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Economy => Trading Discussion => Topic started by: NewLibertyStandard on March 02, 2010, 07:22:10 AM



Title: Money Transfer Regulations
Post by: NewLibertyStandard on March 02, 2010, 07:22:10 AM
Does anyone happen to know what kinds of regulations are in place for people who buy and sell unofficial digital currencies such as Bitcoin? I'm particularly interested in United States regulations, but please mention any regulations of which you are aware.

Registering a business or non-profit organization gives the advantage of being able to do transactions in the name of the business (http://en.wikipedia.org/wiki/Doing_business_as) and forming a corporation limits liability (http://en.wikipedia.org/wiki/Limited_liability_company). But it seems like it would be more trouble than it's worth to incorporate or register a business until the profits are large enough to hire employees.

I noticed that in the United States, financial institutions are required to submit a currency transaction report (http://en.wikipedia.org/wiki/Currency_Transaction_Report) for all transactions over $10,000 and a suspicious activity report (http://en.wikipedia.org/wiki/Suspicious_activity_report) for suspicious transactions. I don't think a private citizen would be required to submit either type of report. In any case, so long as the official currency part of the transaction is passing through a registered financial institution, the institution would already be submitting those reports for such transactions.

I have read about money laundering (http://en.wikipedia.org/wiki/Money_laundering) and it seems that so long as a person is not knowingly laundering money, then the person is not committing the crime.

Profits would need to be tracked for tax purposes but that can be accomplished easily enough using accounting software such as GnuCash (http://www.gnucash.org/).

Am I missing anything? Are there any regulations prohibiting me from sending money to and receiving money from random strangers who may be criminals unbeknownst to me?


Title: Re: Money Transfer Regulations
Post by: theymos on March 02, 2010, 07:46:03 AM
http://en.wikipedia.org/wiki/E-gold

Quote
In 2007 the proprietors of the e-gold service were indicted by the United States Department of Justice on four counts of violating money laundering regulations. In July 2008 the company and its three directors pled guilty to charges of "conspiracy to engage in money laundering" and the "operation of an unlicensed money transmitting business" in the U.S. District Court for D.C.  The company faces fines of $3.7 million.

Running an exchange seems very dangerous. I would never do it without talking to a lawyer and setting up a LLC.


Title: Re: Money Transfer Regulations
Post by: NewLibertyStandard on March 02, 2010, 09:01:53 AM
Thanks for the reply. I agree that running an exchange does seem dangerous. I have started extremely small and limited my service so that if I am doing something wrong it will hopefully be so minor that I won't be prosecuted and so that if I am convicted of something the fines will be small enough to hopefully not bankrupt me.

I've looked at that E-gold article before but this time I read it, I thought to look up some terms mentioned in it which turned up some interesting regulations concerning registration of money transmitting businesses (http://www.law.cornell.edu/uscode/31/usc_sec_31_00005330----000-.html) and prohibition of unlicensed money transmitting businesses (http://www.law.cornell.edu/uscode/18/1960.html). I don't know whether my tiny service qualifies as an unlicensed money transmitting business, but if it does, I'll stop until I can get it registered. Although if there's a large non-refundable application fee, I'll have to re-evaluate whether it's worth the cost since I'm currently not trying to earn a profit.


Title: Re: Money Transfer Regulations
Post by: ihrhase on March 02, 2010, 02:13:58 PM
NLS, there is no "legal" way to do what you are looking to do on a large scale, knowledge is not necessary for indictment...

You are providing a tax shelter, you should automatically factor in illicit to your "hobby"


Title: Re: Money Transfer Regulations
Post by: The Madhatter on March 02, 2010, 03:39:01 PM
Nah.. you guys have it wrong.

It isn't the written law that you should be concerned with.

You need to rely on your courts to make the 'fair and just' decisions. That is the real problem. I wouldn't dream of running any sort of "money transmitting business" (their term) or currency exchange in the USA. (See e-gold and liberty dollar.)

It is probably best to run your exchanger from a different country than the one in which you reside. That would involve a corporation or trustee.

($10,000 OR any "suspicious" transaction. That is subject to OPINION.. very open-ended if you ask me. So a court proceeding on failure to report based on suspicion would boil down to "he who can afford to put forth the most motions in court"... lol)

Another option is an estoppel. (Again, you need to really know what you are doing.)

Cheers! :P


Title: Re: Money Transfer Regulations
Post by: NewLibertyStandard on March 02, 2010, 09:52:57 PM
Here's the legal definition of currency, 31 C.F.R. 103.11(h) (http://www.fdic.gov/regulations/laws/rules/8000-1400.html#fdic8483) and the legal definition of a currency dealer or exchanger, 31 C.F.R. 103.11(uu)(1) (http://www.fdic.gov/regulations/laws/rules/8000-1400.html#fdic8486) (both links take you slightly above the definitions). My lawyer friend indicated that that my service seems legal, but that's absolutely not legal advice for you folks. I'm running my little service as honestly and as legally as I know how, so until I find out that I'm doing something wrong, I'm not going to stop.


Title: Re: Money Transfer Regulations
Post by: The Madhatter on March 03, 2010, 02:25:22 AM
Don't forget to look at state money transmitting licenses. That's what killed Goldage. (They were one of the largest e-gold exchangers). They were unlicensed because that thought that digital gold was outside the jurisdiction (not legal tender) of the state/federal governments. The state laws were vague enough, and law enforcement was ignorant enough, that they were prosecuted by the state of New York.

