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Author Topic: FinCEN says you must be MSB if you sell bitcoins for $  (Read 20500 times)
Malophor
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October 22, 2012, 12:04:07 PM
 #61

I have the reply on voicemail. I'll transcribe it here for what the official answer was tomorrow. I also understand that their calls are subject to FOIA requests so I expect this now an official documented reply.

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October 22, 2012, 12:59:59 PM
 #62

I have the reply on voicemail. I'll transcribe it here for what the official answer was tomorrow. I also understand that their calls are subject to FOIA requests so I expect this now an official documented reply.

What I'd like to know is how often and how hard did you have to insist on bitcoins being a currency and what legal determination was used as basis for this belief.

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October 23, 2012, 08:45:01 AM
 #63

I didn't have to insist on anything. They were really professional. The person I was speaking with thought the question was really interesting and importnat to answer correctly. He asked me a lot of questions about who would use bitcoins, why, and what kind of a business model I was considering. I did need to explain how bitcoin was not a ponzi scheme and how that despite the lack intrinsic value people still assign them value.

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October 23, 2012, 10:44:02 AM
 #64

I didn't have to insist on anything. They were really professional. The person I was speaking with thought the question was really interesting and importnat to answer correctly. He asked me a lot of questions about who would use bitcoins, why, and what kind of a business model I was considering. I did need to explain how bitcoin was not a ponzi scheme and how that despite the lack intrinsic value people still assign them value.

Well I'm pretty sure you made a fallacious case for bitcoins legally speaking being something they are not and they happily bought it. Thanks for doing all of us this disservice of now having to fight an assumption by a mafia that has no basis in fact. You practically guaranteed that it'll also stay that way since the mere threat of violence under this false assumption will shut down most entrepreneurs who might have thought they needn't worry about regulations.

And if you think I'm being too harsh, you should think again. Legally speaking bitcoins are not defined what they are. Yes we pretend they are a currency and we call it a currency but legally speaking we don't know what they are. They might be speech for all we know, legally speaking. And I'm sorry but this kind of foolishness of asking a mafia for their opinion and then permission just irritates me to no end. If you really want to be some mafia's bitch, fine, be so on your own but don't drag the rest of us down with you.

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

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October 23, 2012, 12:59:11 PM
 #65

I didn't have to insist on anything. They were really professional. The person I was speaking with thought the question was really interesting and importnat to answer correctly. He asked me a lot of questions about who would use bitcoins, why, and what kind of a business model I was considering. I did need to explain how bitcoin was not a ponzi scheme and how that despite the lack intrinsic value people still assign them value.

So what class of MSB activity did the regulatory say buying bitcoins fall under?
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October 23, 2012, 01:07:27 PM
 #66

I have the reply on voicemail. I'll transcribe it here for what the official answer was tomorrow. I also understand that their calls are subject to FOIA requests so I expect this now an official documented reply.
We're tomorrow, and I'm very interested in the transcript Smiley

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October 23, 2012, 01:40:25 PM
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Me too, actually I would like to here the recording honestly.

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October 23, 2012, 05:22:00 PM
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Here is the transcript:

"Hello this call is for <me>. This is Anthony from FinCEN. I'm getting back to you after a few weeks. I apologize for the delay. I just wanted to make sure I got a proper answer for you. The bottom line answer for the scenario you describe to us you would be a Money Service Business. That is because you would be a money transmitter purchasing a valuable and using it as money and doing it by means of transmission. So, if that is enough I hope that helps you. In any case, feel free to call us back. Have a good day."


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October 23, 2012, 05:25:48 PM
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I didn't have to insist on anything. They were really professional. The person I was speaking with thought the question was really interesting and importnat to answer correctly. He asked me a lot of questions about who would use bitcoins, why, and what kind of a business model I was considering. I did need to explain how bitcoin was not a ponzi scheme and how that despite the lack intrinsic value people still assign them value.

Well I'm pretty sure you made a fallacious case for bitcoins legally speaking being something they are not and they happily bought it. Thanks for doing all of us this disservice of now having to fight an assumption by a mafia that has no basis in fact. You practically guaranteed that it'll also stay that way since the mere threat of violence under this false assumption will shut down most entrepreneurs who might have thought they needn't worry about regulations.

And if you think I'm being too harsh, you should think again. Legally speaking bitcoins are not defined what they are. Yes we pretend they are a currency and we call it a currency but legally speaking we don't know what they are. They might be speech for all we know, legally speaking. And I'm sorry but this kind of foolishness of asking a mafia for their opinion and then permission just irritates me to no end. If you really want to be some mafia's bitch, fine, be so on your own but don't drag the rest of us down with you.

