitcoins do not need license! I have predicted 4-5 months ago this is exactly what will happen. This is inevitable and this is good for bitcoins. Very good!

What about changing to countries with less authoritarian governments? Switzerland, Cayman Islands, or even Panamá (Pecunix's there), Costa Rica (Liberty Reserve's there)?
How viable is it as an option? I imagine money transfers to such places are strictly traced, but they are not totally forbidden, are them?
I heard Panamá doesn't even have a central bank... I suppose their financial laws are less authoritarian... but I actually don't know.

eazy now. this is not an attack.

I know it's not simple but what stops you guys to get licensed as a financial institution to be able to have other people deposit/withdraw funds from your accounts?

The best thing that we can do is to use our bitcoins as much as possible and exchange it for fiat as little as possible.

We've been trying this for months and months already. It's been our main goal from day 1.

The answer is part of your question.
It is not simple and it is very expensive. In general, if you do it you make bitcoin part of the fiat world. This has to be avoided!

I think it's time to let Banks to do Bitcoin exchange business.

Um nobody every prohibited any bank from exchanging bitcoins.  They never will.  Ever.  Not unless Bitcoin is already accepted by the masses.  Bitcoin is potentially (not in its current implementation but in its potential for "someday") the greatest threat banks have ever faced.  It makes them mostly obsolete and cuts them out of the trillion dollar business of collecting fees from people to "let" them spend their own money.

Banks will fight to the bloody end to kill, minimize, and disrupt Bitcoin.  When a major bank offers Bitcoin exchange service it means they have already lost.  Bitcoin has become the dominant method of global payment and continuing to fight Bitcoin is simply futile.

Until that day happens (if ever) the banks will NEVER support Bitcoin (or any alternative which undermines their very existence).

No, that's not true, when fiat money is not invented, when gold and silver is the popular money , how does banks work?   
it'll  work  mostly same way with Bitcoin.

In laymen's terms..  the license is rigged.    No one here would qualify...  even if they did qualify.

Banking profits are beyond obscence and many magnitudes higher than prior to fiat currencies.  In the US banks now make more money from fees than from actual banking (taking deposits and making loans).  Banking power has slowly become more and more centralized.  The top 4 banks in the US control 70% of all deposits. 

While banks may exist if Bitcoin became mainstream the cenentralized nature of Bitcoin means banks would lose the ability to pass every increasing bogus fees onto consumers in an attempt to be an prasitic siphon of wealth from the general economy. 

Sure banks will exist but they will be much less powerful and much less profitable under global Bitcoin scenario. 
No bank will willingly support Bitcoin.   It would be like a bank saying.  "We are voting to give ourselves less power and profits over the next 20 years".

If a bank every supports Bitcoin it means they already lost.  There is no reason for them to support Bitcoin.  They have nothing to gain and everything to lose.

Unfortunately, DeathAndTaxes is absolutely right!

Have you considered other countries?
Forget about England or EU, that's not going to happen... but maybe Switzerland? Liechtenstein? Panama?

I don't believe that until I guess it comes with solid 100% proof that it's the case.
We can try rationalize their hidden motives all we want, but there are strict rules and regulations to follow in order to operate with other people's money,  either you can comply with that or you can't.

Id like to qualify that statement; no traditional western bank. As I understand it, bitcoin seems rather compatible with islamic banking, and a a few small western non traditional interest free banks might be interested too. Like this one:
http://en.wikipedia.org/wiki/JAK_Members_Bank

Im sure there are similar institutions in many countries.

hehehe

Man, accept it. State regulations exist to block competition. That's their main purpose. The financial sector is probably the most regulated of all economic sectors, no wonder why you don't see new banks being created very frequently - and yet, that's what would normally happen in any economic sector in which profits are so high... more and more people should get in to try to have some of these profits.

Guys, you are hilarious to some degree

no bank will talk to you (support you) weather you are doing bitcoin exchange or wanting to run something like paypal does without being properly licensed to handle other people's money.
same thing as you can't buy a car put a taxi sign and start making money that way without getting taxi licence first, at least in civilized countries .


the commodity we are trading isn't particular interest to finance establishment yet nor it's something they care about, they won't be able to prevent you when you get proper permissions to handle others money and facilitate exchanges between accounts. in this regard everyone has to follow same rules.

this is true.  Genjix, you are better off devoting your time and energy on developing Bitcoin and ways to get around the current system.

Well, seeing as I just looked at your site, and you appear to be selling 0.6BTC for £5 ($7.99), I'd say no, it really doesn't help "us guys".

Don't speculate with bitcoins but invest in bitcoins by P-2-P exchanges like as bitmarket.eu.
It is not for big trades or for speculation but i understand the bitcoin as an investment and alternative currency without the trading to win USD EUR or other fiat money.

I think thats one of the reason that a lot of guys dont have trust in  bitcoin. Too much guys see the bitcoin as an trading object and too less guys buy hold and use the bitcoins.

But i'm sure that the bitcoin will go the way to sucess because there is no better alternative to banks-dominating fiat money.

genjix, I sent you PM and you didn't reply,

for the love of bitcoin, you could at least try to listen what I had to say...

Sorry, I didn't see your PM as it isn't very obvious when you have new messages. Answering now.