(See: http://en.wikipedia.org/wiki/Goldage)

Lots of people speculate that they were prosecuted for political reasons and not for "legal" ones. The central banks (and therefore the governments under their economic debt rule) do not want competing currencies. This isn't because it is competition (e-gold was soooo small compared to the FRN paper game). They didn't want e-gold to open up people's mind to the idea of alternate currencies. That is a far bigger threat.

Remember that a license is an act of privilege that can be revoked/regulated. I firmly believe that any action that you can purchase a license for is fundamentally lawful. (Ex: you can't buy a license to commit a crime. No "license to kill", Bond. :P).

It is possible to claim lawful excuse to operate unlicensed. (By pronouncement or claim by right of notary.. again, you need to know what you are doing.)

Peace!


Title: Re: Money Transfer Regulations
Post by: ihrhase on March 03, 2010, 03:15:31 AM
Remember NLS

There are two types of law...

The Law you can read, and the one the government chooses to apply to you...

Your Lawyer friends may be right, but so were joe stack's and he got prosecuted...


Title: Re: Money Transfer Regulations
Post by: I-am-not-anonymous on March 03, 2010, 03:48:33 AM
Remember NLS

There are two types of law...

The Law you can read, and the one the government chooses to apply to you...

Your Lawyer friends may be right, but so were joe stack's and he got prosecuted...

How encouraging...you've just told the poor fellow that even if he does everything right he could still go to jail--you're making him feel like an ethnic minority!

In most cases though, if a lawyer tells you you won't go to jail, you probably will not go to jail.  Newlibertstandard uses paypal, which already practices know-your-customer and he is operating in amounts less than $10,000 which is what the money laundering and tax cheat police sniff out for.  This means he is unlikely to be doing anything that is wrong OR anything that will attract the attention of Law Enforcement.

However---

Thinking ahead to bitcoin's future--money changing services that operate on a large scale and don't practice know-your customer would indeed be illegal and would thus have to operate within the onionverse, changing bitcoin to money services other than paypal (perhaps offshore based like pecunix).

Another idea would be for some future crypto-preneur to set up a Mom and Pop shop called "Grandpa Joe's envelopes stuffed with cash" and only accept bitcoin as payment.  lol.


Title: Re: Money Transfer Regulations
Post by: satoshi on March 03, 2010, 04:28:56 AM
When there's enough scale, maybe there can be an exchange site that doesn't do transfers, just matches up buyers and sellers to exchange with each other directly, similar to how e-bay works.

To make it safer, the exchange site could act as an escrow for the bitcoin side of the payment.  The seller puts the bitcoin payment in escrow, and the buyer sends the conventional payment directly to the seller.  The exchange service doesn't handle any real world money.

This would be a step better than e-bay.  E-bay manages to work fine even though shipped goods can't be recovered if payment falls through.


Title: Re: Money Transfer Regulations
Post by: The Madhatter on March 03, 2010, 04:30:57 AM
I love how the word "offshore" seems to mean "not in the USA" now. :P

Trading with bitcoin without the need to exchange in/out to fiat is ideal.


Title: Re: Money Transfer Regulations
Post by: The Madhatter on March 03, 2010, 04:38:49 AM
The law *you can read*? Are you talking about legalese or English?

The Law you can read, and the one the government chooses to apply to you...


Title: Re: Money Transfer Regulations
Post by: ihrhase on March 03, 2010, 12:17:25 PM

How encouraging...you've just told the poor fellow that even if he does everything right he could still go to jail--you're making him feel like an ethnic minority!


He is a minority

The law *you can read*? Are you talking about legalese or English?

I am talking about the ones on the books compared to the way the government interprets ones on the books...


Title: Re: Money Transfer Regulations
Post by: The Madhatter on March 04, 2010, 03:01:33 AM
consensus facit legem ;)

Quote
I am talking about the ones on the books compared to the way the government interprets ones on the books...


Title: Re: Money Transfer Regulations
Post by: I-am-not-anonymous on March 04, 2010, 03:39:18 AM
I love how the word "offshore" seems to mean "not in the USA" now. :P

Trading with bitcoin without the need to exchange in/out to fiat is ideal.


Wouldn't there HAVE to be such an in/out exchange for things to get rolling?


Title: Re: Money Transfer Regulations
Post by: The Madhatter on March 04, 2010, 04:31:59 AM
If there were stable fiat exchangers it would make bitcoin a more desirable payment option. Especially in the beginning. After it has a lot of adoption exchanging may occur less and less.

I don't think we HAVE to have exchangers. They are just desirable.


Title: Re: Money Transfer Regulations
Post by: ihrhase on March 05, 2010, 02:39:19 AM
I have to agree with Hatter...

necessary, no, but with the limited commodity base for bitcoin exchanges it may be helpful to get people involved...


Title: Re: Money Transfer Regulations
Post by: FreedomFirst on March 08, 2010, 11:35:23 PM
Remember NLS

There are two types of law...

The Law you can read, and the one the government chooses to apply to you...

Your Lawyer friends may be right, but so were joe stack's and he got prosecuted...

How encouraging...you've just told the poor fellow that even if he does everything right he could still go to jail--you're making him feel like an ethnic minority!

In most cases though, if a lawyer tells you you won't go to jail, you probably will not go to jail.  Newlibertstandard uses paypal, which already practices know-your-customer and he is operating in amounts less than $10,000 which is what the money laundering and tax cheat police sniff out for.  This means he is unlikely to be doing anything that is wrong OR anything that will attract the attention of Law Enforcement.

