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Author Topic: FinCEN says you must be MSB if you sell bitcoins for $  (Read 20523 times)
odolvlobo
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March 19, 2013, 06:05:00 AM
 #101

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This guidance addresses "convertible" virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.

Given that Bitcoin has no equivalent value in any "real currency"  The applicability hinges on the words "substitute for real currency".  It is beyond doubt that virtual "currencies" like Amazon Points or Facebook Credits fall under the guidelines but it is unfortunate that FinCEN didn't provide more guidance on the term "substitute for real currency".  Time to draft another request for administrative ruling.

It seems reasonable to assume that regardless of how obscure the language is, they intend for it to apply to bitcoin because there is a section dealing specifically with decentralized virtual currencies,

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March 24, 2013, 06:34:12 PM
 #102

Hello, asked in discussion forum, but decided that maybe here it is more appropriate.

If now all exchanges have to be considered as MT and have to be registered as MSB then as I can understand redeemable codes are already included into regulation? So this should mean that mtGox can still provide USD codes.

right? or what I did not get?

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March 24, 2013, 06:56:26 PM
 #103

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- Bend over backwards and get anally raped every day....

awesome

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March 24, 2013, 07:26:39 PM
 #104

Hello, asked in discussion forum, but decided that maybe here it is more appropriate.

If now all exchanges have to be considered as MT and have to be registered as MSB then as I can understand redeemable codes are already included into regulation? So this should mean that mtGox can still provide USD codes.

right? or what I did not get?

Gox has contracted out all US/Canada to coinlab so you would have to ask them if they still do redeemable codes
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March 24, 2013, 08:04:28 PM
 #105

I know their answer. They discontinued them.

But they did it before FinCEN published their document.

And as I can remember  Shtylman mantioned that bitfloor will not implement codes because it was necessary tor register as MT.

So now when it is definitely known the in order for exchange to operate it has to register as MSB and also considerd as MT so maybe the situation as automatically fixed with codes?

or?

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March 24, 2013, 09:23:46 PM
 #106

Read most of this post but not all so I dont know if this has already been mentioned. This isnt really a problem it is easily avoided. What they do in japan is this..
The use steal rounds to gamble with, but gambling is illegal.. so what they do is gamble for the steal balls then sell them for lipstick then sell the lipstick for cash.
The government is fine with arrangement because it forces the revenues through a taxation system. The govenment wants to get payed when you use their currency. Which is fine by me. It does say in the ruling that miners can exchange thier coins for goods.

Of course it you sell for cash it is pretty easy to hide that revenue so small ex-changers will still sell for cash.   

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December 22, 2013, 05:09:32 PM
 #107

Did they bother to quote any:
  • laws
  • statutes
  • regulations
  • even policy announcements
to buttress their claim?

Don't be fooled. You will be tracked down through the blockchain. It IS NOT ANONYMOUS, there are a ton of ways to figure out who is who based on the exchanges logging your IPS and bank information. Whenever the government feels like it they will take the data. They are already hacked into everything else and can do whatever the F they want.

You are legally required to report any profit gained as a "Capital Gain" and eventually the government will get enough stuff together to prosecute people who don't. So if you made 10K profit and transferred to your bank or anything, it all has a trail, and the bank will be "obligated" to notify the government of your spending habits and income. That's kinda how it works. be prepared to get F-ed in a year or so.


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Razick
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December 22, 2013, 05:16:33 PM
 #108

I was looking at starting up a site that would sell bitcoins through credit card transactions as a US based business. Not wanting to run into immediate regulatory problems I gave FinCEN (Financial Crimes Enforcement Network) a call. It took them a couple of weeks to get back to me but the answer was yes that business would be required to register as a Money Service Business.

Yes, that is expected.  BitInstant is a register MSB, AFAIK.  A couple other exchanges based in the US are registered, or in the process of registering.

According to my research (WARNING: not a lawyer, seek your own professional advice) online bitcoin exchanges in the US would need to register in ~47 of 50 states, as well as registering as an MSB with the federal government.  (or limit the users accessing the website to a select few states)

There is a multi-state surety bond and registration process, making multi-state compliance a bit easier, but it is definitely a lot of paperwork and background checks required.



Heh, and thats the easy part!

You also need to do the following, just off the top of my head:
- Quarterly audits that you pay for
- Every 6 weeks you need a verified and updated AML Program
- Attend BSA training twice a year
- Bend over backwards and get anally raped every day....

The amount of red tape the government requires to do anything more than piss is just so beyond sanity it would be funny if it weren't ruining lives. But people watch MSNBC and ABC and think our problems are caused by Coca-Cola overpaying it's CEO. Give me break.

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December 22, 2013, 06:47:20 PM
 #109

Did they bother to quote any:
  • laws
  • statutes
  • regulations
  • even policy announcements
to buttress their claim?

