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Author Topic: FinCEN addresses Bitcoin  (Read 28116 times)
Severian
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March 18, 2013, 11:49:45 PM
 #1

FIN-2013-G001
Issued:    March 18, 2013
Subject:    Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Quote

c. De-Centralized Virtual Currencies

            A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

            A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.
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March 18, 2013, 11:53:17 PM
 #2

If I read that right about 5 or so business I can think of, are in violation of U.S laws.
If I am reading this correct anyone who sells bitcoins is now required to register? WOW
Glade I am covered  Wink

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March 18, 2013, 11:54:15 PM
 #3

They say that if you mine Bitcoins and use them to buy stuff you are not "money transmitter".

If someone mines bitcoins and sells them for fiat directly (not via an excahnge) he or she is a "money transmitter".

If you run a Bitcoin exchange  with fiat component involved i.e. you trade BTCUSD, BTCEUR etc... (mtgox, bitstamp etc) then you are an exchange and a money transmitter.

If you run a Bitcoin exchange  without fiat component involved, for example, you trade only Bitcoins and Litecoins then you are not a money transmitter.




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March 18, 2013, 11:57:35 PM
 #4

What is funny is we don't "create" the virtual currency.  We mine it ("find it").  You can create fiat, but not bitcoins.  This means FinCen's statement on de-centralized currencies don't apply to bitcoin.

However, Ripple creates their own currencies so it applies to Ripple.
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March 19, 2013, 12:02:59 AM
 #5

In short - the US Treasury confirms that Bitcoin and its cousins are legitimate enough to require regulation. This is big news.
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March 19, 2013, 12:04:08 AM
 #6

If I read that right about 5 or so business I can think of, are in violation of U.S laws.

If I read it right, miners that sell to exchanges and others, all decentralized dealers and processors are subject to their expected claim of regulation - pretty much the entire bitcoin community minus just spenders/users.

What actually matters will be their first attempted enforcement of their claim.
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March 19, 2013, 12:06:52 AM
 #7

It can be interpreted differently, of course. But I think miners that sell bitcoins via exchanges are not subject to the regulation. The exchanges in this case would be acting as an intermediary that you farm out "money transmitter" functions to. Otherwise, you would become "money transmitter" every time you make international (with currency exchange) wire transfer via SWIFT network to a third party.



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March 19, 2013, 12:11:04 AM
 #8

Severian
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March 19, 2013, 12:12:27 AM
 #9

It can be interpreted differently

To be fair, they always make these "laws" a little fuzzy to give themselves as much wiggle room as possible and very little for us. I think we can agree that we've been noticed by Babylon-on-the-Potomac.
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March 19, 2013, 12:20:19 AM
 #10

What is funny is we don't "create" the virtual currency.  We mine it ("find it").  You can create fiat, but not bitcoins.  This means FinCen's statement on de-centralized currencies don't apply to bitcoin.
No, bitcoins are created, not "found". You have to be naive to think otherwise.

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March 19, 2013, 12:20:33 AM
 #11

tl;dr...  bitcoins are legal

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March 19, 2013, 12:22:27 AM
 #12

tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
lonelyminer (Peter Šurda)
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March 19, 2013, 12:23:52 AM
 #13

Well, the way I read it:

Quote from: FinCEN
An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.
emphasis added

While it is possible to "destroy" Bitcoin units, nobody has the authority to redeem it. So there is no such thing as "administrator" of Bitcoin.
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March 19, 2013, 12:24:11 AM
 #14

tl;dr...  bitcoins are legal


And you need a +$1million dollar worth money transmitter license if you want to mine and sell them for fiat  Roll Eyes

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March 19, 2013, 12:26:10 AM
 #15

tl;dr...  bitcoins are legal


And you need a +$1million dollar worth money transmitter license if you want to mine and sell them for fiat  Roll Eyes

Or you can do it for 6 month and then start a new company. Or you can live outside of USA (for now).


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March 19, 2013, 12:28:12 AM
 #16

tl;dr...  bitcoins are legal


Where's the upvote button?
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March 19, 2013, 12:28:35 AM
 #17

tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
I also see this as a positive development, especially in the long run.

They're there, in their room.
Your mining rig is on fire, yet you're very calm.
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March 19, 2013, 12:29:02 AM
 #18

1 million? That is quite expensive. As far as I know that license in Finland costs like 5000 EUR, which our company is prepared to pay if this ruling spreads to Finland. Not sure how much these licenses cost for the whole EU though.

For mining though, I will venture to guess that people will simply not report any of it from now on. If the coins are mixed, there is no way to really know where the coins came from.