However---

Thinking ahead to bitcoin's future--money changing services that operate on a large scale and don't practice know-your customer would indeed be illegal and would thus have to operate within the onionverse, changing bitcoin to money services other than paypal (perhaps offshore based like pecunix).

Another idea would be for some future crypto-preneur to set up a Mom and Pop shop called "Grandpa Joe's envelopes stuffed with cash" and only accept bitcoin as payment.  lol.


Money exchanges are required to be licensed and undergo a huge ordeal of regulations and licensing and bookwork in it's operation. If you fail to do this, it is running illegally then. I see e-gold was mentioned here. One of the best examples but not the only example of how the government doesnt like competition or any large assets it cant control or put a hand in. Especially if they feel the service is allowing criminal activities to be hidden.

And I love how someone always seems to bring race into a debate about an unrelated topic. Epic.

Lawyers interpret the vague laws as they believe, the government interprets law any way it damn pleases even if it means bending it or using it out of context. Even hinting at illegal activities, is enough to be taken down which has already been done on his exchange site. It will lead to conspiracy or worse charges.

If bitcoin or the exchange never gets big, the law might not bother with his exchange but if any popularity ensues and especially if taxes arent being paid. It will be taken down by LEO.

The danger isnt in buying or selling bitcoins. The danger lies in a centralized and concrete exchange. Centralization has been the key factor in the fall of many systems especially alternative ones.


Title: Re: Money Transfer Regulations
Post by: Suggester on March 10, 2010, 08:37:53 PM
NLS, you know well how I think of Bitcoin's future under the current model, but as Suggester I'll suggest something which could keep you out of trouble. Why don't you create another exchange webpage, make another paypal account, and register another name on this forum using a proxy (tor or jap or otherwise) and use this new identity for your exchange service? Sure, everybody would "know" that it's you, but they can't technically "prove" it's the same person. Just post a "I quit" message here then a week later re-emerge with the new identity as "A new exchange service" ;)

To fund your new paypal account, you need to stop selling coins now. Just keep buying them till you run out of dollars, then make some $ for the new account by selling coins. You obviously won't state that on the site, but you'll accidentally skip the emails requesting to buy coins. Make sure you delete all requests from your gmail in case they're subpoenaed later.

Alternatively you can move to a more liberal country, like North Korea  :-\


Title: Re: Money Transfer Regulations
Post by: Anonymous on June 09, 2010, 07:41:28 AM
Its only illegal if you pass the money on.....how are you responsible if two other people make a transaction and you just put them in touch with each other? :)



Title: Re: Money Transfer Regulations
Post by: Timo Y on June 29, 2010, 02:33:21 PM
Quote
Running an exchange seems very dangerous. I would never do it without talking to a lawyer and setting up a LLC.

Running an exchange is only dangerous because it is likely to attract the "wrong" customers, sooner or later.

If you run a web store that sells luxury watches, and you agree sell $100,000 worth of watches to some anonymous customer, no quetions asked, who then turns out to be a drug dealer, then this will also get you into a lot of trouble.

The government isn't going to crack down on your exchange just for the sake of it. 

As an exchange operator it's wise to reject the kind of transactions that are likely to trigger alarm bells with the authorities.



 


Title: Re: Money Transfer Regulations
Post by: The Madhatter on June 29, 2010, 02:58:43 PM

Quite simply: you're not responsible.

how are you responsible if two other people make a transaction and you just put them in touch with each other? :)


Title: Re: Money Transfer Regulations
Post by: The Madhatter on June 29, 2010, 03:15:23 PM

Technically you are only an exchanger if you call yourself one. The Bitcoins themselves are the product you are selling. What the customer does with the Bitcoins is really none of your concern, nor are you liable.

Now for the age-old analogy regarding liability: If someone buys a hammer from Home Depot and kills someone with it is it Home Depot's fault? Is it my fault that someone purchased something illegal with the Bitcoins I sold them? The answer is a resounding "NO".

Also, for a court to rule that you are engaging in currency conversion they have to *recognize* Bitcoins as a currency. If that did happen, it would open a whole new can of worms. (I can elaborate here upon request.)

All the best,
The Madhatter :D

Running an exchange is only dangerous because it is likely to attract the "wrong" customers, sooner or later.

The government isn't going to crack down on your exchange just for the sake of it. 


Title: Re: Money Transfer Regulations
Post by: Gavin Andresen on June 29, 2010, 03:27:33 PM
I did some research into money exchanging and money transfer regulations in the U.S.

The raw legal code is online at:  http://www.access.gpo.gov/nara/cfr/waisidx_08/31cfr103_08.html (http://www.access.gpo.gov/nara/cfr/waisidx_08/31cfr103_08.html)

I am not a lawyer; trying to understand legalese is just an odd hobby of mine.  From my reading of the regulations, if you exchange less than $1,000.USD worth of Bitcoin per day you don't have to worry:

Quote
(1) Currency dealer or exchanger. A currency dealer or exchanger  (other than a person who does not exchange currency in an amount greater
than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions).

It looks to me like if you exchanged more than $1,000.USD per day a good lawyer might be able to argue that Bitcoins do not meet the legal definition of "currency":
Quote
(h) Currency. The coin and paper money of the United States or of any other country that is designated as legal tender and that circulates
and is customarily used and accepted as a medium of exchange in the country of issuance. Currency includes U.S. silver certificates, U.S. notes and Federal Reserve notes. Currency also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country.