Don't be fooled. You will be tracked down through the blockchain. It IS NOT ANONYMOUS, there are a ton of ways to figure out who is who based on the exchanges logging your IPS and bank information. Whenever the government feels like it they will take the data. They are already hacked into everything else and can do whatever the F they want.

You are legally required to report any profit gained as a "Capital Gain" and eventually the government will get enough stuff together to prosecute people who don't. So if you made 10K profit and transferred to your bank or anything, it all has a trail, and the bank will be "obligated" to notify the government of your spending habits and income. That's kinda how it works. be prepared to get F-ed in a year or so.

I must admit that I am somewhat mystified by your response. The topic was whether or not someone would need to register with FinCEN as an MSB. Nobody is talking about breaking the law, trying to hide behind the obfuscation of the blockchain.

Yes, bitcoin anonymity is fragile, and not something one should stake their freedom upon. We all get that.

I guess the second half of your response has to do with tax issues? Again, nobody is talking about tax evasion. How would someone 'get F-ed' when they are following all applicable laws and regulations?

Anyone with a campaign ad in their signature -- for an organization with which they are not otherwise affiliated -- is automatically deducted credibility points.
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December 30, 2013, 03:25:13 PM
 #110

Fuck them! Bitcoins in fact are digital signatures. You sign integer and recipients public key with your private key. So Bitcoins are more like service like SSL root authority instead of money like paypal.

P.S. next time call DEA and ask them what license you need to sell drugs on Silk Road. The future of Bitcoin is illegal that might destroy current establishment and governments. Again, fuck the government, fuck any regulations and  fuck them all! You have the tool in your computer - Bitcoin!

Great stuff! And ya, making the banksters into ancient middle-men is likely to land many of us in jail.

Sanity in BTC is insanity in the history of trading.
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January 02, 2014, 03:12:49 AM
 #111

Trying to get my head around the (FinCEN) "money transmitter laws". They're wording for "stored value" means cash, money orders, gift cards or anything with a fixed value from my understanding. Does that mean that anything that doesn't have a fixed value isn't considered a "stored value" and therefore doesn't fall under the "money transmitter laws"?

Example: If I run a service that trades bitcoin for pocket lint and there's an exchange for bitcoin and an exchange for pocket lint. Since both bitcoin and pocket lint are fluctuating in price at all times are they both then not considered a "storeded value" and legally I could run my shop and not be bound to the "money transmitter laws" when accepting one for the other?
BCB
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January 02, 2014, 03:20:10 AM
 #112

Trying to get my head around the (FinCEN) "money transmitter laws". They're wording for "stored value" means cash, money orders, gift cards or anything with a fixed value from my understanding. Does that mean that anything that doesn't have a fixed value isn't considered a "stored value" and therefore doesn't fall under the "money transmitter laws"?

Example: If I run a service that trades bitcoin for pocket lint and there's an exchange for bitcoin and an exchange for pocket lint. Since both bitcoin and pocket lint are fluctuating in price at all times are they both then not considered a "storeded value" and legally I could run my shop and not be bound to the "money transmitter laws" when accepting one for the other?

As far as I know pocket lint has no value and does not substitute for currency so you would NOT be a money transmitter.

However if you trade any other value that substitutes for currency you would be a money transmitter.

Also bitcoin is NOT "stored value" (the term now is prepaid) because this implies an issuer has a liability to pay at a later date.  With bitcoin there is no "issuer" and any "liability" is extinguished the moment you broadcast the bitcoin transaction.

Hope that helps.



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January 02, 2014, 12:49:11 PM
 #113

What is defined as being a "substitute for currency"? If I have a staple such as soap or a commodity such as oil and I open an exchange and trade bitcoin for them am I considered a "money transmitter"? To me both of those items, soap and oil have a price that is not fixed and wouldn't fall under the "money transmitter" laws or am I not understanding correctly? If they still do fall under the "money transmitter" laws what is the difference then if I was to work for bitcoin and got paid by my job in bitcoin? My value is not set and at anytime I could get a raise or a deduction in pay. I guess what I'm getting at is as long as I don't fall under the "money transmitter" wordage I'm legally able to take and exchange any item for bitcoin and only pay a tax when I convert my bitcoin to currency be it dollars or euro's correct?
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January 02, 2014, 01:39:37 PM
 #114

Do I need to register with FinCEN if i from oversea and  I am just buying BTC from US resident without physical presence in US.

https://localbitcoins.com/?ch=wx5
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January 02, 2014, 05:43:39 PM
 #115

What is defined as being a "substitute for currency"? If I have a staple such as soap or a commodity such as oil and I open an exchange and trade bitcoin for them am I considered a "money transmitter"? To me both of those items, soap and oil have a price that is not fixed and wouldn't fall under the "money transmitter" laws or am I not understanding correctly? If they still do fall under the "money transmitter" laws what is the difference then if I was to work for bitcoin and got paid by my job in bitcoin? My value is not set and at anytime I could get a raise or a deduction in pay. I guess what I'm getting at is as long as I don't fall under the "money transmitter" wordage I'm legally able to take and exchange any item for bitcoin and only pay a tax when I convert my bitcoin to currency be it dollars or euro's correct?

