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Author Topic: The altcoin topic everyone wants to sweep under the rug  (Read 24164 times)
smooth
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December 22, 2015, 02:46:46 AM
 #101

My point is that because of the broadness of the FinCEN mandate if a virtual currency meets the very narrow FinCEN requirement of de-centralized virtual currency then it also fails the Howey test but not the other way around. I fail to see how a crypto - currency can be both a de-centralized virtual currency under the FinCEN requirements and at the same time pass the Howey test making the currency itself a security.

So your point is that because FinCEN has defined how a decentralized crypto currency can be "money", then "money" can't also be an investment security.

This is failure of logic because FinCEN's guidance is not exclusionary. Saying that decentralized crypto currency has an attribute which is that it shall be considered "money" from the perspective of FinCEN's jurisdiction and mandate over money transfers, is not saying that decentralized currency is only "money" in every other case of jurisdiction and mandate. If you can find any where that FinCEN wrote that decentralized currency is ONLY money and nothing else, then please do. There is a big difference between qualifying as a money equivalent for the purposes of FinCEN's jurisdiction and being declared to be ONLY money in every possible case. Otherwise this exhibits that you don't understand well legalese.

The Howey test will look at the economic facts and no obfuscations will color the inspection of the facts.

Edit: Also even that which is money to users in the FinCEN guidance doesn't preclude those tokens having investment attributes to issuers and speculators. FinCEN even makes a distinction between different types of entities involved with crypto currency, such as miners, issuers, etc..

I don't think that was his argument. It was that FinCEN's exemptions for decentralized virtual currencies are so narrow that it probably satisfies the SEC as well. Maybe true, maybe not. Certainly the SEC is not bound by FinCEN, however the issues have significant overlap.

Also, on the pre-mine issue, he quoted from FinCEN which says that if you "create" or "issue" units, you are an "administrator". Hard to make the case that anyone who premines or ICOs is not an "administrator" under this rule.

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December 26, 2015, 01:35:40 AM
 #102

My point is that because of the broadness of the FinCEN mandate if a virtual currency meets the very narrow FinCEN requirement of de-centralized virtual currency then it also fails the Howey test but not the other way around. I fail to see how a crypto - currency can be both a de-centralized virtual currency under the FinCEN requirements and at the same time pass the Howey test making the currency itself a security.

So your point is that because FinCEN has defined how a decentralized crypto currency can be "money", then "money" can't also be an investment security.

This is failure of logic because FinCEN's guidance is not exclusionary. Saying that decentralized crypto currency has an attribute which is that it shall be considered "money" from the perspective of FinCEN's jurisdiction and mandate over money transfers, is not saying that decentralized currency is only "money" in every other case of jurisdiction and mandate. If you can find any where that FinCEN wrote that decentralized currency is ONLY money and nothing else, then please do. There is a big difference between qualifying as a money equivalent for the purposes of FinCEN's jurisdiction and being declared to be ONLY money in every possible case. Otherwise this exhibits that you don't understand well legalese.

The Howey test will look at the economic facts and no obfuscations will color the inspection of the facts.

Edit: Also even that which is money to users in the FinCEN guidance doesn't preclude those tokens having investment attributes to issuers and speculators. FinCEN even makes a distinction between different types of entities involved with crypto currency, such as miners, issuers, etc..

I don't think that was his argument. It was that FinCEN's exemptions for decentralized virtual currencies are so narrow that it probably satisfies the SEC as well. Maybe true, maybe not. Certainly the SEC is not bound by FinCEN, however the issues have significant overlap.

Also, on the pre-mine issue, he quoted from FinCEN which says that if you "create" or "issue" units, you are an "administrator". Hard to make the case that anyone who premines or ICOs is not an "administrator" under this rule.

Get your facts straight. Afair, FinCEN (in more than one document, reiterating it in that prosecution) said if you create or issue AND redeem. The point is that by issuing and redeeming, then you are acting as an administrator from a money transmitting perspective, which is FinCEN's mandate.

I don't understand how some bizarro interpretation of narrowness has anything to with the SEC as their mandate is to protect investors. FinCEN doesn't have that mandate.

Seems like a lot of nonsense. You guys don't seem to base your analysis on the mandate and purpose of the agency, that is why you don't seem to make sense of their guidance.