Then again, if Bitcoins are not legally "currency" then it might be left up to a Court to decide what, exactly, they are, and the result might be really unpleasant (if a judge decided that they're like stocks and are therefore subject to regulation by the Security and Exchange Commision you might find yourself in jail for being an unlicensed stock broker).

I think Bitcoin needs some licensed, regulated exchanges that abide by all the regulations, treating Bitcoins just like another foreign currency, and make it really easy to buy or sell a few hundred dollars worth of Bitcoins.  The regulations are not as onerous as I expected; basically you just have to get identification from customers that make large transactions and report them.


Title: Re: Money Transfer Regulations
Post by: The Madhatter on June 29, 2010, 04:23:49 PM
If you ended up in court under full force of statute, you have probably already lost. They will expand existing statutes (like the "unlicensed stock broker" point) to get you. The usual route is to hire a lawyer, have him/her argue and reduce the sentence. The state gets paid, the lawyer gets paid, you get incarcerated. Everyone makes money, except for you. Fun times, no? :P  

The way to do it is to assert claim, state your intentions, form an estoppel, declare a societal association, and go the Common Law route. In my country they don't even bother to take you to court when you do this. There is NO profit in it for them. Remove the profit motive and a lot of the harassment seems to disappear.

Common Law is the law of substance.

Statutes (sometimes called "codes") are contracts. You can revoke consent in my country. Once you do that, they have to use Common Law. Proving that I injured someone by selling them Bitcoins, would be quite difficult.

Licenses evidence the acceptance of a CONTRACT (aka statute). If you are operating under Common Law and do not have a license the statutes do not apply. As long as fair warning of your intentions has been provided. (Those who want LLCs, Incs, Corps, etc should re-read the first sentence again.)

So as I stand, I am an unbonded/unlicensed man operating in a Common Law jurisdiction with my own society under full liability for the benefit of ??? ... Bitcoin, I suppose. :P

Peace! :)


Title: Re: Money Transfer Regulations
Post by: theymos on July 01, 2010, 03:31:45 PM
What country are you in, MadHatter? That sound very different from what (little) I know of US law.


Title: Re: Money Transfer Regulations
Post by: The Madhatter on July 01, 2010, 07:39:51 PM
I am on the sovereign lands of Alberta. It is a part of the Dominion of Canada.

You might be interested in this post:
https://www.bitcoin.org/smf/index.php?topic=227.msg1908#msg1908 (https://www.bitcoin.org/smf/index.php?topic=227.msg1908#msg1908)

Cheers! :)


Title: Re: Money Transfer Regulations
Post by: Anonymous on July 11, 2010, 01:26:53 PM
What about exchanging bitcoins for silver rather than fiat money?You could buy silver rounds off ebay for example and have them mailed to an address.How could this be tied back to you and your use of bitcoins?The person you buy them from off ebay has no idea what you are doing and absolutely no motive for saying anything .....All you are doing is legally buying silver.

If you used the open currency standard  http://www.opencurrency.com/directory/ (http://www.opencurrency.com/directory/) linked to bitcoin you could use the AOCS approved silver at all the merchants listed (currently 26,000).There could even be actual "bitcoins" minted for the purpose. :)


Title: Re: Money Transfer Regulations
Post by: redengin on July 26, 2010, 07:19:04 PM
What about exchanging bitcoins for silver rather than fiat money?

I'm investigating this route, as I'm interpreting local state laws to state that the act of arbitrage (bringing two parties to together to transact an exchange of currency) requires securities licensing.  I'll probably still need a business license to sell a commodity for bitcoins, but I think this will be more palatable to the powers that be.


Title: Re: Money Transfer Regulations
Post by: Red on July 26, 2010, 10:33:20 PM
I see this is an old thread. Did any real lawyers advise anyone on this?

I see that the current market just helps people meet and paypal or others handle the currency. That seems sound to me. Either those outside organizations are registered to as money transmitters or their neck is on the line.

I doubt any of the argument of "It's not a currency" will hold water in the US, its the money transmittal service aspect that tends to get people in trouble.


Title: Re: Money Transfer Regulations
Post by: Babylon on July 26, 2010, 10:40:47 PM
What about exchanging bitcoins for silver rather than fiat money?You could buy silver rounds off ebay for example and have them mailed to an address.How could this be tied back to you and your use of bitcoins?The person you buy them from off ebay has no idea what you are doing and absolutely no motive for saying anything .....All you are doing is legally buying silver.

If you used the open currency standard  http://www.opencurrency.com/directory/ (http://www.opencurrency.com/directory/) linked to bitcoin you could use the AOCS approved silver at all the merchants listed (currently 26,000).There could even be actual "bitcoins" minted for the purpose. :)

ebay does not accept bitcoins.  You could buy silver off of bitlist or biddingpond, if you can find someone selling it.


Title: Re: Money Transfer Regulations
Post by: Babylon on July 26, 2010, 10:43:16 PM
I think that as long as the exchanges stay small we are going to be ok.  I was heartened to see MT Gox add another dollar based exchange even though bitcoin market was not lacking in any way.  Ideally none of the exchanges will get big enough to catch the eye of johnny law, and if the amount of exchanges grows as the bitcoin economy does, rather than the size of any one exchange or group of exchanges, by the time the government is worried about it they wont be able to shut it down.  Shutting down one large exchange is easy, shutting down a dozen is more of a challenge, shutting down hundreds is more work than they will want to do.