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March 19, 2013, 12:30:29 AM
 #19

tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
I also see this as a positive development, especially in the long run.

When was bitcoins ever illegal? LMAO I was jumping for joy over 2 years ago when I got into bitcoins, cause they were never illegal.

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March 19, 2013, 12:30:35 AM
 #20

1 million? That is quite expensive. As far as I know that license in Finland costs like 5000 EUR, which our company is prepared to pay if this ruling spreads to Finland. Not sure how much these licenses cost for the whole EU though.

For mining though, I will venture to guess that people will simply not report any of it from now on.

There is also the cost of compliance which is likely involved. And this I would guess means hiring a lawyer as a compliance officer.

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d'aniel
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March 19, 2013, 12:30:50 AM
 #21

Well, the way I read it:

Quote from: FinCEN
An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.
emphasis added

While it is possible to "destroy" Bitcoin units, nobody has the authority to redeem it. So there is no such thing as "administrator" of Bitcoin.
The 'De-Centralized Virtual Currencies' section was obviously written with Bitcoin as the prototypical example, and it's pretty clear what the spirit of the law is there IMO.
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March 19, 2013, 12:32:09 AM
 #22

"An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency. "

This is absurd, no one can withdraw bitcoin from circulation, maybe they think bitcoin is the same as FED's money printing business

There will be better exchanges appear in bahamas and virgin island

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March 19, 2013, 12:33:37 AM
 #23

tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
I also see this as a positive development, especially in the long run.

When was bitcoins ever illegal? LMAO I was jumping for joy over 2 years ago when I got into bitcoins, cause they were never illegal.
You're not happy about having legal certainty, finally?
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March 19, 2013, 12:35:06 AM
 #24

Well, the way I read it:

Quote from: FinCEN
An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.
emphasis added

While it is possible to "destroy" Bitcoin units, nobody has the authority to redeem it. So there is no such thing as "administrator" of Bitcoin.

Bitcoin is covered under (c), quoted in the OP.  Other virtual currencies do meet the criteria for having an administrator.  Don't confuse the two.

Quote
A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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March 19, 2013, 12:37:23 AM
 #25

tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
I also see this as a positive development, especially in the long run.

When was bitcoins ever illegal? LMAO I was jumping for joy over 2 years ago when I got into bitcoins, cause they were never illegal.
You're not happy about having legal certainty, finally?

See some people have not contacted lawyers before jumping into bitcoin businesses, if you contacted your lawyer before doing business in bitcoin, you would know it was always legal.

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March 19, 2013, 12:38:59 AM
 #26

This is pretty much the best news regarding bitcoin we could have gotten from the government.

Are you out of your fucking mind???

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March 19, 2013, 12:40:15 AM
 #27

See some people have not contacted lawyers before jumping into bitcoin businesses, if you contacted your lawyer before doing business in bitcoin, you would know it was always legal.
It's about the law going forward.  Nobody had any certainty about that before.  Jesus, you're such a fucking buzzkill Smiley
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March 19, 2013, 12:40:27 AM
 #28

I don't think this has anything to do with legality.

This is about regulation: The bureaucrats weapon of choice.
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March 19, 2013, 12:41:22 AM
 #29

Anyone who thinks this is a good thing for bitcoin is in for a rude awakening.
I had my fingers crossed that bitcoin would get much further along before this happened.

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March 19, 2013, 12:41:49 AM
 #30

I don't think this has anything to do with legality.

This is about regulation: The bureaucrats weapon of choice.

You act as if this is a bad thing.
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March 19, 2013, 12:42:37 AM
 #31

tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
I also see this as a positive development, especially in the long run.

When was bitcoins ever illegal? LMAO I was jumping for joy over 2 years ago when I got into bitcoins, cause they were never illegal.

They've been a legal gray area since they were created. We've always known that the Government would get into regulating them someday, but nobody knew what form that regulation would take. They could be all but ignored or they could do their level best to squash it like a bug. I believe this is a good sign in that it seems to be pretty light regulation and provides some security - the more official recognition Bitcoin gets, the less likely the Government is to try to crush it.
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March 19, 2013, 12:43:00 AM
 #32

This is pretty much the best news regarding bitcoin we could have gotten from the government.

Are you out of your fucking mind???

No I agree, it is the best news US peoples could have hoped for. Bitcoin is now explicitly legal and will be regulated like real money (we knew it was already real money, but now the "normal business community" will as well).  I've long said that Amazon will not accept Bitcoin until the legal uncertainty is removed. This just removed it.