I had a legitimate concern about a business proposition. I investigated it with the people responsible for enforcement of the law and got the answer. I'm simply sharing that question and answer back here with the community. I am just the messenger here. If you have a problem with that answer you can call FinCEN yourself.

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October 23, 2012, 05:39:27 PM
 #70

Here is the transcript:
Quote
"Hello this call is for <me>. This is Anthony from FinCEN. I'm getting back to you after a few weeks. I apologize for the delay. I just wanted to make sure I got a proper answer for you. The bottom line answer for the scenario you describe to us you would be a Money Service Business. That is because you would be a money transmitter purchasing a valuable and using it as money and doing it by means of transmission. So, if that is enough I hope that helps you. In any case, feel free to call us back. Have a good day."

Interesting.   What was the scenario?  The reason I ask is that Money Transmitter is a very tough license to get.  Almost every state requires a MT license and it involves posting a bond, undergoing background checks of beneficial owners, detailed third party auditing of financials, proof of sufficient capital reserves (i.e. sworn statement by bank officers, etc).  So merely registering with FinCEN wouldn't make one compliant as a money transmitter.  If anything it would be used as evidence by the states as to your willful non-compliance.  To my knowledge no Bitcoin related business has a Money Transmitter license (type 409 MSB).  

Simply "purchasing a valuable" and paying customers doesn't make one a money transmitter. For example the largest retail gold buyer in the US (APMEX) doesn't have a money transmitter license (or any MSB license).  They buy "purchasing a valuable" (gold) and pay sellers via a transmission (ACH or bank wire).

So I wonder what exactly you described?

FinCEN definition of a "money transmitter".
http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=d5570d7646c5fc13fe1fa42a61d1dcf1&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.1.3.1

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(5) Money transmitter —(i) In general.
(A) A person that provides money transmission services. The term “money transmission services” means the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means. “Any means” includes, but is not limited to, through a financial agency or institution; a Federal Reserve Bank or other facility of one or more Federal Reserve Banks, the Board of Governors of the Federal Reserve System, or both; an electronic funds transfer network; or an informal value transfer system; or

(B) Any other person engaged in the transfer of funds.

(ii) Facts and circumstances; Limitations. Whether a person is a money transmitter as described in this section is a matter of facts and circumstances. The term “money transmitter” shall not include a person that only:

(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;

(B) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller;

(C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions. This includes but is not limited to the Fedwire system, electronic funds transfer networks, certain registered clearing agencies regulated by the Securities and Exchange Commission (“SEC”), and derivatives clearing organizations, or other clearinghouse arrangements established by a financial agency or institution;

(D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person primarily engaged in such business, such as an armored car, from one person to the same person at another location or to an account belonging to the same person at a financial institution, provided that the person engaged in physical transportation has no more than a custodial interest in the currency, other monetary instruments, other commercial paper, or other value at any point during the transportation;

(E) Provides prepaid access; or

(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

The agents response would seem to indicate he is stating that bitcoin is a "currency substitute" which would be a rather broadening of the definition. Bitcoin has no pre-designated value, there is no guaranteed redemption, no insurance or backing (in the sense of capital reserves).  If it is a "currency substitute" than essentially anything is.  Network bandwidth, or electricity could be viewed as a currency substitute.

Now it may be FinCEN declaration that bitcoin IS a currency substitute (they certainly "can" make that declaration) however given that the central axis around MSB/MT requirement it should have been explicitly stated "..... since bitcoin is a currency substitute ... the scenario you described ...".  To not do so is well weird.
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October 23, 2012, 05:50:17 PM
 #71

Great job looking into that Death, That call is way to vague I would call back and ask them why they felt this way and under what laws. If they are as helpful as they seem they will be more then happy to get that information to you.

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October 23, 2012, 06:10:10 PM
 #72

The scenario I described to them on a previous call was starting a business that offered a website accepting credit card payments in exchange for bitcoins. It took about an hour to explain what bitcoins were, why people would be interested in the business, and what bitcoins are used for. I agree that the reply message was vague as to the reasoning, but, I don't really care to challenge their lawyers on the matter. I really just wanted a yes or no answer. And I got it. So, if you are going to sell bitcoins for dollars -- register as a MSB. It's actually not that difficult. Being a money transmitter (different than MSB) is on a state by state basis and it seems to have a large cost of entry.

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October 23, 2012, 06:14:17 PM
 #73

The scenario I described to them on a previous call was starting a business that offered a website accepting credit card payments in exchange for bitcoins. It took about an hour to explain what bitcoins were, why people would be interested in the business, and what bitcoins are used for. I agree that the reply message was vague as to the reasoning, but, I don't really care to challenge their lawyers on the matter. I really just wanted a yes or no answer. And I got it. So, if you are going to sell bitcoins for dollars -- register as a MSB. It's actually not that difficult. Being a money transmitter (different than MSB) is on a state by state basis and it seems to have a large cost of entry.