Title: Re: Money Transfer Regulations
Post by: NewLibertyStandard on July 26, 2010, 10:51:10 PM
I see this is an old thread. Did any real lawyers advise anyone on this?

I see that the current market just helps people meet and paypal or others handle the currency. That seems sound to me. Either those outside organizations are registered to as money transmitters or their neck is on the line.

I doubt any of the argument of "It's not a currency" will hold water in the US, its the money transmittal service aspect that tends to get people in trouble.
Sort of... I asked a real lawyer whom I know. It's not his specialty and he wasn't giving official legal counsel or whatever. I sent him a couple links to some laws posted on the Internet and then he pointed out to me that the law defines money as government backed currency. He said that bitcoins are plain ol' digital goods according to the law. Anyway, I don't think anyone has done enough business to be targeted by the government. If I ever got to the point where a significant amount of dollars were coming and going through me, I would look more in depth into the issue. I think the first regulation I'd run into is needing to follow KYC rules just in case. If it continued to increase, I'd probably register as offering financial services also just in case. I'd also get real legal advice on how to stay completely legal.


Title: Re: Money Transfer Regulations
Post by: Red on July 26, 2010, 11:14:16 PM
I think the digital goods argument holds until it becomes obvious that the following is happening.

1) Someone within the US buys $X,000 worth of bit coins.
2) That person transfers those bitcoins to the account of someone undesirable.
3) That undesirable person sells $X,000 worth of bitcoins for cash in another part of the world.

At that point, unless bitcoin is receiving public adulation, (like say FaceBook) the whole network will be deemed an unregistered money transfer service. If the undesirable person is undesirable enough, showing steps 1) and 2) will not be proven, just implied.

I think you are correct that no one will care for small numbers of X. But as market volume goes up, someone will start to notice.

P.S.:  I think you will also want to be able to show that you are NOT in too tight with other traders. Otherwise it looks even more like a money transmittal service.


Title: Re: Money Transfer Regulations
Post by: FreeMoney on July 27, 2010, 10:24:43 AM
I think that as long as the exchanges stay small we are going to be ok.  I was heartened to see MT Gox add another dollar based exchange even though bitcoin market was not lacking in any way.  Ideally none of the exchanges will get big enough to catch the eye of johnny law, and if the amount of exchanges grows as the bitcoin economy does, rather than the size of any one exchange or group of exchanges, by the time the government is worried about it they wont be able to shut it down.  Shutting down one large exchange is easy, shutting down a dozen is more of a challenge, shutting down hundreds is more work than they will want to do.

Right on, if every time they close an exchange two open that are a little trickier to find they just won't be able to stop it.

Lol, maybe we'll get weed and BTC from the same guy.


Title: Re: Money Transfer Regulations
Post by: bytemaster on July 27, 2010, 05:39:33 PM
I am somewhat new to the whole bitcoin community, but bit coin solves a problem I was trying to solve myself (how to establish an unregulated digital currency to replace paper money).

It seems that the principle of bitcoin is to track transactions and that it is possible for anyone to review the "transaction history" of any particular coin.  If that is the case, then is there any reason why bit coins couldn't double as digital warehouse receipts?  

Suppose you deposit 100 oz of gold with me and in exchange I give you 100 bit coins with a "repurchase agreement" in place where I will buy back the "same" 100 bit coins for 100 oz of gold.  The fact that the coins "left" a designated account and have not yet returned to that account means that they are "backed by gold".  With some standard and published "addresses" and some "even/odd" counting it should be possible to independently verify whether a coin is backed by gold and *who* is doing the backing without checking in with a the warehouse.  

Is there something about the bitcoin implementation that would prevent this kind of usage?


Title: Re: Money Transfer Regulations
Post by: Red on July 27, 2010, 06:05:53 PM
Bytemaster: I had a similar ideal. It turns out the major limiting factor is that coins are not actually serialized or represented in any way. Only exchanges of fungible value are represented.

It quickly becomes impossible to identify your particular backed coins unless special care is taken. I was going to write a post on this, but instead I wrote the one on coin collecting in the marketplace forum.

If you want create a new topic and we can all discuss "non-fungible" bitcoins.


Title: Re: Money Transfer Regulations
Post by: throughput on August 10, 2010, 02:44:21 PM
I think that as long as the exchanges stay small we are going to be ok.  I was heartened to see MT Gox add another dollar based exchange even though bitcoin market was not lacking in any way.  Ideally none of the exchanges will get big enough to catch the eye of johnny law, and if the amount of exchanges grows as the bitcoin economy does, rather than the size of any one exchange or group of exchanges, by the time the government is worried about it they wont be able to shut it down.  Shutting down one large exchange is easy, shutting down a dozen is more of a challenge, shutting down hundreds is more work than they will want to do.

Great, it looks like a P2P exchanges for a P2P money transfer system :)

I think, that Bitcoin will benefit as a system, if such law considerations will be well documented and published together with step-by step recommendations for operators of exchanges, perhaps with software to run them automated.
For example, a HOWTO, verified by a payed lawyer, on how to securely run your own exchange will be GREAT.
I think, community may fund such research.
Who can take the liability to collect funding?


Title: Re: Money Transfer Regulations
Post by: chaord on August 15, 2010, 04:02:31 AM
As someone who is very much interested in creating another exchange for BitCoin, I think that commissioning a paid lawyer to do a full report is a great idea.  I think the goals of such a report should include:
  • legal reporting/record keeping/operating requirements for a BitCoin-enabled currency exchange business
  • tax implications and reporting requirements for normal businesses merely choosing to accept BitCoins as payment for their services
  • any clever legal loopholes that can be used to promulgate BitCoin usage without risking jail or injunction (perhaps selling visa/amazon/etc gift-cards for BitCoins?)
IMHO commissioned reports like these would go a long way towards lending mainstream credibility to the decentralized currency movement.