Exactly. As I pointed out months ago, MtGox should be licensed as a money transfer firm in Japan, and audited by the Financial Services Agency. The regulations aren't that severe; they were revised a few years ago to encourage Internet and phone-based payment systems.  However, they do require that customer funds be kept in a separate account, and that gets audited.  They also require identity checks of key employees, which means that taking the money and disappearing is no longer an option.

MtGox is subject to Financial Services Agency regulation even if they didn't register.  At some point, this will probably bite them.

The real problem is that no Bitcoin exchange is going to have a moat.  Jessy Kang explained it well in regard to the adult services industry, but the same principles apply here.  Because there's nothing unique about Bitcoin exchanges, if Bitcoin ever became widely adopted and the masses were screaming to be able to use it in every day life, it would be a trivial matter for large financial service providers to open their own Bitcoin exchanges and integrate them with their existing services.  Adding Bitcoin to existing infrastructures would be a trivial expense for them whereas creating the same kind of infrastructure as modern banking uses is a huge financial challenge for Bitcoin exchanges.

While I don't really knock the exchanges for trying to avoid the costs associated with regulatory compliance as long as possible, they should always have had a contingency plan and been preparing for the day when they would have to become compliant.  If their businesses were only viable for as long as they weren't being forced to comply with general financial services regulations, then they were doomed to fail anyway.

We don't have any problems getting DialCoins to our clients because we don't use banks!


please, enable it for Croatia

Of course that depends not on their business model, but completely on how much revenue they could generate. Such compliance likely isnt cheap and therefore this is a perfect illustration of my point: bitcoin simply isnt ready for this. The economy is way too small and we have way too many exchanges and other speculation tools (and too many speculators (ab)using them)  for what is mostly still a nonexisting economy.

Speculation is helpful if it helps predict, hedge and stabilize a real economy, its devastating when the speculation  becomes bigger than the economy itself, as speculation becomes about predicting speculation rather than the underlying economy. As a results its a casino with non stop bubbles and bursts with little or no relationship to any underlying fundamentals, and that is putting a great brake on bitcoin's acceptance as anything other than a casino chip.  Its a catch 22, because this extreme volatility attracts the gamblers.

If rulings such as these help turn back that clock and help to limit bitcoin's purpose again to being a tool to conduct trade, even if its just peer to peer trade of second hand goods, thats perfect for me. Let the economy grow, and only once its big enough to support these kinds of (regulated) financial service companies, then these companies can also serve a constructive role rather than providing the tools with which the fools destroy bitcoin.

I  largely agree with you on that.  I doubt that any of the exchanges which existed before the Bitcoin bubble had planned for such rapid growth.  They probably weren't capitalised for it and so are entirely dependent on revenues to fund it (they could raise outside capital, but that's another story).

There's no excuse for new exchanges to have the same issues though. It's ridiculous to start a new exchange now without enough starting capital to fund proper security, regulatory compliance, etc - such ventures deserve to fail.  I'm not suggesting that it would be cheap - on the contrary, I'd expect any new exchange to have a minimum of several hundred thousand dollars in start-up capital - but it's crazy to start an exchange on a wing and a prayer now and simply hope that revenues will cover both your initial investment plus your ongoing costs. 

There is a silver lining here though. If Mt Gox or someone else would decide (and manage) to raise the needed capital, now or whenever, to take this step, they will have to recover those costs from their customers. This could have the effect of a "tobin tax" putting a brake on excessive speculation if there is a, say 10% commission to be paid. And still it wouldnt completely disallow people from joining or leaving the bitcoin economy.

The only problem is of course that no one is going to pay 10% as long as there are other, unregulated markets that do it for almost nothing and you can rest assured the gamblers will just move to the caymans or wherever.

I hate to say it, but by definition all exchanges are part of "the fiat world".  The whole point of exchanges is to provide a gateway through which the great majority of us that get paid in "fiat currency" can explore the possibilities of BitCoin.  If you want no part of "the fiat world", then any issues the exchangers are running into would be irrelevant to you anyhow as they would have no value.

Because of this, all exchanges by definition have one foot in BitCoin and one foot in "standard currencies", and must be friendly to each (or try hard not to attract notice).  Unfortunately, it sounds like various governments are hacking at one of the feet, for rather good reasons from their point of view (according to where that one foot is "standing").  Whether this is an attempt to knock the exchangers over or not (or even if the "bitcoin" side of this has even been noticed) is an open question, the exposure and bubble that we just went through probably didn't help much here.

- Big pools are DDoSed...


Leave a p2p-project as it is "p2p". Re-centralization (via pools or central exchangers) is the Achilles' heel of any p2p-system.

Usually because their business plan is "take the money and run". Bitcoin has had quite a few of those "exchanges" already.

Why are they F-ing with France. Mt Gox should open a account in Andora and be done with it!

Alternatively I am sure plenty of islands in the Caribbean would be happy to take their business (and tax revenue).  For smaller players this may not be an option but Mt. Gox is a market leader and thus has more resources and more future revenue to lose.

When lots of countries outlawed online gambling the online gaming sites simply went offshore.

These are the questions I've been asking... how hard would it be to establish an exchange in such places? I guess the worst part would be to get costumers money in and out, but how difficult would it be? Maybe it's a feasible option... I have no idea, just wondering...

The whole point of establishing a presence in Europe was to offer SEPA to their European customers.  There are already plenty of ways to get money in and out of the exchanges by going through third party processors but people living in Europe wanted a quick and easy way to deposit and withdraw money from the exchanges.  SEPA offered that.  People don't want to have to fuck around with the whole bank account > payment processor > MtGox thing to deposit and they especially don't want to have to fuck around with the same process in reverse to withdraw.

