http://www.scribd.com/doc/151346841/Bitcoin-Foundation-Response-to-California-DFIThe real meat in this letter is under Section C for "stored value." The Bitcoin Foundation says that
Bitcoin is not stored value. This directly contradicts U.S. Department of Treasury FinCEN statements which say that the reason why Bitcoin operators need money transmitter licenses (or MSB licenses) is because BTC is stored value.
The interesting thing is that the Foundation didn't need to argue that Bitcoin is not stored value. They could've just said that, even if Bitcoin is stored value, they don't sell or issue it and so they aren't subject to the license. They claim they are a not-for-profit and their activities are more political in nature. Consumers can only donate Bitcoin to the Foundation, not buy or sell Bitcoin to them.
So why are they arguing something seemingly unnecessary to their case? My thoughts are: 1) They actually have done some issuing, selling or transferring of Bitcoin, although probably in a small capacity. The Foundation actually might be giving money to people. They have grant competitions, and whoever wins the grant probably gets resources to bring the grant idea to fruition. What if, for one of those grants, they gave some BTC to someone? Well, then, that might consist of the activity of issuing BTC, which CA claims they need a license for.
2) The other possibility is that they are making a political/legal move in trying to get a case in court. Just because FinCEN or a CA Department says something, doesn't mean its statement is legally binding. If they could get a judge to adjudicate whether Bitcoin is stored value, then this would bring great clarity to the field. The Foundation argues that Bitcoin is not stored value, or any other definition under money transfer laws, and therefore
no Bitcoin operator needs a money transmitter license. This is a bold argument that directly contradicts FinCEN. It's also highly appropriate for the Foundation to make this move since it's their mission to advocate Bitcoin in general.
The Foundation might be on to something. In fact, at the recent conference in DC, the European Central Bank declared that they don't think Bitcoin fits any of the three functions of money: Medium of Exchange, Unit of Account, or Store of Value (
http://www.thebitcoinchannel.com/archives/13169). If they mean Store of Value in the same way that the US Department of Treasury means Stored Value, then it's possible that one day the U.S. will give into the notion that Bitcoin is not stored value and thus Bitcoin operators would not need a money transmitter license.
The Bitcoin Foundation's response to CA's cease and desist here is really exciting. The Foundation is officially requesting here for CA to make an official statement that "the sale of bitcoin is not regulated under the California Money Transmitter Act." Of course it might take a couple of years for this case to get through the court system in order to produce a final answer.
In addition, the Foundation says, "It is important, and a core aspect of the Foundation's mission, to ensure that State regulators understand the bitcoin industry, and that the bitcoin industry participants receive clarity regarding and achieve understanding of their obligations under state law." The Foundation here is suggesting that perhaps our government bodies don't quite understand the nuances of Bitcoin, and so consulting with the Foundation should help.
[please note this is not legal advice]