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December 26, 2015, 10:20:56 AM
 #103

I hope more ICOs will come so we might see scammers buying expensive drinks and hookers like EQX coin back in the good old times
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January 09, 2016, 08:49:01 PM
Last edit: January 09, 2016, 09:32:02 PM by TPTB_need_war
 #104

Since you are talking shares anyway, why not simply issue so many common stock shares that they are tiny value per share, comparable to a cryptocurrency value per coin or maybe less since shares have no decimal-places they are whole things, integer things; issue the shares on an existing platform such as HORIZON or NXT or Ethereum or the like, and use the API of that platform from your app to let people earn shares.

-MarkM-


That's brilliant, the only downside being compliance with federal securities laws.

I've looked into that. The nasty little surprise is the "Howey test", which allows the SEC to go after any vehicle so long as it meets this four criteria:

1. It has to be sold for money.
2. It has to be intimately tied to a common enterprise, not an aggregation of enterprises.
3. A reasonable person considering whether or not to buy it will be motivated by the hope of profit when deciding to buy or pass.
4. The expected profits are to be realized by the efforts of a centralized group headed up by the promoter, or the efforts of the promoter him- or herself.

Cryptocurrency-wise, #4 is the easiest to avoid for a true decentralized cryptocurrency. So long as you encourage, or at least allow, any independent party or parties to build value-adding services using your cryptocurrency which have the effect of making the crypto more valuable, I think you can make a good case for criterion #4 being false. To qualify as a security, all four criteria have to be met. If one of the four criteria is false, your crypto will not be a security by this test.

By my reckoning, your best bet is to focus on #4 rather than trying to get clever or cute with #1. ["The IRS said Bitcoin is property, not money, and I sold it for Bitcoin!"] Better yet, focus on #4 and #2 by actively encouraging as many independent folks as possible to build value for your crypto. In this sense, the crypto most unlike a security is Dogecoin. To prove it meets the Howey test, the SEC would have to prove a conspiracy theory. That's possible in a court, but it's an onerous procedure unless the conspiracy is small in membership. With respect to Dogecoin, the SEC might as well be hawking the "Protocols of the Elders of Shibe" (if you get my drift.)

One notorious crypto, Paycoin, did meet the Haney test because its promoter, Josh Garza, personally promised that he'd buy back the ones he sold at a price of twenty dollars each through an organization he controlled. This promise sunk him; the fact that he reneged on it sunk him hard.

Disclaimer: I'm not a lawyer, only a Googler. Don't listen to me unless you want to go overboard to pass the "smell test." You cannot rely on me for a technicality-driven measn to avoid the Howey test.

Afaics, the Howey test only requires that investors had a reasonable cause to expect their gains would come from the efforts of some group or community. So if you are pitching your coin to investors, I think you will be culpable. Just being decentralized in terms of distribution of the coins (and not selling it directly) doesn't appear to be sufficient. The Supreme Court said it will look past any obfuscations and always at the underlying economic reality, meaning whether the investors were reasonably relying on the lead developer for their future returns.

To bypass the Howey test, I suggest distributing the coin to non-investors (initial distribution) and diversify the ecosystem as soon as possible so the future performance of the tokens is not tied to the lead developer. These HODLer coins that have nearly no usership can't accomplish this.

Disclaimer: I am not a lawyer.

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January 09, 2016, 08:59:20 PM
 #105

Cross-referencing and wondering why no one wants to rationally discuss this topic?

https://bitcointalk.org/index.php?topic=1218269.0

I would make that list on the OP a bit simpler for simpletons like myself.The questions look too formal/sanitised for the majority of peeps who tune in and I have looked at a few of your threads and they are interesting but some of the points I would compress a bit.Maybe something like

question= is it illegal to premine a coin and sell it through an ICO/IPO and then run off with all the raised funds and do no development leaving the buyers/investors/community swinging in the breeze?

answer=yes and if not it pretty much should be

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January 10, 2016, 02:19:06 AM
 #106

Hopefully, we would be OK with regard to securities law if we premine 100% and distribute those coins to users of our app at no cost.

I think so if you can also get many other apps to use your coins and create a huge diverse ecosystem for these tokens (but I don't think you can do that without losing your focus on your app!), but consult your own attorney. Note smooth and others felt premine was culpable. I argued against that. None of us are lawyers.

I doubt distributing 100% at no cost is a problem.

How do you prove 100% was distributed not to yourself? I think you should remove the "100%" and reconsider if that changes your stance since you were stating in my thread that a premine is culpable.

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January 10, 2016, 11:49:24 AM
Last edit: January 10, 2016, 12:03:09 PM by TPTB_need_war
 #107

I replied to you in the long thread about the Howey test.