The online gambling sites didn't just go offshore, they also routed their customers' funds through third party processors.  That was the point of vulnerability when the US Department of Justice went after the online gambling sites which had been allowing US customers to play - they went after the third party processors and large amounts of player funds which were in the accounts of the payment processors were frozen.

There are already offshore exchanges - TradeHill is one - the issue is being able to offer users quick and uncomplicated methods of depositing and withdrawing their funds without running into legal problems.  

For SEPA deposits/withdrawals. This issue is not about their operations in general.

I don't know but every time I visit Grand Cayman I see lots of very large banks in shiney buildings with plenty of pleasant english speaking staff.  Doesn't seem very hard for rich Americans to move tens of millions of dollars there.  Granted somewhere like Caymans likely would require some kind of license but the difference is they might actually want your business where an established country like US or France the license exists to stifle and limit competition.

Rich people are happy to pay for wire transfers to move their money.  People wanting to deposit $50 with an exchange or withdraw $100 from it don't want to pay $30 or more for an international wire transfer  - and I suspect that an awful lot of people are conducting those kind of small transactions based on what gets posted on the forum.  People want a cheap method of getting money in and out of their exchange accounts but they also want it to be rapid.  It's easy to provide one or the other but a little more challenging to come up with a method which combines both.
 
To some extent, I think there's a bit of a conflict in what users want from exchanges and wallet services.  On the one hand, they want them to be based in locations where they're transparent and accountable and on the other hand they want them to offer the benefits which operating offshore provide.

Andorra is in Europe. In fact they are located between France and Spain. I don't see the problem.

Andorra isn't part of the SEPA zone.  These are the SEPA zone countries.

1. Austria
2. Belgium
3. Bulgaria
4. Cyprus
5. Czech Republic
6. Denmark
7. Estonia
8. Finland
9. France
10. Germany
11. Greece
12. Hungary
13. Ireland
14. Italy
15. Latvia
16. Lithuania
17. Luxembourg
18. Malta
19. Monaco
20. Netherlands
21. Poland
22. Portugal
23. Romania
24. Slovak Republic
25. Slovenia
26. Spain
27. Sweden
28. Switzerland
29. United Kingdom
30. Iceland
31. Liechtenstein
32. Norway

Besides Coffee and Hosting services this is what I found worth spending Bitcoins on:

Decent T-Shirt site, didnt like any other t-shirt site.
http://babbletees.com

USB 1TB Hard Drive, a computing commodity so that's a good sign
http://bitmart.org/index.php?main_page=product_info&cPath=2_16_17&products_id=27

Jewellery for your chick
http://www.shedoeslove.com

Gold for Bitcoins, nice!
http://coinabul.com


Two problems:
1) BTC are worth less than I paid for them

2) I cannot find cellphones to buy

I want to buy electronics with BTC because USA retailers won't ship outside the USA with CC transactions.

Cool, didn't know, now I do.

These might be better options, particularly Liechtenstein....

Why? Its not because banking laws in these countries protect (to some extent) banking privacy that they would have no regulation of financial institutions. I wouldnt be surprised if in fact regulation would be more strict and it would be more difficult to operate there than, say france.

Just in theory. In reality, SEPA transfers from Romania (I didn't check TO) cost and take the exact same time as regular international wires. I checked more than 10 major banks until I gave up.

They don't, not anymore. They gave up information to USA and sold databases to Germany (and no, please don't tell me that was some rogue employee who stole a CD from the datacenter, I know enough security to realize that it's much more common that Germany put a lot of pressure on the banks and then bribed them).

I wouldn't consider banking as being private anywhere in the world anymore.

Thats why I said, to some extent.

I don't know, maybe you're right, maybe not. I just would like to know more how feasible it is.

Banking privacy is important. Governments that preserve a bit of it have less incentives to ban bitcoin. They are already used to people protecting their money, their tax system probably don't rely too much on spying their subjects' revenues and so on...

Mostly true. But sometimes what more authoritarian governments do it to threat the subsidiaries of offshore banks that are located in their jurisdiction, like when US gov threatened UBS of dropping their license in US if they don't give up private data on US subjects' money stored in Switzerland.
You're less vulnerable to such attacks if you only exist on these offshore countries...

EDIT: By "offshore" I meant these places where banking privacy is slightly less disrespected than average.

But this ruling isnt about banning bitcoin. Its about requirements for operating a financial service company that holds your Euros (or swiss francs or whatever).

I know... I'm just "thinking ahead". I don't expect bitcoin to remain legal in most places if it gains importance. Actually I wouldn't be surprised if many governments already have laws that implicitly forbid something as bitcoin.

If bitcoin is outlawed, having an exchange in the caymans wont make your transactions legal, Im not even sure it would protect you in any way. Most of these tax heavens do share financial information with our governments when a crime is involved, no?

As for whether bitcoin is already illegal or not, is a good question that can only be answered in court. There are good legal arguments to be made either way.

is it possible to make an alternative currency illegal? wouldnt that be like the US banning the exchange of euros?

It already is illegal.
http://www.fbi.gov/charlotte/press-releases/2011/defendant-convicted-of-minting-his-own-currency

The question is wether bitcoin is a currency, legally.

so is it also illegal to own Euro, Yen or GBP etc? and is it illegal to exchange those currencies for other currencies, commodities, assets goods or services?