Title: Re: Money Transfer Regulations
Post by: bytemaster on August 15, 2010, 05:20:57 PM
You can commission 10 different lawyers and get 10 different results and tomorrow they will change the rules. 

It does not matter what the law says in this country.  They either like you or they don't and if you are using bitcoins to undermine their tax collection system and currency monopoly then they will not like you.  They can print endless dollars to fund an attack on bitcoin, its users, and the exchanges. 

I know what the law says regarding the income tax, yet they enforce something entirely contrary to the law.   

What is needed is a black market defense company with honest intentions that will provide legitimate "self defense" against government goons.   You pay for "protection" from the government and when you are attacked by the government they scare, and if necessary dispose of officials whom violate the natural right to private property, free association and exchange.  At the very least it could be an insurance fund to provide defense in a lawsuit.   

Until the black free market develops its own security apparatus to defend against organized crime (government), systems like bitcoin will be too dangerous for most individuals to risk.

 


Title: Re: Money Transfer Regulations
Post by: Willsway on August 15, 2010, 07:04:18 PM
To be legal from my country's perspective I would need to:

1) Limit the value per transaction. I'm not 100% sure which value this would be - I'm currently consulting on the fact - but it would be less than $10000.
2) I would need to withdraw any profits from the offshore account (paypal, etc) within 30 days of receipt within the account.
3) If I would need to refund, or pay someone out, I would have to do that within the allocated 30 days. Paying out cash would not be allowed.
4) I would have to declare my income from the sale, and pay taxes on it.
5) Obviously normal accounting practice would need to be followed and books maintained as per normal tax regulations.


Title: Re: Money Transfer Regulations
Post by: FreeMoney on August 15, 2010, 08:12:46 PM
To be legal from my country's perspective I would need to:

1) Limit the value per transaction. I'm not 100% sure which value this would be - I'm currently consulting on the fact - but it would be less than $10000.
2) I would need to withdraw any profits from the offshore account (paypal, etc) within 30 days of receipt within the account.
3) If I would need to refund, or pay someone out, I would have to do that within the allocated 30 days. Paying out cash would not be allowed.
4) I would have to declare my income from the sale, and pay taxes on it.
5) Obviously normal accounting practice would need to be followed and books maintained as per normal tax regulations.


It sounds like it'll be tough to compete with someone who has freedom.


Title: Re: Money Transfer Regulations
Post by: Willsway on August 15, 2010, 08:20:42 PM
To be legal from my country's perspective I would need to:

1) Limit the value per transaction. I'm not 100% sure which value this would be - I'm currently consulting on the fact - but it would be less than $10000.
2) I would need to withdraw any profits from the offshore account (paypal, etc) within 30 days of receipt within the account.
3) If I would need to refund, or pay someone out, I would have to do that within the allocated 30 days. Paying out cash would not be allowed.
4) I would have to declare my income from the sale, and pay taxes on it.
5) Obviously normal accounting practice would need to be followed and books maintained as per normal tax regulations.


It sounds like it'll be tough to compete with someone who has freedom.

It's almost impossible. There is huge debate in the country about the damage these kinds of protectionism do to the economy of the country. Unfortunately, getting a politician to do something about our competitive disadvantage is far harder than trying to compete despite it, so we need to think in terms of creative competition :)


Title: Re: Money Transfer Regulations
Post by: ichi on August 15, 2010, 11:58:12 PM
What is needed is a black market defense company with honest intentions that will provide legitimate "self defense" against government goons.   You pay for "protection" from the government and when you are attacked by the government they scare, and if necessary dispose of officials whom violate the natural right to private property, free association and exchange.  At the very least it could be an insurance fund to provide defense in a lawsuit.   

Until the black free market develops its own security apparatus to defend against organized crime (government), systems like bitcoin will be too dangerous for most individuals to risk.
If you're paying protection, it's just another government -- and probably a more dangerous one.  What you need is a system that protects itself by design.  Threats of force against governments are pointless.  Nothing to see here, move along.  These are not the droids you're looking for.


Title: Re: Money Transfer Regulations
Post by: Willsway on August 16, 2010, 02:51:03 AM
What is needed is a black market defense company with honest intentions that will provide legitimate "self defense" against government goons.   You pay for "protection" from the government and when you are attacked by the government they scare, and if necessary dispose of officials whom violate the natural right to private property, free association and exchange.  At the very least it could be an insurance fund to provide defense in a lawsuit.   

Until the black free market develops its own security apparatus to defend against organized crime (government), systems like bitcoin will be too dangerous for most individuals to risk.
If you're paying protection, it's just another government -- and probably a more dangerous one.  What you need is a system that protects itself by design.  Threats of force against governments are pointless.  Nothing to see here, move along.  These are not the droids you're looking for.

LoL. I have some baseball bats in the cupboard if we need to break some kneecaps. But seriously, as long as the right to use bitcoin is protected, or at least if the usage is ignored, by a single country, the bitcoin itself should be safe. Should some governments declare it illegal (in many jurisdictions it will take some fancy spin-doctoring to achieve this), the people who find themselves in these countries will be able to use the system anonymously, if they are careful. The best protection for bitcoin will be to achieve a wide acceptance in the "new economy" of online games and services. Should this happen most governments would find it extremely difficult to oppose the use of bitcoins outright. They may try to force some form of regulation down on the system but this will largely be limited to the places where they will be able to enforce a modicum of control, like the exchanges.


