I agree that this is very strange.  My experience of dealing with regulators is that they like to give you very lengthy written answers to such questions and tell you exactly what sections of the regulations apply to your question and why.  They also frequently tell you to seek independent legal advice because what they're telling you is how they would apply the regulations to your particular situation, not necessarily how a court would rule on that application - as I mentioned above, a lot of AML related stuff hasn't ever been challenged because nobody wants to take the risk of losing a challenge.

At the end of the day, people need to take the advice of their own lawyers because that's who'll be representing them if they find themselves under legal scrutiny.  That's who'll have to come up with on point legal arguments and actual precedents in the court-room.  Arguments which sound good on a messageboard can be useless in a courtroom and many of them are more wishful thinking than anything else.

I notice that "informal value transfer system" is mentioned on the form posted by D&T.  It would be worth spending a few hours on the FinCEN website and seeing what kinds of activity they've applied this designation to in the past.

Likewise, if there are exemptions available for businesses dealing in stored value (this is how gift card issuers and issuers of pre-paid phone and internet credit get around needing to be licensed deposit-takers and Tier 1 capital requirements here in Australia) then it's in your interests to argue that BTC are stored value.

The issue isn't so much what is the absolute legal "truth" (there's no such thing), but what legal argument would be most beneficial to a given Bitcoin business at a specific time.  Different Bitcoin enterprises will benefit from different types of classification, but they'll likely all seek the classification which regulates their particular type of activity the least.

That might not matter if those private keys allow someone to access stored value.

One of the problems with the FATF framework, from which the AML/CTF regulations of so many nations derive, is that it really is just a broad framework.  Each individual nation then adopts over-arching regulations and passes its own specific legislation related to that framework.  Each nation then applies those laws and regulations within its own boundaries, but the interpretation of those laws and regulations by the regulators often remains legally untested.  Even organisations which have the resources to mount a legal challenge - such as major banks - agree to civil forfeitures because the penalties per offence are so huge that losing a legal challenge would bankrupt them.  Massive as some of the forfeitures paid by banks have been, they're a drop in the ocean to what they would have been required to pay if a penalty was imposed for every single violation.

Now it's possible that a court might find that existing laws cannot be applied to certain types of BTC activity (a loophole which would be quickly closed, BTW), but such a finding would require a test case which would be expensive to defend and in which the stakes would be extremely high for the person/entity challenging the regulator's ruling.  Even the biggest of existing Bitcoin businesses couldn't afford to pay millions of dollars in penalties if they lost.


Of course they hate it.  The cost of compliance is huge.  They comply because the cost of not complying is potentially catastrophic.

Regardless of what you believe, it's Bitcoin service operators who are actually putting themselves in potential legal jeopardy.  It's not your right to determine what level of risk is appropriate for them.  That's up to the service operators themselves to decide.  If they don't want to expose themselves to the risk of prosecution for multiple federal offences, that's their right.  They have no obligation to take risks for your benefit.  If you think that "someone" should be taking those risks, put your own ass on the line instead of complaining that others aren't willing to do so.

That's not what I'm talking about.  I'm talking about limits set by the regulators themselves which allow certain types of businesses to be exempt from some aspects of regulation and determine whether or not they need licensing/what type of licence they require.  For example, jewellers can be exempted from AML compliance if they are (i) retailers who exclusively purchase from other dealers subject to the anti-money laundering program regime, (ii) businesses who purchase from the general public, and (iii) non-dealers subject to the anti-money laundering rules as long as purchases of precious metals, jewels and stones are less than $50,000; if purchases exceed $50,000 in a year, then the anti-money laundering regime does apply.

There is nothing even slightly illegal about having an exemption granted by regulators.  When it's granted you agree to abide by the terms of that exemption, which will often only continue to apply as long as you operate within certain limits - adhering to those limits is not "structuring"; trying to find creative ways to bypass them is.

Part of the political platform for some Bitcoin users is to destroy all AML programmes.  Others simply want a convenient, low-cost payment system.  Some want to get rich speculating on BTC value.  It's ridiculous to assume that everyone who uses BTC does so for ideological reasons when it's pretty obvious that large sections of this community are only interested in BTC for making short-term profits and don't give a shit about political platforms if they can use BTC to increase their income/wealth right now.

I'm not sure that the one-way thing is any sort of shield.  Jewellers, for instance, are subject to AML regulations based on their volume of business even if they do not buy from the general public.  

It's also worth noting that the IRS itself carries out AML investigations and makes referrals to FinCEN - merely paying your taxes is not enough to protect you if you're required to comply with AML regulations and fail to do so.

There may be some exemptions open to you if you operate within certain limits.  It's worth seeking advice from an experienced financial services lawyer to find out in what circumstances exemptions might apply.  Operating within those limits might be more financially viable for you at this time than seeking licensing.  Obtaining an exemption is a formal process - you have to apply for it so it still costs money.

Are there different classes of MBS, all with their own additional requirements?  My understanding is that the business that the OP is proposing is somewhat different to that operated by BitInstant.  Are they likely to be subject to more regulations as they'll actually be selling BTC direct to the public rather than operating as a platform for others to trade BTC (like MtGox) or a conduit for getting funds into exchanges quickly (like BitInstant)?

It's what I'd expect but I'm interested in the specific regulations they quoted.  Knowing that gives an indication of whether they're currently regarding Bitcoin as a currency, a commodity or some other kind of financial product/service.  As FinCEN operates at a federal level and MSBs are regulated at state level, I'm also curious whether there are any exemptions you could seek if you operated within set limits.