Your reply:

Afaics, the Howey test only requires that investors had a reasonable cause to expect their gains would come from the efforts of some group or community. So if you are pitching your coin to investors, I think you will be culpable. Just being decentralized in terms of distribution of the coins (and not selling it directly) doesn't appear to be sufficient. The Supreme Court said it will look past any obfuscations and always at the underlying economic reality, meaning whether the investors were reasonably relying on the lead developer for their future returns.

says that you're either antsier or more prudent than I. You seem reluctant to accept that Howey requires that all four criteria be met, and even more reluctant to recognize the efficacy of a "best-efforts" defense. Did you read the link I supplied, or the Wikipedia article on Howey? W.J. Howey went out of his way to discourage independent action. By my lights, that's the complete opposite of the peer-to-peer foundations of cryptocurrency. As I noted, I'm no lawyer myself...but I fail to see why a best-efforts defense backed up by repeatedly and publicly encouraging independent entrepreneurial action won't hold up.

A capable lawyer could really drag out the case by slowly and emphatically introducing every individual exhortation by the dev (team) to build an independent service for the cryptocurrency - as Defense Exhibit A, B, C, and so on in a performance that would be a lot like a filibuster - and not stop introducing them until he runs out, or is shouted down by the judge (which would give him good grounds to "except" [i.e., indirectly object and give notice of a future appeal.]) or until the prosecutor agreed to stipulate that there's a pattern of exhortation that's the opposite of the pattern of W.J. Howey's exhortations. To mount a defense of this kind, all you need to do is be somewhat of a nag. Tongue

I can probably safely assume you didn't read the entire thread of prior discussion and analysis at the link I provided to you. I don't have time to go redigest that thread again, so I will just attempt to broadly resummarize from memory. You should refer to the thread to dig deeper.

I had read the actual Supreme Court text and not just summary of interpretation. The judgement revolves around the interpretation of the meaning of "investment contract" and it specifically says that there are no specific cases that will preclude the interpretation of the economic reality:

Quote from: SEC v. W. J. Howey Co.
The term 'investment contract' is undefined [...]it had been broadly construed by state courts so as to afford the investing public a full measure of protection. Form was disregarded for substance and emphasis was placed upon economic reality. An investment contract thus came to mean a contract or scheme for 'the placing of capital or laying out of money in a way intended to secure income or profit

So there are no specific rules. The court will look at the economic reality of whether participants were placing of capital or laying out money in expectation of profit. Note that 'capital' might not even mean money. It can include applying their effort, which is a form of human capital. I confirmed this by reading in depth other expert interpretations and subsequent case law.

It appears to me that the court will look at the reasonable expectations of the participants. And always side with protecting the public. Thus my interpretation is if the participants are not investing but just using your tokens, then they don't need to be protected by securities registration. However if your tokens are being invested in by investors expecting a profit, then you need to register then with the SEC. This is why I advised making sure the ecosystem is well diversified asap, so that by the time investors start accumulating the tokens, then it can't be alleged that the investors were basing their investment on the ongoing effort of the original developers of the coin. It is with this interpretation that I have concluded that even coins (such as Aeon and Monero) which distributed their coins via PoW are still culpable under this law. And I don't understand why smooth is risking his already lucrative employment as a software developer to work on a coin that could end up getting him in big trouble. He doesn't need that! And for what gain? IMO Monero and Aeon are not solving any major paradigmatic issues for crypto. OTOH, since they are very small fish, they are likely to never amount to any legal case, but again why waste effort?

But again I am not a lawyer, so you can't cite my posts as legal advice!!

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January 30, 2016, 04:50:30 AM
 #108

SEC, "Some mining contracts are securities":


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February 01, 2016, 01:50:14 AM
 #109

Warned Zcash their plans for an 11% royalty on coin emission may run afoul of FinCEN guidance, and also suggesting they read this thread about the Howey test.

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February 01, 2016, 11:24:57 PM
 #110

Warned Zcash their plans for an 11% royalty on coin emission may run afoul of FinCEN guidance, and also suggesting they read this thread about the Howey test.

Surely team Zooko have considered this and have a plan to meet any fincen requirements. If not, the zcash is a dead man walking and someone will fork and release a clone without the 11% elephant baggage. Some smart tech people can be quite stupid ...
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February 02, 2016, 07:13:31 AM
Last edit: February 02, 2016, 08:33:31 AM by TPTB_need_war
 #111

Warned Zcash their plans for an 11% royalty on coin emission may run afoul of FinCEN guidance, and also suggesting they read this thread about the Howey test.