That is a question beyond my pay grade.  But FinCEN makes these determinations based on "Fact and Circumstance."  (As they did on the Milly/Atlantic City Bitcoin case).

So you would have to request an opinion from FinCEN.

 
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January 02, 2014, 05:51:54 PM
 #116

Do I need to register with FinCEN if i from oversea and  I am just buying BTC from US resident without physical presence in US.


I don't believe so.  As long as you were not turning around and selling that virtual currency to another person in the US in one of the 48 States with Money Transmitter Laws.

In the March 18th "interpretive Guidance" FinCEN defined three categories for persons dealing with virtual currencies:

Users
Exchangers
Issurer

"A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations."

FinCEN’s regulations define “person” as “an individual, a corporation, a partnership, a trust or estate, a joint stock company, an association, a syndicate, joint venture, or other unincorporated organization or group, an Indian Tribe (as that term is defined in the Indian Gaming Regulatory Act), and all entities cognizable as legal personalities.”

"A user is a person that obtains virtual currency to purchase goods or services."

How a person engages in “obtaining” a virtual currency may be described using any number of other terms, such as “earning,” “harvesting,” ”mining,” “creating,” “auto-generating,” “manufacturing,” or “purchasing,” depending on the details of the specific virtual currency model involved. For purposes of this guidance, the label applied to a particular process of obtaining a virtual currency is not material to the legal characterization under the BSA of the process or of the person engaging in the process.

http://fincen.gov/statutes_regs/guidance/pdf/FIN-2013-G001.pdf
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January 02, 2014, 07:06:51 PM
 #117

This is not legal advice, this is just food for thought. Possibly for a real horrible defense. But one that is real. All businesses should seek professional business legal guidance. Or just not become a business. If you can't afford the lawyers, you shouldn't be operating a business, try tag-sales.

Cupcakes do not have a fixed-value... (Asset)

Bitcoins are cupcakes, they have value in Yuan, Yen, USD, Euro... but not a "fixed value". Selling a cupcake for someone does not make you a money transmitter. You have no idea if they purchased the cupcake in Yuan, Yen, USD, Euro. The only thing that matters is what you give them, for the cupcake. If you give them cash, then you just purchased an asset of cupcakes. If you sell the cupcake for cash, you just made a capital gain on that cupcake asset.

You are a store, selling assets, if you use YOUR money to purchase the assets. If you use other peoples money, that makes you a distributor or drop-shipper of assets. (Which is similar to capital gains/losses, as you are a broker of an asset.)

Only sell what you BUY, and you are just a reseller. (Working within the confines of your own risk/loss, limited by your personal finances. Not using others finances and placing them at risk. By say... selling BTC that came from a forked-chain, which would require "insurance", to get your losses back, or require you to cover losses yourself.)

BTC is NOT...
A currency. It has no regulation or sole-ownership or fixed value.
A check. It has no regulation or sole-ownership or fixed value.
A bond. It has no regulation or sole-ownership or fixed value.
A stock. It has no regulation or sole-ownership or fixed value.
A commodity. It has no physical origins, regulations or sole-ownership.

BTC is...
A non-material virtual Asset. It has "claimed community-ownership", with "community accepted-ownership", with an "implied communal value". This is like saying you own the number "2", and want to sell it to someone. Only you have proof of ownership, of the number "2", in electronic form, that the community accepts as proof of ownership.

There are no laws for claiming to own the number "2". However, there are laws that determine what you can do with the claim of ownership of number "2". Which is standard tax laws, if you accept "money". But accepting to exchange number "2" for number "86", does not fall within the rights of any government, as the government does not own electrons, or the physical representations of those electrons, we call bits and bytes. Electrons are non-country-specific. Just because the "record" is on a US computer, does not make the COIN "2" property of the US, that simply makes the "record", property of the US, in the US. (Same if you kept a bank-statement here, for a swiss account of a friend. They can not claim ownership of the swiss account, because the record is here.)

Physical things created in a country, are not YOUR property. They are property of your country, with you having the right to USE the item, if you live in that country. Bitcoins have no physical form. Only physical "records". (Like a check, which is also not money.)

Saying you have to register as a money transmitter is like saying the airlines have to register as a money transmitter. Because they transport physical money across borders, from country to country, for exchange. Bitcoins are just the physical representation of ownership. The network/electrons are the transmitter, and is not a person, and there are no laws that machines/electrons must follow. That would make the ISP, the state, the govt itself, and the banks, the transmitters. They are already registered as money transmitters.