IANAL, but I think its the creation of a competing currency thats illegal for a US citizen. Miners reserve your corner jail in Gitmo now ;).

Bitcoin is the digital equivalent of gold. Is gold a currency? No, gold is neither currency nor money. This is what Bernanke said - http://www.youtube.com/watch?v=jyTBhsEliUE

yeah, but mining is not the creation of the currency. mining is processing the transactions and maintaining the network and the block awarded to the miner is a reward from the already existing currency which is being paid for work completed.

Bitcoin is the digital equivalent of gold. Is gold a currency? No, gold is neither currency nor money. This is what Bernanke said - http://www.youtube.com/watch?v=jyTBhsEliUE
[/quote]

No one settles debts (IOW, pays for stuff) with gold; in that sense, its not a currency (anymore). Bitcoin arguably is. It is used to pay for goods and services.

No one settles debts (IOW, pays for stuff) with gold; in that sense, its not a currency (anymore). Bitcoin arguably is. It is used to pay for goods and services.
[/quote]

You can even buy gold with bitcoins (hint)

 ;D

  I had orignally misunderstood the LD  thing the same way. Granted the news article I had read did not contain this important bit here;

 " of making coins resembling and similar to United States coins;"

Post 9/11 financial privacy is very difficult these days. But still very possible.

Apparently what companies do now is register a company in one place and then bank in another. The difference is that in order to do that you have to register a company somewhere that doesn't tell the USA who the directors are straight away, and that means $1000's in company annual fees. All it's done is push the overheads up a bit making it generally too much hassle for the individual rather than a company.

What if exchanges with Bitcoin were outlawed in the EU and America though? And for that matter gold too at the same time? That would be a bit like having a walled garden around the more commonly known almost anonymous currencies. The worst scanario is that you can't get money in and you can't get money out. Probably for a while a way out would be allowed in order to get the value to collapse.
However, if you already hold Bitcoins then you still have that functionality available to you, how much would you pay in terms of risk to maintain that possibility? If many people say 'Well, even if I think it's going to crash to $0.01 I'll still keep $200 in there just on the offchance it might come in handy for armageddon' then we have a strong floor on the value of the currency.

Which is better to have in a crackdown? Gold or Bitcoin? How anonymous is Bitcoin compared to gold? That's a case of CCTV camera vs Deep Packet Inspection. In that case Gold wins. But gold is not portable and I think harder to use in transactions in practice than many have thought about. The answer has to be a bit of both, assuming you stay in one place at a time enough to keep gold somewhere.

My point is that exchanges via bank transfers are so the first thing to disappear. But there are plenty of other ways to get Bitcoin. Selling gold for Bitcoin, cash (or Hawala?). There is also the possibility of taking a risk with something that might be spotted. There are some banks in some countries that are so disorganised records just don't get recorded properly and even if they do and the USA wants to know more there's a massive beaurocratic process to go through.

 But regards decentralised exchange the question then becomes how to put people in touch with each other? Then I think you want a number of ways - freenet sites, p2p exchanges and eepsites. We need this NOW and everyone on this forum to be aware of it. Does anyone here know how to make a Freenet Wiki or another way of decentralised communication?

Gold and silver coins are better for small value transactions so you should keep a few of them in your sock drawer. What would be really helpful is a bitcoin agent in every town and city in the world so you can buy and sell in person.

It is 100% LEGAL to mint currency in the US by US citizens.

There are couple dozen private currencies in the US right now.  One has been in circulation for 20+ years.

http://en.wikipedia.org/wiki/Ithaca_Hours

Here is another more recent once (started in 2006)
http://en.wikipedia.org/wiki/BerkShares

It IS illegal to counterfit US coins.  It IS also illegal to mint private currencies that make any references to US government, have similar shape and design as existing or previous US currencies, make any claims to a guaranteed exchange rate, or imply any backing by US federal government.



Von NotHaus was a loon.  He actually received "endorsement" from FBI who investigated determined Liberty Dollars weren't counterfitted and the US Mint who indicated that Liberty Dollars weren't illegal.  However Von NotHaus went way beyond that.  He changed the design of coins to look similar to US coinage, included similar symbols even used the $ sign and logo of US coinage.  The website became a overthrow the federal reserve by intermixing alternate coinage nonsense and he began implying (at least that is prosecutions claim) a backing of federal govt and a guarantee of value.

In otherwords greed and nutjobbery did him in.


Bitcoin is legal under current US law.  That doesn't mean future laws could make it illegal but it is not illegal for US citizens to mint, own, exchange, or conduct trade in private currencies.  It never has been.

If introducing anyone to Bitcoin always make it explicitly clear that Bitcoin is not issued by nor backed by nor has any edosement of the federal govt (or any government).  Also be clear that it has no fixed exchange rate to USD and is not guaranteed to hold any value relative to USD (or any other currency).  It also is not legal tender (which means nobody is required to accept it as payment of debts).

You have a source or link for that? Like I said, IANAL, but read this:


Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both
http://www.law.cornell.edu/uscode/18/486.html

True, thats about physical coins. But there is more:

NORFED’s "Liberty Dollar" medallions are specifically marketed to be used as current money in order to limit reliance on, and to compete with the circulating coinage of the United States. Consequently, prosecutors with the United States Department of Justice have concluded that the use of NORFED’s "Liberty Dollar" medallions violates 18 U.S.C. § 486, and is a crime.

http://www.usmint.gov/pressroom/index.cfm?flash=yes&action=press_release&id=710

That really doesnt seem to rhyme with your (interpretation of ?) law.

bitcoin could not be defined within these criteria.