Surely team Zooko have considered this and have a plan to meet any fincen requirements. If not, the zcash is a dead man walking and someone will fork and release a clone without the 11% elephant baggage. Some smart tech people can be quite stupid ...

Appears they are really this clueless:

Zooko (CEO of Zcash) is answering questions live now for the next 2 hours if anyone wants to participate:

https://forum.bitcoin.com/post16211.html

See my (shelby3's) posts in the above thread for numerous gaps in Zooko's knowledge about crypto currency (their team really needs someone like me but they've screwed up the funding model so I won't be joining them, much better to fork their code which is something I will be able to do if my other plans are successful giving me adequate resources to hire the necessary zk-snarks experts and then I can also expand it to smart contracts while fixing Ethereum's insoluble flaw). There is no way they can meet FinCEN regulations for the miners, because the corporation is not the miners. The miners will need to comply, or not mine.

Readers I urge you to read my posts in that thread linked above wherein I correct numerous myopias of Zooko. It will be very educational. I have explained some scams going on for Bitcoin right now.

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February 02, 2016, 08:15:26 AM
 #112

Warned Zcash their plans for an 11% royalty on coin emission may run afoul of FinCEN guidance, and also suggesting they read this thread about the Howey test.

Surely team Zooko have considered this and have a plan to meet any fincen requirements. If not, the zcash is a dead man walking and someone will fork and release a clone without the 11% elephant baggage. Some smart tech people can be quite stupid ...

In the AMA Zooko was ignoring that specific question, he answered promptly to everything else.

That tells me he

a) pretends the issue doesn't exist and hopes it goes silently away as he has $1M duty to his investors
or
b) is careful not to say anything about it in public in order to claim ignorance later.
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February 02, 2016, 08:23:40 AM
 #113

Warned Zcash their plans for an 11% royalty on coin emission may run afoul of FinCEN guidance, and also suggesting they read this thread about the Howey test.

Surely team Zooko have considered this and have a plan to meet any fincen requirements. If not, the zcash is a dead man walking and someone will fork and release a clone without the 11% elephant baggage. Some smart tech people can be quite stupid ...

In the AMA Zooko was ignoring that specific question, he answered promptly to everything else.

That tells me he

a) pretends the issue doesn't exist and hopes it goes silently away as he has $1M duty to his investors
or
b) is careful not to say anything about it in public in order to claim ignorance later.

Or his legal counsel has advised him to not discuss such issues in public.

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February 12, 2016, 08:03:45 AM
Last edit: February 12, 2016, 08:33:14 AM by TPTB_need_war
 #114

Zcash does not understand this thread about funding and distribution models and I also point out how the recent Ethereum shrilling has thus made Ethereum illegal:

Have you done[published very transparently and with equal emphasis to other technobabble hype] any analysis?

You should be asking Ethereum that question.

Did Nick "Satoshi" Szabo mention any such analysis during his apparent endorsement of Ethereum in his presentation where he promoted centralization as a problem.

Did Ethereum just violate the SEC securities law by underpromoting transparency (c.f. the linked Coin Center report), e.g. hiding it in obscure layers as r0ach has shown and put talking head Vitalik on a stage to promote the shit out of it with technobabble.

Quote from: Zooko CEO of Zcash
The most important fact is that an "Initial Coin Offering" could potentially be treated as selling a security by SEC or other securities regulators. See the new report “Is Bitcoin A Security?” by the excellent Coin Center crew to understand what that means and when it might apply:
 https://coincenter.org/2016/01/is-bitcoin-a-security/

So this is the number one fact that determined my decision: doing an ICO would risk legal consequences that could prevent the technology from ever being built.

     (The Coin Center report actually cites us as an example of how to avoid this legal issue.)

I had studied that Coin Center report in the past and their conceptualization of the Howey test (pg. 41 of the report) is incorrect! The test is not some explicit set of 4 attributes as the Coin Center claims but rather the Supreme Court explicitly stated it will overlook all obfuscations and distill to the economic reality of who is creating the expectations of investors (implied by any means, not just those 4 attributes so enumerated)! For example, the points on pg. 30 (32 of the PDF) and pp. 38 - 40 are linking profit by developers to the Howey test, but rather I argue the Howey test looks not primarily at profits by developers (although that is also a necessary ingredient) but rather whether the developers promoted expectations for gains amongst the investors. The term 'security' means another entity is securing (i.e. responsible for in the eye of the investor for) the outcome. Note IANAL though.