You were smart to seek advice in advance.  I've worked for a cc provider and they'll shut down your account and make a suspicious activity report in a heartbeat if their algorithms think there's anything fishy about the account transaction patterns.

You could try posting about this on /r/Bitcoin.  For some reason, their staff sometimes respond more quickly over there.

Bitcoin's finest.

So this guy admits to being a Silk Road seller and he's stupid enough to scam people on PayPal.  Lolicopter.  Can't wait until PayPal gets a formal legal request for disclosure of all financial accounts linked to his PayPal addresses.

I think it's also something of a cautionary tale.  PayPal is monumentally successful but it hasn't really remained true to Thiel's original vision of becoming the financial payments system of the world or addressing the inequality of wealth distribution. 

I don't disagree with your points but I don't understand the various types of financial services licences available in the US well enough to judge whether the same kind of licence held by BitInstant would be appropriate for MtGox's financial activities.  I know that in many places once you actually hold user funds you become subject to regulations which don't apply to businesses which merely transmit them (this is why PayPal is required to meet Tier 1 capital requirements - a minimum of $5 million or 5% of total stored value liabilities, whichever is the greater - here in Australia).

I believe that Mark could be far more forthcoming about MtGox's plans for licensing in the US and elsewhere.  MtGox has such a massive market dominance that there's not really anyone currently positioned to force them out of the US market by getting licensed first.  To some extent, it does seem like they're playing the PayPal game and will probably put off becoming licensed for as long as possible and then seek the lowest level of licensing they can get away with - even if they know they'll ultimately have to comply in the long run (as PayPal did), the longer they can delay that inevitability, the lower they keep their immediate overheads.  

It's hard to imagine now, but PayPal would never have survived without eBay.  There's nothing equivalent in the Bitcoin world.  MtGox pretty much depends on Bitcoin speculators and volatility.  When the price is stable, people chase high returns elsewhere.  If MtGox is going to require the kind of licence which costs millions of dollars, then they would want to be damned sure that speculation on Bitcoin prices is going to continue for the foreseeable future.

Obviously no Bitcoin business is required to share their thinking with us, but I do think that Mark often puts himself at a disadvantage by not doing so.  

I'm sorry, but I find the idea of Patrick calling people dumbasses in open court when called to give testimony in Cartmell et al highly amusing.  I'm sure it will impress the judge.  Everything he's ever posted here is discoverable - it would be fun to watch him being questioned about those posts.

You missed the point.  It was not a ruling on Bitcoin.  The whole case centred around the fiat services MtGox was performing for its customers and whether it needed to be licensed in order to offer those services in France.  And yes, it could be used as precedent in other EU countries but it's probably not binding.

One of the decisions which Bitcoin financial service providers need to make is whether a given market is profitable enough to justify seeking licensing in that market.  Even when lower tier (and therefore lower cost) forms of licensing are available, they're often quite restrictive (limits on customer account balances are a common restriction).  The US market is obviously hugely profitable for MtGox, but becoming licensed in every US state would be an astonishingly expensive undertaking.

I'm pretty sure Mark has said before that they intend to seek licensing as a money service business in the US but that it's a process which happens at state level and is quite expensive.  Whether or not they're currently licensed in the US has no impact on their obligations to comply with Japanese AML/CTF/KYC requirements or their obligation to comply with the requirements of the licensed financial institutions with whom they deal in other nations, but they're not going to get a licence in the US without being able to demonstrate that they have appropriate risk assessment and other AML procedures in place.  If you look at institutions like PayPal, you'll see that they can be licensed very differently from one location to the next - here, they're regulated as an authorised deposit-taking institution and regulated under the Banking Act - and that the restrictions on their operations vary by jurisdiction.

I do agree with D&T that this error should never have occurred and that the onus is on MtGox to make it right at their expense.  It would probably be to their advantage to use Western customer service reps as their responses often come across as quite dismissive - even if they're technically correct - and that reflects badly on MtGox as a whole.

Just because it wouldn't make sense, doesn't mean people won't do it anyway.

mcdett's assertion was that 30% of people controlling 70% of wealth is somehow unheard of.  In the US alone, 20% of people control 80% - 90% of the wealth (95% if you exclude home ownership and calculate only financial wealth).  

Of course people are going to say that.  Why on earth would you think that a Bitcoin economy would be any different than a conventional economy in terms of wealth disparity?  Hell, you see people begging for the same kind of financial markets and products which lead to recessions in the real world and somehow expecting a different result.  People think that because they got in on the ground floor they are going to be part of the 1% (or 30%).  They seem to forget that everyone else is also trying to be part of the 1%, too.

Will someone from YOSPOS please find a way to replace Desolator's ugly dog with a Cosby avatar?

If anything would de-clutter the board and enhance the newbie experience, it's doing away with the endless nested quotes.  It's a pain in the ass to edit them manually so people don't bother, but it gets tedious very quickly in long threads where whole discussions are repeatedly being quoted by posters wanting to reply to a single point.  Merging topics would also help.  We often get a ridiculous amount of threads on a single topic and that makes finding useful information difficult because it's often spread across many threads in multiple forums.

I also think that you're seriously over-estimating the amount of people who use sock puppets to troll.  Using them to circumvent a ban is already a bannable offence, but there's not really a whole lot of need for people to use them solely for the purpose of posting controversial or inflammatory opinions as those can be posted under a legitimate account given the free speech ethos of these forums.