US Code 18 -486 deals with coinage.  Bitcoins don't have physical coins and thus don't meet the requirements of US Code 18-486.  IIRC the word "current money" has a legal definition to mean legal tender.  As in coinage accepted as legal tender.  Granted I have no cites for this (yet) so feel free to disregard that portion.  Still even without the distinction of "current money"  18-486 only applies to physical coinage and thus doesn't apply to bitcoin.

He was also prosecuted under US Code 18-485.
http://www.law.cornell.edu/uscode/18/485.html

Essentially counterfeitting US coins.  A counterfeit doesn't have to be an exact replica.  If the intent of your coin is to be similar to US coinage that is may be mistaken for US coinage you have violated 18-485.

He was also prosecuted under US Code 18-514

http://www.law.cornell.edu/uscode/18/514.html

You can't create any insturment or document (currency or not) that implies a connection to US government if none exists.  That includes common US government symbosl, phrases, icons, and imagery.  That doesn't apply to Bitcoin either.   To remain outside this statute it is important to not imply any sort of connection to US government (or any government because they may also have similar laws).  Being a open source group we have no control over other members but we can use peer influence to police the actions of others.  


It is very important (at least in the US) to never use the phrase "legal tender" in connection with Bitcoin.  Bitcoin has no status as "legal tender".  Even states are prohibited from issuing legal tender.  Gold & Silver are not considered legal tender in the US (unless minted by US govt and then only for the face value - often $20 on a one ounce coin ~$1600 worth of gold).   Bitcoin can NOT be used to satisfy any debt or obligation under US law.  If you did have a debt you wanted to pay off with Bitcoins it would need to be structured as a two part transaction.

1) You sell me 100 BTC for $320.
2) You use that $320 to pay a debt you owe me of $320.

No actual money needs to change hands however it should be clearly recorded that you aren't paying a debt in bitcoins.  You are selling me bitcoins and I am applying those USD I owe you against an existing debt in US you owe me.  This can even be agreed upon in advance via contract or terms of service to allow regular payments but any contract/language/terminology should indicate that an exchange from BTC to USD is occurring and then only USD are being applied towards the debt.   

It may be a trivial distinction but there are many legal private currencies in existence in the US.  A private currency isn't illegal.  Making coins which resemble US coins is illegal, counterfitting is illegal, committing fraud is illegal, attempting to overthrow portions of the federal government is illegal, passing coinage off as "legal tender" is illegal.  None of the legal private currencies in the link below attempt to any of those things.

http://en.wikipedia.org/wiki/List_of_community_currencies_in_the_United_States

To my knowledge Bitcoin doesn't violate any current US statutes.

Of course proving a negative is impossible. The law never defines legal it only defines illegal. If you believe Bitcoin is illegal then please provide the statute it violates.  

Everything in this post (and any other posts by author) should be considered the opinion of the author and does not constitute legal advice.  If you are concerned with the legality of Bitcoins under US law you should consult with a licensed attorney.

It does! Bitcoin competes with the US dollar. Nothing (name it whatever you like) is allowed to compete with the US dollar. Period.

Bitcoin cannot be used to pay debt.  Taxation is debt. Does this then also not imply that bitcoin cannot be taxed.

I was recently harangued on these very forums for saying that bitcoins could not be taxed. I am not US citizen so do not know US system of taxation.

Does this include foreign currencies such as Euro, Yen, Rub and GBP?

Taxation isn't debt.  Taxation is a transfer of wealth but it isn't debt anymore than your employer paying you a salary is "debt".

Yes an obligation to pay taxes on transactions in Bitcoins exists just the same as dollars.
Transactions in other alternate currencies are taxed.  
Hell you owe taxes (in US) even if paid in barter.

How effective enforcement of that taxation can be if both parties are using Bitcoin is another issue but that doesn't change the legal requirement.
Cryptography makes enforcement of child porn laws more difficult but cryptography doesn't magically make child porn legal.

Please provide a cite to this "nothing can compete with the US Dollar" statute. 

Also please explain these:
http://en.wikipedia.org/wiki/The_barter_network
http://en.wikipedia.org/wiki/BerkShares
http://en.wikipedia.org/wiki/Ithaca_Hours

i should have said taxation is payment of a debt. I'll take the rest of your point. thanks

Sure.


Yes, of course it does! If you're an oil producer try to sell your crude oil priced in euro... Saddam Husein did that back in 2002 and we witnessed what happened. Moammar Gadhafi tried to tie the price of his oil to gold and the same happened again.

so is there a law that prohibits americans from exchanging their dollars for other currencies such as Euro's. How do american folk buy stuff when they go on holiday to europe?

i think his conviction was justified.  if you've ever looked at the Liberty Dollars he was issuing, they look just like real ones.

not to mention the recent Utah statute that legalizes gold and silver.

even the Medallions you've quoted are physical also.  i don't get your point how Bitcoins are illegal based on these references.