Pleeeeaaaaaassssseeee don't insinuate to us that your company is basing its decision on a report from the Coin Center and has not consulted its own legal counsel. You need your own legal counsel to indemnify you from this risk.

That Coin Center report has technical errors as well, such as they claim on pg. 15 (17 of the PDF) that a 51% attack can't create coins out of the thin air nor otherwise alter the consensus protocol, but what they fail to realize is that the minority mining can't fork away from the 51% attack because the 51% attack can always create the longest chain on any new fork as well. So the minority mining is powerless and thus the users of the coin have no choice but to the use the 51% attacked protocol, so their cois are not locked up (jammed). Also that Coin Center report claims it is very expensive to sustain a 51% attack, but this fails to mention the case where the cost is charged to the collective by the corrupt State, such as may be the case in China (which controls 65% of Bitcoin's hashrate) where perhaps a wink and a handshake gets you free electricity from the Three Gorges Dam.

The Coin Center repeats that technical error on pg. 19 (21 of the PDF) wherein they formulate a thus erroneous distinction between proof-of-work (PoW) and permissioned block chains. On pg. 20 (22 of the PDF), the report makes an erroneous claim about proof-of-stake (PoS) coins being more expensive to acquire as the coin's price rises, because as we explained, PoS has lack of Nash equilibrium failure modes of which includes the fact that externalities can be employed to pay for attacking the coin, most especially because the attack cost is paid only once and not ongoing as for PoW. On pg. 53 (55 of the PDF), the statement that investors in ETH (Ethereum's tokens) do so primarily for use-value is entirely disproven by the recent domination of the Altcoin Discussion thread at Bitcointalk.org with numerous of Ethereum threads shrilling[1] for the recent price rise from $2 to $15 despite my numerous attempts to explain that Ethereum has no use-case because they never solved the centralization of verification issue.

On pg. 23 (25 of the PDF) the point is made that proof-of-burn is probably the most unarguably fair.

[1]https://bitcointalk.org/index.php?topic=1356957.0
https://bitcointalk.org/index.php?topic=1361609.0
https://bitcointalk.org/index.php?topic=1360037.0
https://bitcointalk.org/index.php?topic=1361613.msg13856423#msg13856423

Quote from: Zooko CEO of Zcash
> There's actually a good reason for securities regulators to look critically at such deals —
> because they are an opportunity for the seller to take advantage of the buyers, and to find
> buyers who are naive or vulnerable. An ICO is an acute opportunity for a "pump-and-dump"
> scam. I didn't want even the appearance of the possibility of such a thing to be associated
> with Zcash. I also didn't feel comfortable taking money from people who may be ill-informed
> and who may be unable to afford the loss if the project were to fail.
>
> It's ironic: there is a certain segment of the cryptocurrency world who considers an open ICO
> to be good because it exposes a bunch of self-selected people to the upside, but this is the exact
> same reason that securities regulators such as SEC regard such things as potentially bad: because
> they expose a bunch of self-selected people to the downside! (And insidiously, the cost to the
> buyers is potentially to the benefit of the seller.)

But you have steadfastly ignored the numerous times I (shelby3 on the Zcash forum and Zooko's AMA) have asked you to comment on the FinCEN regulations which seem to require that all Zcash miners will have to apply as Money Service Businesses (and note even the Coin Center report mentions FinCEN at the top of page 3), if you require miners to transfer 11% of the coinbase block rewards to your corporation. Even if you build in the protocol the requirement that 11% of the coinbase is to be transfered to your foundation, the miner still is the one who creates the block and decides on his own free will whether to honor the protocol or fork the protocol. This is very dubious and I don't think miners will risk it! You may think that FinCEN regulations do not apply globally, but the G20 has announced plans to cooperate against money laundering (and the recent false flag operation in France is being used as another excuse just as that false flag 9/11 got the BigT Lie rolling with the resultant "Patriot" Act). You think you are clever, but you are digging your grave by monkeying around trying to skirt USA regulations, which you've now admitted in public above. Not good. You are starting to demonstrate that you are not competent to run this operation. Please stop being obstinate and wake up to the realities.

That will kill your coin because it means that FinCEN controls your coin.