Title: Re: Money Transfer Regulations
Post by: Anonymous on August 16, 2010, 06:49:07 AM
The way things work with politicos is you need a lobbyist to go and pay them off with political "donations" for their campaigns.They then enact laws that benefit their contributors.At its base politics is all about punishing your enemies and rewarding your friends.Untill Bitcoin can bribe the right politician it will be in danger.I wonder which politicos are getting contributioins from paypal.

 :)


Title: Re: Money Transfer Regulations
Post by: throughput on August 16, 2010, 03:05:22 PM
But seriously, as long as the right to use bitcoin is protected, or at least if the usage is ignored, by a single country, the bitcoin itself should be safe. Should some governments declare it illegal (in many jurisdictions it will take some fancy spin-doctoring to achieve this), the people who find themselves in these countries will be able to use the system anonymously, if they are careful. The best protection for bitcoin will be to achieve a wide acceptance in the "new economy" of online games and services. Should this happen most governments would find it extremely difficult to oppose the use of bitcoins outright. They may try to force some form of regulation down on the system but this will largely be limited to the places where they will be able to enforce a modicum of control, like the exchanges.

Exactly. The only point of control (for the governments) is at the local exchange.
Governments will outlaw the operation of Bitcoin exchanges, sooner or later, and that seem obvious to me,
I don't know why I am so sure :-\.

So, sharing the best practices of (legally) operating the Bitcoin exchange is most welcome.


Title: Re: Money Transfer Regulations
Post by: bytemaster on August 16, 2010, 03:08:57 PM
How do you out lobby the fed?


Title: Re: Money Transfer Regulations
Post by: bytemaster on August 16, 2010, 03:12:04 PM
How do you out lobby the fed?


Title: Re: Money Transfer Regulations
Post by: FreeMoney on August 16, 2010, 07:58:53 PM
How do you out lobby the fed?

Fed can only bribe w/ dollars, but we have bitcoins.  :)

But seriously, freedom is not giving extra to your masters.


Title: Re: Money Transfer Regulations
Post by: MoonShadow on August 17, 2010, 05:30:39 AM

What is needed is a black market defense company with honest intentions that will provide legitimate "self defense" against government goons.   You pay for "protection" from the government and when you are attacked by the government they scare, and if necessary dispose of officials whom violate the natural right to private property, free association and exchange.  At the very least it could be an insurance fund to provide defense in a lawsuit.   
 

Sounds like either "Alongside Night" or "The Diamond Age".

But a legal defense fund isn't a bad idea.


Title: Re: Money Transfer Regulations
Post by: EconomyBuilder on August 21, 2010, 09:35:41 AM
Bitcoin by not relying on a trusted third party makes it quite secure in some ways from governments.  There's no gold warehouse that anybody can confiscate.   And assuming it doesn't have major security flaw (a big if, it needs a security audit by professional cryptographers)  it won't need to rely on government legal systems for its security.   But it's not securely anonymous, so governments can trace down and raid the exchanges (under current money transfer regulations, as with e-gold and others) and end users (if totally outlawed) and force them to reveal their keys and thus cough over their bitcoins.

BTW, the short legal answer is that we're screwed both ways -- it's "money transfer" for the purposes of financial regulation but not "money" under the UCC .  So you can't, for example, write a check for "10,000 BTCs" and have it legally be treated like a check in the U.S.    You can make BTCs a term in your contract but it will probably be treated like a good or service rather than like money.   But money laundering regulations and the like apply.  As usual, consult a real lawyer.


Title: Re: Money Transfer Regulations
Post by: Timo Y on October 06, 2010, 10:38:14 PM
I was thinking about launching a Bitcoin accepting website and to get around all these pesky regulations (most of which I probably never even heard about!), what if I just post a disclaimer on the website saying

"WARNING: Bitcoin is nothing but Monopoly Money."

Would that work?

I mean, is it my fault that some crazy people are prepared to trade Monopoly dollars for real dollars on some crazy website in some corner of the big wide web?  :D


Title: Re: Money Transfer Regulations
Post by: MoonShadow on October 06, 2010, 11:27:37 PM
I was thinking about launching a Bitcoin accepting website and to get around all these pesky regulations (most of which I probably never even heard about!), what if I just post a disclaimer on the website saying

"WARNING: Bitcoin is nothing but Monopoly Money."

Would that work?


I doubt it.


Title: Re: Money Transfer Regulations
Post by: Terence on June 02, 2011, 01:40:51 AM
I am planning to launch a crowd-funding platform called "Goodwill" (in 26 different languages), which looks/works rather like Kickstarter and several others, but which is completely free and aimed at helping fund entrepreneurs and change-makers in the least developed countries and other developing economies.  Of the 48 least developed countries in the world, 33 are in sub-Saharan Africa. 

The method of project funding the platform supports will be by pledging donations or goodwill-giving (hence the name), and instead of creating a liabiity, a profit share agreement or receiving shares in the venture, donors are rewarded with gifts which typically have no monatary value and are only intrinsiclly valuable to the project and donors.  Therefore no real-world purchase is being set up or transacted.