Exactly.  I think a photo will help.

http://www.howtovanish.com/wp-content/uploads/2011/03/Liberty-Dollars-multiple.jpg

He was convicted because he was selling coins which were deceptively similar to US legal tender, using language that indicate a connection to US govt, and deceptively using less precious metal than face value of coin.  For example the $10 silver coin had ~$6 worth of silver in it.  Language on the website indicated that the coins were backed by silver and could be redeemed for silver certifercite.  What wasn't mentioned is that redeeming a $10 coin (purchased for $10 USD) would get you a $6 silver cert which could be redeemed for an equivelent amount in silver based on spot prices.

It was fraud and it is a poor example to illustrate the legality of Bitcoin.

I don't think there is any such law...however, I think the point that was being made is that laws don't necessarily restrain government action, especially in this regard.  Show me the statute the prohibits foreign nations from selling their oil for gold.  You won't find it, and yet it would seem wars have been waged to prevent it.

thank you.  i was hunting around for that exact pic but couldn't find it.

 +1  TL;DR of the LD issue; They threw the book at his ass for counterfitting money......

Coinabul doesnt sell liberty dollars  :D

And DialCoin isn't connected to banks. FYI, if all the banks crash and burn on us, DialCoin will still get you guys your bitcoins in 30 seconds.

Looking in to it further, I have to agree it doesnt appear to be illegal in the US at this point.
The statement made by the attorney Tompkins however, is either incorrect or extremely misleading.

 fucking dial coin! meh!  $10 for 0.5 BTC. how the fuck does that help anything?

I missed that.  Got a link to quote?  Thanks.

Ah, I forgot that the US govt is directly connected to God and all the rest should pay the broker if they want to communicate with God. Of course, if the silver spot price was an issue those coins should be legalized now as silver spot is currently $33 per ounce! So, if you want to make a silver coin illegal you have to artificially depress the price of silver?!

  hear, hear!  That was the first thing I read. My vote is on 'extremely misleading', for the purpose of 'spin'.

No three times the coins were redebased.  No one coin was minted with an amount of silver equal to the face value.  Same amount of silver and price of coin went from $10 to $20 to $25 as the price of .  Acquirers were never advised that while coins were backed by the value of silver they weren't backed by ENOUGH silver even at the time of minting.

The coins were minted to be obviously misleading, misleading enough that a jury of his peers felt it was his intent to defraud.

http://www.howtovanish.com/wp-content/uploads/2011/03/Liberty-Dollars-multiple.jpg

It went way beyond that ...


http://www.lewrockwell.com/rounds/rounds34.1.html

So you are owed $10 in change and you are given a $10 Liberty Coin (which looks like US currency) something you likely didn't want and it turns out the coin is really only worth $6 because it has little to no trace value and only $6 worth of silver in it.  You don't see anything wrong with that?  When those actions are combined with the groups stated intent to disrupt and overthrow the federal reserve and US currency it isn't difficult to see this stinks.

The case was about fraud & counterfitting.  It has nothing to do with Bitcoin.

However, I do want them and reason is very simple. The 10 Liberty dollar coin has only $6 worth of silver while the 10 US dollar banknote has no silver or gold at all. They are backed by nothing but IRS demanding paying taxes in $$$! Do you know that the cost of printing a $100 banknote is just $0.17?

  And you, as a US citizen would be more than entitled to buy any coin you wish IF it is presented as holding said value and can legaly do so. And, if said coin does not attempt to represent legal US tender, coins or otherwise. Its called counterfitting.  What he was selling was a far cry from a company selling gold coins with their own stamp on it, which would be perfectly legal if they do not look like US coins or have a misrepresentation of being 'backed' by the US in any shape or form.

Would you mind to post some images of coins that do NOT look like US coins but still have US symbols on them?

You aren't required to accept or use US federal reserve notes.  If you employer is willing you can be compensated for your time in gold or barter.  The US treasury makes no claims to it being back by anything but full faith and credit of US government.

Also if you want to buy Silver why not buy $10 in silver for $10 instead of $6 in silver for $10?

You can use any alternate currency you like.  Hell you can put your entire life savins in Chuck E Cheese video game tokens (warning they might be easy to counterfit). 

However you can't mislead people, commit fraud, or counterfit US currency.  It is a rather simple concept.

 Being that I deal very, very little in coins, other than a safe full of actual US minted ones, walking liberties, half bens, half kens, etc, I am not familiar with and Non US coins that have US symbols on them. I have to ask though, why would you want to buy Non US coins that had US symbols on them?  

  But, if you are still insterested, I believe you are looking for gold 'proofs', etc. Again you would want to talk to one of the coin buffs around here if that is truely your interest.

One mint of thousands that sell Gold Clad Proofs;    http://en.wikipedia.org/wiki/National_Collector%27s_Mint

  Edit; Just realised how far off topic we have gotten. Anyone interested enough in LD or debating the interpretation of US Coinage Act, USC, etc, want to start a new thread?

They are still going to tax you in US dollars on the Chuckie Cheese tokens though. 

Exactly.  So even if your life is 99% USD free you may someday still need to use a currency exchange to pay your income taxes.  Thinking about that reminds me of the novel SnowCrash.  Corporations (and franchises) have superceded both of the authority of federal government.  Most people no longer use USD but federal employees are paid in it and the government requires all fees/taxes/fines to be paid in USD.

Sadly I could see our government being that petty.

Because with my change I don't want to buy silver but 10 Liberty dollars! The fact that the 10 Liberty dollar coin has $6 worth of silver built-in is a plus that the US government $10 don't have!

There is nothing wrong with that.  As long as you are aware that what you are receiving is not legal tender. 