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February 14, 2016, 10:16:21 AM
 #115

I want to add that I realize the legal issues make any PUBLIC pre-sale/pre-mine choice dubious. If you do public ICO then the tokens must be registered as securities. If you do PRIVATE pre-sale and then PUBLIC royalties from mining as Zcash proposes, then the miners apparently have to register as Money Service Businesses under FinCEN regulations and the coming G20 plan to harmonize these regulations starting in 2017.

Appears the only options for legal distribution are PRIVATE ICOs (that can include any qualified investors as so defined by the SEC but you can't advertise this to the public-at-large and has to be viral within the qualified investor social network).

Or via PUBIC proof-of-work mining.

IANAL yet I think Ethereum violated the securities law.

Some have also claimed that PUBLIC airdrops might be legal, when these are not marketed as investments but rather for-use tokens.

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February 17, 2016, 11:45:51 AM
Last edit: February 17, 2016, 12:37:10 PM by TPTB_need_war
 #116

One point they forgot to make is that it doesn't matter if Ethereum did their ICO under Swiss laws. The USA has securities law is that if you advertise and market securities to US investors, then you are culpable under US law no matter where in the world you are. They will come after you. KimDotCom will soon learn this that you can't run and you can't hide from the USA. Don't forget that Sweden was involved in trying to extradite Assange and probably turning him over to the USA. And Switzerland has been caving in to USA demands for turning over US citizens hiding wealth in Swiss banks.

And besides, Martin Armstrong has pointed out that the G20 will start sharing information and cooperating on enforcement as of 2017 (when the global economy will collapse in earnest and capital controls will be ramped up significantly).

Here is something related to FinCEN which is not the same as SEC regulation, but nevertheless the same principle applies of filtering out US residents/citizens:

You can avoid US customers, but it takes work

America

Plenty of businesses, some of my own clients included, have decided that the US market just isn’t for them.

They’ve either soured on the idea of servicing US clients altogether, or have decided to launch and wait it out in jurisdictions like Canada until the US sees regulatory reform.

This can be both profitable and practical, but simply incorporating the overseas market isn’t going to cut it.

The smart business will develop a set of policies and procedures reasonably calculated to keep US residents out. A competent attorney can help guide you through this process, and I can give some very basic principles here.

Quote
    Firstly, a pre-emptive response to a question I get asked weekly: geofiltering incoming IP addresses is only the beginning. The business itself should detect the jurisdiction of the customer’s IP address, display that address, and ask the customer to confirm that this is his or her jurisdiction.

Both customer and business can take affirmative steps: the customer can be required to click a button stating “I affirm that I am a resident of *country*,” and the business can require verifying documentation, like a passport or utility bill.

Several providers offer these kinds of onboarding services. Your business should develop a risk profile for each of its customers in real time setting forth the probability that the customer is a US resident.

The risk profile should take into account different factors like: (i) whether the customer registers a US bank account with your business, (ii) how many transfers to US bank accounts the customer requests (if you offer such a service), and (iii) how many times the customer accesses your service from within the US after setting up a new account.

The record shouldn't just show that your business followed its own policies, but that those policies worked. If push comes to shove, a judge and jury would probably like to see that, every once in a while, your procedures actually caught a US resident trying to use your service, and that you closed his or her account.

Finally, it should go without saying that your business should not advertise to US customers. This all might seem excessive for, or inapplicable to, your business and indeed it might be. The proper set of procedures will depend heavily upon the details of your business model and your degree of risk tolerance.

For some, even crafting and implementing these policies may be just as unappetising as compliance. There is, in fact, a way to service US customers and avoid these burdens.

Namely, you can become the agent of a Bank or Credit Union, as existing MSB Certified agents of banks, credit unions and money services businesses are typically exempt from registration and licensure requirements.

Functionally, becoming an agent means hiring an attorney to negotiate and execute an agreement with the bank, credit union or MSB (called the “principal”) setting forth your relative rights and obligations.



I don't have time to read this:

http://www.coindesk.com/forking-bitcoin-msb-legal-issues/

I was also provided the following link by Zcash:

https://coincenter.org/2016/02/no-fincen-policy-is-not-relevant-to-the-bitcoin-forking-debate

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February 17, 2016, 12:23:56 PM
 #117


I responded privately to Zcash as follows:

Quote from: myself
Okay I read the document you provided and it doesn't change anything I have written in the past. I never said the developers would be at-risk of FinCEN regulation. It is the miners who transfer coinbase to your company/foundation that will be subject to registration as MSBs. And the document you provided does not argue otherwise. The document you provided is only talking about miners who don't transfer their coinbase but rather mine it for themselves (they may exchange it later as an individual but that is not the same as a regularized transfer operation). Now you might argue that since they are transferring it only to one (or just two) entity then there is no risk of money laundering, thus the MSB regulation would not apply. But that is not what FinCEN guidance says. They say if the entity is creating and transferring, then they must register. Sorry you are potentially wrong and this could cost you dearly. Why not simply premine it! Much easier and avoids the problem on your miners.