Worst advice ever.

Based on what the agent told you registering as an MSB would be insufficient.  He stated that you need to register as an MSB BECAUSE YOU WOULD BE A MONEY TRANSMITTER.  

Quote
The bottom line answer for the scenario you describe to us you would be a Money Service Business. That is because you would be a money transmitter purchasing a valuable and using it as money and doing it by means of transmission. So, if that is enough I hope that helps you. In any case, feel free to call us back. Have a good day.

When you register as an MSB you need to indicate the regulated activities you will be engaging in.  It is the agents opinion (based on the unknown circumstances and details you provided) that the reason for MSB registration is that you would be a "money transmitter".

Simply registering as an MSB (stating the reason for registration is Money Transmitter) and then not complying with state laws & requirements would be the worst possible scenario.   Your registration would indicate you understand AND AGREE that you are a money transmitter you simply are choosing to willfully violate the law.

You do realize there is no such thing as a generic "MSB registration" right?  I linked to a screenshot of the form upthread.   The MSB registration requires you to state EXPLICITLY what MSB ACTIVITY (such as money transmitter) you will be engaging in.
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October 23, 2012, 06:17:05 PM
 #74

I would also like to throw this into the discussion:

What if you own an island on international waters and you would "run" you business there.

Would you be subjuct to some sort of international law?

Pirate radio's for example like to sit out in international waters, so why not businesses?
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October 23, 2012, 06:25:06 PM
 #75

The scenario I described to them on a previous call was starting a business that offered a website accepting credit card payments in exchange for bitcoins. It took about an hour to explain what bitcoins were, why people would be interested in the business, and what bitcoins are used for. I agree that the reply message was vague as to the reasoning, but, I don't really care to challenge their lawyers on the matter. I really just wanted a yes or no answer. And I got it. So, if you are going to sell bitcoins for dollars -- register as a MSB. It's actually not that difficult. Being a money transmitter (different than MSB) is on a state by state basis and it seems to have a large cost of entry.

Worst advice ever.

Based on what the agent told you registering as an MSB would be insufficient.  He stated that you need to register as an MSB BECAUSE YOU WOULD BE A MONEY TRANSMITTER.  Registration as an MSB (selecting the activity of Money Transmitter) would then open one up to the state requirements for Money Transmitter.  Not meeting those requirements would result in penalties (possibly even jail time).  One couldn't even argue they believe they aren't a money transmitter as they registered as one with the federal government.

You do realize there is no such thing as a generic "MSB registration" right?  I linked to a screenshot of the form upthread.   The MSB registration requires you to state EXPLICITLY what MSB ACTIVITY (such as money transmitter) you will be engaging in.


You get what you pay for. Free advice on the forums should be taken as just that.

Money transmitter as defined by FinCEN is not the same as money transmitter as define by the state of x. They have different standards. FinCEN only updated their rules in the last 2 years with the "informal value transfer system" bit at the end of 5(A). This was not in my state regulations. But, I don't have an official answer from the state.

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Gerald Davis


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October 23, 2012, 06:31:45 PM
 #76

You get what you pay for. Free advice on the forums should be taken as just that.

Money transmitter as defined by FinCEN is not the same as money transmitter as define by the state of x. They have different standards. FinCEN only updated their rules in the last 2 years with the "informal value transfer system" bit at the end of 5(A). This was not in my state regulations. But, I don't have an official answer from the state.

The other 49 states?  Multiple states require a money transmitter license if you even offer services to residents of that state.  Mere registration isn't compliance.  Advising others to register without compliance is just asinine.  It is an admission that you accept the regulatory definition and yet plan on willfully not complying with any requirements.
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October 23, 2012, 06:34:16 PM
 #77

  It is an admission that you accept the regulatory definition and yet plan on not willfully breaking the law.

Catch 22 I think they call that

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October 23, 2012, 06:36:39 PM
 #78

By the way, everyone I know of who has asked this question to lawyers (and that is more than two but fewer than ten) has gotten the same response. The FinCEN definition of money transmitter is: "A person that provides money transmission services", which is defined as "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means."

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October 23, 2012, 06:51:21 PM
 #79

It took about an hour to explain what bitcoins were

Like I said, I just wonder how many times you had to insist bitcoins were a currency.. and I have no problem believing it took you an hour to achieve that.

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October 23, 2012, 06:53:12 PM
 #80

First they he said when they asked "What are bitcoins?" They are a Digital Currency.................

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