The defendants passed coins off on unsuspecting victims.  They minted coins deceptively similar to US legal tender.  They used misleading statement regarding the value of the coins.

There are legal alternative currencies in the United States.  They didn't attempt to defraud victims, counterfit US coins, or pass off coins as legal tender hence they still exist and the organizers aren't in jail.
http://www.berkshares.org/images/gallery/images/BerkShares2006_0010.jpg

You'll pay US dollar income taxes on your US dollar income. If the US government wants you to pay income taxes on your bitcoin income they'd have to define taxes in bitcoin too!

  Hey, atleast there is a tax deduction on the costs incured in converting said monies.  ::)  Atleast according to one of my wife's US tax guides here. That goes for capital gains and gross receipts.  

No they won't.  Currently you are required to pay income taxes on your USD equivelent income.  The IRS doesn't need to do anything, the laws have already been in place for 50+ years.

If your employer pays you in euros, gold, chickens, kWh, gaming tokens, giftcards, compute cycles, prostitution credits, or simply barter you STILL owe income taxes in USD based on the equivelent value of that compensation in USD.

Bitcoin would be no different.

Hmmm... you have to define what is 'legal tender'?

Bitcoin can not be represented as a USD equivalent. There is no official exchange rate and never will be!

Well I don't define it the courts do.  Simplisticly legal tender is the method of payment recognized by a legal system to be valid for meeting a financial obligation

If you owe me $10,000 you can't pay me in chickens (even if they are worth $10,000).  I can demand you sell those chickens and pay me in legal tender.  In the US currently the only legal tender is the Federal Reserve Notes.

Now that doesn't mean I CAN'T accept chickens (or gold, or bitcoins) but I don't have to.  This is where the phrase "good for all debts public and private" comes from.  

Likewise if I owe you $100 you have no legal authority to require repayment in Gold, bitcoins, or chickens.  Granted you can take the $100 I pay you and buy Gold, bitcoins, or chickens likewise we can come to a mutual agreement on alternatives.

By passing our Liberties dollars as change for Federal Reserve Note the actors were implying they are legal tender.   Victims weren't advised these weren't US coins and given an options to accept them as alternate payment.  

There is only one legal tender in the United States and that is Federal Reserve Notes.  Of course that could change via statute but that is rather unlikely.

Come on are you are moron or do just like pretending to be.

There also isn't an official exchange rate between:
USD->Gold
USD->Chickens
USD->kWh
USD->Gaming tokens

The IRS doesn't care.

If you receive compensation (in any form) you are required to make a note of the USD equivelent.  At the end of the year that USD equivelent will be part of your income and thus income taxes.  It doesn't matter if you are paid in chickens, gold or Bitcoins they all have USD equivelent at the time of compensation.

It is very easy to do with Bitcoin.
I pay you 5BTC to annoy the living shit out of someone else for 2 hours.  As of the time of writing that is roughy $13.75.  You owe income taxes on that $13.75.  Obviously there is some margin of error and you could game the system slightly by recording that value is roughly $2.68 per BTC on one exchange still if you tried to report $0.01 USD per BTC and got caught that would be tax fraud.  Likewise if you don't report that income it is tax fraud.

How effective the IRS would be at catching tax fraud is immaterial to the fact that currently you owe taxes in USD for all compensation regardless of type or method (and that would include Bitcoin).

So, if there is only one legal tender all other tenders are illegal. And here we go back to square one - nothing can compete with the US dollar. This is the law! All the rest is just a simulation of a free market and free society...

Nothing can

That isn't the definition of legal tender.

You are wrong.
You are a troll.
You are on ignore.

Good thing I live in Belgium; there is no capital gains tax here :) (we have plenty of others tho)
Question for US citizens; since you have to pay taxes on profits you make on capital gains, can you deduct losses you make from your income tax?

Yes, but there are limits to how much you can deduct in a given year.

Surely you only owe taxes if you turn it into usd ?

Yes.  You can deduct losses up to your gains and then apply up to $3K more towards normal income.  Any excess rolls over to next year.

So it may take a while to get full benefit.  Yes our tax code is complicated beyond all stupidity.  It is more complicated that I explained because you technically have dividends, short term capital gains, long term capital gains, and regular income.  There are lots of worksheets for figuring out what can go against what.  Also sometimes you need to try and predict the future.  

Last year I had $2800 in excess short term capital losses and some long term capital gains.  Now using a crap ton of worksheets I could apply that short term capital loss against the long term capital gain BUT technically that is suboptimal as short term capital gains are taxed higher rate than long term capital losses.  The govt gave me the option to offset $420 in long term capital gains taxes but if I had short term capital gains it would be worth closer to $700.  So I gambled and rolled the short term capital loss forward and paid full taxes on long term capital gains betting that I will eventually (before they change the tax code) have a short term capital gain that I can apply the short term capital loss against.

Yes our taxcode is that stupid.  That is like 0.1% of our taxcode.  Nobody knows how it works anymore.  I gave up years ago trying to file manually and trust that TaxCut software does it right and I don't get audited.  

yes you can.

You have to understand that our tax code is the largest document ever created by humans.

If printed in 10 font,  it would reach from here to the moon, literally.

There are federal taxes, state taxes, local taxes,  sales taxes, import taxes, export taxes, federal wage taxes, state wage taxes,  employee "right to work" taxes,  there are social security taxes,  taxes on airline travel... the list goes on for as far as the eye can see.

Each subset of each of those taxes have their own special code themselves,  often incompatible.