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February 19, 2016, 03:20:49 AM
 #118

What is the point of all this? You're trying to second guess what regulators will do in each country by reference to America?

Well, that's a waste of time. Some countries will make up regulation on the spot if they don't like the colour of your shoes.

If your concern is that America will hunt you down even if you live outside of the USA, then throw away your computer and crawl under a rock. Or just hard code black lists of American IP addresses into your code. If its investment related concerns, tell yanks they can't participate and if they try they take liability for your legal costs - TnC's issue.

This really is a pointless, futile exercise. If its that much of a concern, write up your project and post it to regulators asking for their view on legalities.
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February 19, 2016, 02:02:14 PM
Last edit: February 19, 2016, 04:54:43 PM by TPTB_need_war
 #119

This really is a pointless

Only to someone who isn't paying attention to what is really going in the world that is oblivious to most (see below).

Whereas, it has helped me greatly to decide how to launch a coin wherein it will be legal every where. Which is very important compared to those coins which may run into trouble later, such as Ethereum and Zcash (assuming Zcash continues with their plan to have miners act as money transmitters to the foundation).

Note the issues I raised in this thread may not apply for those coins that never reach some level of millions of adoption, if they are no threat to the powers-that-be and haven't caused anger among investors.

You're trying to second guess what regulators will do in each country by reference to America?

https://www.armstrongeconomics.com/world-news/taxes/2017-the-year-from-political-hell/
https://www.armstrongeconomics.com/world-news/2017-is-coming-and-the-g20-has-agreed-to-share-all-info-on-everyone/
https://www.armstrongeconomics.com/world-news/swiss-to-give-up-everything-everybody/
https://www.armstrongeconomics.com/international-news/western_europe/britain-to-ban-any-encryption-that-prevents-the-taxman-from-exposing-british-citizens/
https://www.armstrongeconomics.com/international-news/western_europe/uk-to-ban-whatsapp-messaging-service/
https://www.armstrongeconomics.com/world-news/larry-summers-calls-to-end-100-billis-here-comes-the-totalitarian-state/
https://www.armstrongeconomics.com/world-news/taxes/the-new-age-of-economic-totalitarianism-the-london-meeting-to-end-currency/
https://www.armstrongeconomics.com/world-news/nsa-blames-snowden-for-paris/
https://www.armstrongeconomics.com/world-news/nsa-a-tax-economics-espionage-agency/
https://www.armstrongeconomics.com/category/world-news/taxes/
http://www.nestmann.com/
http://www.nestmann.com/best-place-to-launder-money-surprisingly
http://www.nestmann.com/theyre-coming-for-your-cash

http://www.independent.co.uk/news/world/asia/china-has-made-obedience-to-the-state-a-game-a6783841.html
http://theantimedia.org/china-just-launched-the-most-frightening-game-ever-and-soon-it-will-be-mandatory/

At G20 last year, all governments agreed to report everyone everywhere to their host countries for tax purposes. The hunt for taxes is destroying the world economy at a staggering rapid pace and this is far worse than even I had anticipated when we first forecast BIG BANG would hit 2015.75 back in 1985. Here is a email a non-US citizen received from his trust company in Malta.

Quote from: trust company in Malta
“The reporting charges have arisen due to the implementation of new U.S legislation known as the Foreign Account Tax Compliance Act (“FATCA”) which has been introduced as part of a global initiative to create an International tax reporting regime. Together with the majority of the World’s major trading nations, the Maltese Government has entered into an agreement with the US Authorities to implement FATCA legislation in Malta. The legislation has required all Trust Companies in Malta to evaluate all structures operated on behalf of clients and categorise them according to detailed rules set out in the FATCA legislation. This categorisation process is not just limited to structures operated on behalf of US clients, or clients holding US assets but has to include all clients and structures irrespective of where clients and their structures are domiciled. We can advise you that <Name> has taken extensive legal and tax advice regarding the categorisation of clients and which information should be reported according to various trigger reporting events since our accounting and client management systems have to be tailored to supply relevant information on a per client and <Name> entity basis to the Malta Authorities who then report directly to the IRS.