P.S. It is not LIKE owning the number "2", it is EXACTLY owning the number "2". You own the hash-value, which is a numerical representation of your ownership. It exists in every country, on the record, called the block-chain. It originated in-between atoms, as electrons, and was given "proof of ownership", by no specific regulated entity.
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January 02, 2014, 08:12:54 PM
 #118

Good explanation ISAWHIM. I've read the (FinCEN) PDF document twice now that BCB posted. To me two things stand out and correct me if I'm wrong but the below sounds like they're taking the term "convertible virtual currency" as meaning an item that holds a value such as a deed, title or bond that's held in electronic format and used to exchange for legal tender.

Currency vs. Virtual Currency
FinCEN’s regulations define currency (also referred to as “real” currency) as “the coin
and paper money of the United States or of any other country that is designated as legal tender
and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the
country of issuance.” In contrast to real currency, “virtual” currency is a medium of exchange
that operates like a currency in some environments, but does not have all the attributes of real
currency. In particular, virtual currency does not have legal tender status in any jurisdiction.
This guidance addresses “convertible” virtual currency. This type of virtual currency either has
an equivalent value in real currency, or acts as a substitute for real currency.

The other thing that stands out to me is the wordage on "prepaid". Does the below mean that prepaid is perfectly fine to exchange bitcoin for and doesn't fall under (FinCEN)?

A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations. However, an administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. An administrator or exchanger is not a provider or seller of prepaid access, or a dealer in foreign exchange, under FinCEN’s regulations.
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January 02, 2014, 09:01:52 PM
 #119

Your observations are correct... except on the prepaid component... I believe that is too open-ended of an observation there.

It depends "what you do with the asset".

This is coming from a loose explanation from my mother, who works for the IRS. She deals with these questions every day at work. Again, consult an actual lawyer. This is just third-party translation.

In the USA...
If you accept USD, and give Yuan... you are, "yourself", acting as an exchange/money-exchanger. (Trades for differences.)

*** Grey area... (Just this one below.)
If you accept Yuan, and give USD... you are, "yourself", acting as a store/reseller or an exchange/money-exchanger. (Depends WHO you give the money to.)

If you accept USD for YOUR BTC, and give YOUR USD for BTC... you are, "yourself", acting as a store/reseller.

If you take USD on someones behalf for someone-else's BTC, without using YOUR BTC, for sale to another person... You are a broker/money-handler.

* Replace any "prepaid", credit/dollar with USD/Yuan, and it is the "same as", currency. (Except BTC.)

The purpose of registering, is for volume-records and fraud-protection and possible insurance. Since you are handling "potential", large volumes of "potential", stolen funds. They want to make sure you have the ability to confirm the owners of the transactions, and have the ability to reduce loss to the ones who would be the "victims", from YOU handing out MONEY (which is not yours), to the thieves.

If it is YOUR money... the risk of loss is all yours, and they don't care if you lose. As an individual. That is all registration is for. If you are the one assisting laundering, inadvertently, that too is your risk, if it is your money used. (Used = exchanged for BTC. It is a crime to accept money/assets from criminals, or to fund criminal activities with money/assets. Which is why you should always know who you get the money/assets from, and who you give it to.)

Then, there is the tax-reasons... But, if it is your funds, you are the only one responsible for your claims. Your registration as an exchange/broker, is so YOU don't end-up having to pay taxes on your-customers holdings, as if they were your own holdings. (Any unidentified funds will be audited as if they were your funds, and you will be held accountable for those taxes on those unidentified owners gains/holdings.)

Also, when "holding" others money, to ensure you are not just spending all the BTC and FUNDS, thus fraudulently just giving people fictitious "credit", waiting for others to forward-deposit replacement funds... They require things like "auditable public accounts", which can be "seen", holding a percentage of the "credited funds", that you are giving these people credit for. (Eg, you can't just say someone has 100 BTC and another person has $10,000... but have yourself cashed-out the BTC and spent the $10,000... and hope they just don't withdraw before a new person deposits another 100BTC or $10,000 to cover the withdraw request. That would make your operations a pyramid-scheme, or a HYIP-scheme, which is another reason they want you to register.)
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January 02, 2014, 09:16:57 PM
 #120

Also... FinCEN also says...

If you MINE/BUY BTC for YOURSELF to SELL, in your own countries currency, to a confirmed person in your country... you do not have to register. (But the IRS laws still require you to claim ASSET-VALUES for holdings and losses/gains, on a personal/business level.)

This is old news though...

This has already been beat to death with IMVU.com funds, Second-Life Lindens, World-of-warcraft gold, and various other forms of online virtual funds.

Good resources there. Just ask any of those exchangers how they do it. Most of them operate globally, legally.
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