For state taxes in Pennsylvania:  

Everything is 6 percent unless it's a house,  that's 1%,  but if it's clothing it's 0,  if it's food it's 0,  unless it's branded a vanity clothing item, such as a coat, that's taxable at 6%,  renovating your house is 6% on material, but 0 on labor but buying the home is 1% as noted before,  Food is zero unless it's bubble gum,  that's 6%   Gas is taxed not only a federal,  but state, local, county and city level as well.   Each dollar spent on gas,  almost 60 cents of it goes to taxes,  not one taxing authority,  but roughly a dozen of them each with their own rate.  diesel fuel is taxed differently than unleaded gas,  unless it's for an offroad 4 wheeler or boat, then it's taxed differently than normal diesel which is taxed differently than regular gas.

I tried to load the US tax code (someone typed it up, literally)  in text about 10 years ago,  the 450 meg text file crashed my machine back then.

No.  In the US you owe income taxes on all compensation you receive regardless of the format.

For example your employer could pay you a small amount of actual cash salary and pay $80,000 in benefits (a car lease, house rental, paid vacation each year, $10,000 worth of groceries, $5,000 worth of clothing, etc).  You aren't converting any of that into cash.  You are simply receiving non-cash compensation.

It doesn't matter.  If your employer compensated you with $80,000 worth of X (regardless of what X is) then you have income of $80K and owe taxes as if it was $80K in cash.

Bitcoin wouldn't change the legality of that.  Bitcoin might make enforcement of that more difficult but taxes would still be due exactly the same as if your employer paid you in groceries or gold.

I think he was talking about capital gains...if he buys a bitcoin, he doesn't owe capital gains until he later sells it for USD.  If he spends it, he's still owes tax as a barter transaction (basically a wash either way).

All this tax talk has me thinking about the Beatles song:
http://www.youtube.com/watch?v=ZqK97av7I3s

So is anyone here going to try and get a tax reduction for his bitcoin trade losses?

Yeah if that was what he intended then sorry for the confusion.  Well I am more sorry our tax code sucks so hard.

Compensation - taxed are owed @ point of compensation.
Investment - taxes are owed @ the point of divestment.
Interest/Dividends - taxes are owed @ the point of payment.

In all three of those it doesn't matter what form it is in.  While you file at the end of the year trust me taxes are due at the time of the event.  Got into some "fun times" with IRS over some stock options over not paying taxes early enough.  No it wasn't I didn't pay enough I paid the right amount I just didn't pay it early enough in the year.

I think this is a common mistake.  A lot of people assume that just because you file once per year that you only have to pay taxes on an annual basis.  But the IRS requires that you pay estimated taxes quarterly if you have enough income that isn't subject to withholding.

er... so about these bank account being frozen. any updates?

  Allinvain had made some mention about wanting to write off his lose. His was related to 'theft' which requires a bit more work on his end to prove the loss, but its a loss none the less. I am not sure he reported back after being advised to consult a qualified legal professional reguarding such a matter. With my limited knowledge on taxes and such, I would sure try. As long as your accounting of sells/buys is good and you can match it up with bank statements, then why not? That is not to say I am confident the IRS would accept it.

Im taking bets ours is even worse. Want an example? Years ago I worked for a company that was preparing an IPO. I was offered a generous amount of stock options. On those stock options, I would have had to pay taxes. Fair enough, but not on the profits, not on the difference between the option price and the market value or even book value of the shares, but on the face value of those options.

Not sure Im using the right terminology, but to clarify; assume I was awarded options to buy stock at $5 while the stock was valued at $15 by the VCs and might IPO for $30. Every option I got was taxed as a benefit of... $5.

That might sound good, but it would be $5 even if the company was valued at $6 and IPO'd for $7. Or $4.  I would still be taxed as if I received a $5 benefit per option that was worth $1 or could even be worthless (as it turned out)! I double and triple checked this with our accountant as I couldnt believe such stupidity, but I can only conclude whoever wrote that law didnt understand the first thing about stock options!

So I asked 10x less stock options at a corresponding lower face value, but I couldnt get our French mothercompany to understand that lol. Cant even blame them. Anyway, then the internet bubble burst and the IPO never happened. I still paid my taxes on it!

I think the only risk is the IRS sees it not as an investment but as gambling which has different tax implications.  If it is a large amount getting a tax attorney advice may be worth it.  If nothing else it provides denability and means the IRS will likely consider it an accidental claim not a fraudulent one which can be the difference between just paying the taxes or paying the taxes plus penalties plus interest.

If it is a small amount well you can always bet on the fact that less than 1% of all returns are audited.  ;D

  lol, so true. We(mostly my wife, I'm the grunt number puncher when she needs it) have filed ~100 small biz returns a year, for going on 7 years now, with not one single audit. And some of them, I'll tell you. We do what our clients ask, within 'legal reason' of course, but some of these people and their 'accounting' practices and odd claims. I'd expect a 10% audit rate on a lot of them.  ;)  She's a CPA, etc, not real up on all that and we have a full time tax attorney that advises on some of the more concerning ones to ensure we are within the tax guildines. Still....

I would never file taxes on bitcoins! I would tell them "prove it"!

Do you do the same with cash? It's essentially the same situation. It's actually harder to "prove" transactions with cash.

Seems with every transaction and just any action within the network is tracked and listed on blockexplorer.  Is it not just a matter of tying you to the address' used?