Consistent with many other Trust Companies a decision has been taken to pass on some of the costs of this work to client structures for whom we act. Accordingly a December invoice will be issued for a one off fee of £250 that will be described in the invoice as a FATCA classification fee.“

You need to understand that the dollar will grow stronger as we collapse starting in earnest in 2017 and this will place the global financial leverage in the hands of the USA so it can force FATCA on the rest of the world while the rest of the world collapse they too will hunt down "tax evaders":


The dollar rally and the devaluation of the yuan is not a fluke and it most certainly is not a one-time event. The dollar declined against the yuan for 19 years during the same timing that saw gold decline from 1980 to 1999. The major low on an annual closing basis at 2013 and 2014 was an outside reversal to the upside for the dollar. The Yearly Bullish Reversal stands at 683 and technical resistance stands at 658. The dollar filled the gap that existed prior to 1994 and is yet another confirmation that the dollar rally is underway.

Yes, the world trade is contracting and will get much worse after October. Governments are destroying the world economy on their hunt for taxation. Politicians are hunting money as if it were some sport and are undoing everything that was built postwar. Numerous reports are coming in to us about people traveling on trains and having their bags searched for money in Europe. The hunt for cash is wiping out the world economy. Americans are being thrown out of banks and mutual funds everywhere. FATCA has forced Americans to repatriate dollars. The only real Americans who can operate overseas are now established multinational companies. Small companies cannot expand from the United States nor can individuals send money anywhere.

Add to FATCA the problem in Europe and we see capital still pouring into the USA from both China and Europe. The real estate cycle has/or will peak with this turning point around the world from Switzerland, Britain, Canada, to Asia right down into India and Australia. We are plagued by politicians who have absolutely no clue how to run an economy and it is now all about them retaining power virtually everywhere we look.

The dollar rally is unfolding despite the fact people do not understand why. They look only at the USA debt and assume the dollar must crash, when in fact, the problem we face is on a global scale and $18 trillion in U.S. debt is simply not the large enough for international capital to hide. The future is going to be anything but a textbook move. This is why this year’s World Economic Conference is going to be a real eye opener.

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February 22, 2016, 07:22:26 AM
 #120

Regulation increasing as I expected...

Recently the European Commission (EC) announced plans to apply the EU anti-money laundering and counter-terrorist financing regulations (the Fourth AML Directive or 4AMLD) to digital currency exchanges and possibly wallet providers.

This move is a part of the EC’s broadening action against terrorist financing.

But while this news comes as no surprise, another EC proposal, far less publicized and somewhat overlooked, has the potential to revolutionize the current state of affairs in digital currency regulation in the EU.

The EC announced that it will consider applying the licensing and supervision rules of the Payment Services Directive (PSD; a new version of which, 2PSD, has been adopted in 2015) to digital currency exchanges in order to "promote better control and understanding of the market".

PSD is one of the cornerstones of the EU single market for payments. It sets out rules for regulated payment services and contains a catalogue of such services.

Firms which render payment services have to comply with many regulations, including licensing and supervision rules, which now the EC apparently also intends to apply to digital currency exchanges.

Such a plan seems to be sensible. It is clear that there are two legal acts in the EU that would be well-suited for regulating cryptocurrencies: PSD and another related directive, the E-Money Directive (EMD). Works on the new '3EMD' are now under way, so some changes could be introduced there as well.
Revising basic assumptions

What matters, however, is what the current PSD regulatory methodology looks like.

A crucial piece of the PSD is the definition of "funds", which so far has included only cash, bank (scriptural) money and e-money (regulated by the EMD). Cryptocurrencies do not fall into any of those categories – a fact confirmed by the European Central Bank (ECB) and others.

It follows that, for the EC, digital currency exchanges would be best covered by some provisions of the PSD, although in the current form it does not apply to digital currencies at all.

It therefore appears that regulatory change might have to be much deeper than merely adding a few provisions extending the scope of licensing and supervision regulations on digital currency exchanges.

New regulations would probably have to revise some of the basic assumptions and concepts of the PSD, including definitions of "funds", "payment transaction" or "payment institution".
How should stakeholders react?

It is difficult to evaluate the EC's plan, since at the moment it is extremely general and vague. However, very likely it will open the door for the introduction of cryptocurrencies to the EU payment services regulations.

Various proposals may emerge afterwards, from cautious and restrained ones to those proposing comprehensive and broad regulation.

Firms that may be affected by any regulatory change should monitor developments closely and be ready to react.

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