The plan is to have it available in English, French, Portuguese and Spanish plus the 22 'national' languages of Africa soon after launch.  The Goodwill platform and services will all be available entirely open-source and completely free to use.  And like the Ushahidi software, for example, there will also be a free hosted version in each language, with instant setup, which we will run on our servers. 

One of the major forms of investment or funding for these projects is anticpiated to come from the diaspora, and therefore a low cost method of transferring funds internationally is highly topical and important.

This is what's planned to roll out so far...

1.   Crowd VC Goodwill crowd-funding platform
2.   Crowd VC Goodwill crowd-funding platform (hosted solution)
3.   Crowd VC Goodwill Stock Exchange
4.   Crowd VC Goodwill Seed Money Startup Fund
5.   Crowd VC Goodwill Diaspora Fund
6.   Crowd VC Goodwill iPhone/3G App (with Bitcoin/M-Pesa type payment gateways)
7.   Crowd VC Goodwill Network (publishes projects to other crowdfunding platforms)

Our "big idea" is to help create a world in which even the poorest of us has the opportunity to reach their full potential and contribute to the well-being of their family, community, country and the world.  Our focus will be the least developed countries of the world, helping to fund projects which improve education, health, civil society and economic development with the intention of helping their economies reduce their dependency on multilateral and bilateral aid. 

From profits we are able to generate we will also create a 'Seed Money Startup Fund' as a source of ready capital capable of getting good ideas off the ground.  It will be run as an NPO (not for profit organization) and any surpluses will be reinvested in bringing new sustainable development projects to life.

I would be very pleased to have your thoughts and suggestions (or offers of help) to try and understand this project and how it relates to the issues which surround the topic specifically, and the brave new word of Bitcoin in general.


Title: Re: Money Transfer Regulations
Post by: R- on August 08, 2012, 08:55:29 PM
I did some research into money exchanging and money transfer regulations in the U.S.

The raw legal code is online at:  http://www.access.gpo.gov/nara/cfr/waisidx_08/31cfr103_08.html (http://www.access.gpo.gov/nara/cfr/waisidx_08/31cfr103_08.html)

I am not a lawyer; trying to understand legalese is just an odd hobby of mine.  From my reading of the regulations, if you exchange less than $1,000.USD worth of Bitcoin per day you don't have to worry:

Quote
(1) Currency dealer or exchanger. A currency dealer or exchanger  (other than a person who does not exchange currency in an amount greater
than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions).

It looks to me like if you exchanged more than $1,000.USD per day a good lawyer might be able to argue that Bitcoins do not meet the legal definition of "currency":
Quote
(h) Currency. The coin and paper money of the United States or of any other country that is designated as legal tender and that circulates
and is customarily used and accepted as a medium of exchange in the country of issuance. Currency includes U.S. silver certificates, U.S. notes and Federal Reserve notes. Currency also includes official foreign bank notes that are customarily used and accepted as a medium of exchange in a foreign country.

Then again, if Bitcoins are not legally "currency" then it might be left up to a Court to decide what, exactly, they are, and the result might be really unpleasant (if a judge decided that they're like stocks and are therefore subject to regulation by the Security and Exchange Commision you might find yourself in jail for being an unlicensed stock broker).

I think Bitcoin needs some licensed, regulated exchanges that abide by all the regulations, treating Bitcoins just like another foreign currency, and make it really easy to buy or sell a few hundred dollars worth of Bitcoins.  The regulations are not as onerous as I expected; basically you just have to get identification from customers that make large transactions and report them.

Could be stickied


Title: Re: Money Transfer Regulations
Post by: repentance on August 08, 2012, 11:53:08 PM

Could be stickied

It's based on speculation from two years ago.  We now have concrete information about the extent to which services based in different locations are being required to comply with AML/KYC requirements, both directly - as entities having a reporting obligation in their own right - and indirectly - in the case where other financial service providers are requiring them to collect KYC information.


Title: Re: Money Transfer Regulations
Post by: thermos on July 03, 2013, 04:23:52 AM
Does anyone happen to know what kinds of regulations are in place for people who buy and sell unofficial digital currencies such as Bitcoin? I'm particularly interested in United States regulations, but please mention any regulations of which you are aware.

Registering a business or non-profit organization gives the advantage of being able to do transactions in the name of the business (http://en.wikipedia.org/wiki/Doing_business_as) and forming a corporation limits liability (http://en.wikipedia.org/wiki/Limited_liability_company). But it seems like it would be more trouble than it's worth to incorporate or register a business until the profits are large enough to hire employees.

I noticed that in the United States, financial institutions are required to submit a currency transaction report (http://en.wikipedia.org/wiki/Currency_Transaction_Report) for all transactions over $10,000 and a suspicious activity report (http://en.wikipedia.org/wiki/Suspicious_activity_report) for suspicious transactions. I don't think a private citizen would be required to submit either type of report. In any case, so long as the official currency part of the transaction is passing through a registered financial institution, the institution would already be submitting those reports for such transactions.

I have read about money laundering (http://en.wikipedia.org/wiki/Money_laundering) and it seems that so long as a person is not knowingly laundering money, then the person is not committing the crime.

Profits would need to be tracked for tax purposes but that can be accomplished easily enough using accounting software such as GnuCash (http://www.gnucash.org/).

Am I missing anything? Are there any regulations prohibiting me from sending money to and receiving money from random strangers who may be criminals unbeknownst to me?


interesting read i wonder if we will find some clarity soon NYC;)


Title: Re: Money Transfer Regulations
Post by: 0z0n321337 on December 18, 2016, 09:22:10 AM
lets necropost