There is good and bad in this news, but the net effect is extremely good. Bitcoin demolishes all resistance, and just entered the next phase of its evolution.
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March 19, 2013, 12:44:21 AM
 #33

Well, the way I read it:

Quote from: FinCEN
An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.
emphasis added

While it is possible to "destroy" Bitcoin units, nobody has the authority to redeem it. So there is no such thing as "administrator" of Bitcoin.

Unfortunately, there is no silver bullet in the law. The law will be adjusted if the nuance of bitcoin doesn't fit the "redeem" and "administrator" paradigm. The goal is to bring exchangers directly under the MSB and MT regulations. No more casual preemptive compliance like Bitinstant because it will be required and they did it without declaring bitcoin real currency.

Also, a decentralized convertible virtual currency has no single administrator as stated in the FinCEN guidance.

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March 19, 2013, 12:45:00 AM
 #34

See some people have not contacted lawyers before jumping into bitcoin businesses, if you contacted your lawyer before doing business in bitcoin, you would know it was always legal.
It's about the law going forward.  Nobody had any certainty about that before.  Jesus, you're such a fucking buzzkill Smiley
tl;dr...  bitcoins are legal

Yeah, I've been jumping with joy for the past 10 minutes Smiley
I also see this as a positive development, especially in the long run.

When was bitcoins ever illegal? LMAO I was jumping for joy over 2 years ago when I got into bitcoins, cause they were never illegal.

They've been a legal gray area since they were created. We've always known that the Government would get into regulating them someday, but nobody knew what form that regulation would take. They could be all but ignored or they could do their level best to squash it like a bug. I believe this is a good sign in that it seems to be pretty light regulation and provides some security - the more official recognition Bitcoin gets, the less likely the Government is to try to crush it.

Another two people who never talked to a lawyer before getting into bitcoin, it isn't a buzzkill, if the news was the other way, I be very sad, but we are talking about something that must people already knew. Bitcoins are legal, and if your exchanging a high volume of them get your wallet out and license up. Nothing new here.

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March 19, 2013, 12:47:14 AM
 #35

There will be better exchanges appear in bahamas and virgin island

Not really sure how well that's going to work out. Although those territories are outside of US jurisdiction, fiat funds wired to US bank accounts would not be. Unless you either launder the money through third party countries (which requires wealth and contacts), or you maintain your entire life in crypto-currencies - you'll fall foul of the regulation.

The problem is much as we all love Bitcoin (it is awesome), it's a) still not a mass market technology and b) now likely to face heavy commercial resistance from the entrenched monopolies (e.g. Mastercard, Visa) as a consequence of this ruling. As a result it's not likely to replace the Dollar, Euro, Yuan etc - physically or electronically - anytime soon a unit of transaction in day-to-day life. That of course is unless you go specifically out of your way to pay for your life with Bitcoins (or other crypto-currencies)... which the average person won't do.

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March 19, 2013, 12:48:01 AM
 #36

You act as if this is a bad thing.

I have had no issues (and no special paperwork) in my dealings with Australian government & Tax Office in regards to my businesses accepting Bitcoin before this announcement.  

I cannot say the same for the future thanks to our FTA with the yanks.
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March 19, 2013, 12:48:44 AM
 #37

There is good and bad in this news, but the net effect is extremely good. Bitcoin demolishes all resistance, and just entered the next phase of its evolution.

I just wonder how miners will cope with this news. Technically they could just buy gold and silver and sell that to avoid needed a license.. but still..

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March 19, 2013, 12:54:27 AM
 #38

Money Services Business - The term "money services business" includes any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

(1) Currency dealer or exchanger.
(2) Check casher.
(3) Issuer of traveler's checks, money orders or stored value.
(4) Seller or redeemer of traveler's checks, money orders or stored value.
(5) Money transmitter.
(6) U.S. Postal Service.

An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger; check casher; issuer of traveler's checks, money orders or stored value; and seller or redeemer of travelers' checks, money orders or stored value. The threshold applies separately to each activity -- if the threshold is not met for the specific activity, the person engaged in that activity is not an MSB on the basis of that activity.

Source:  http://www.fincen.gov/financial_institutions/msb/definitions/msb.html

So, stay below $1,000 a day and a miner should be okay?

R
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March 19, 2013, 12:55:16 AM
 #39

tl;dr...  bitcoins are legal


And you need a +$1million dollar worth money transmitter license if you want to mine and sell them for fiat  Roll Eyes

I don't read it that way at all...  assuming that the miner is selling via a licensed bitcoin exchange (MSB/MT).


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March 19, 2013, 12:56:35 AM
 #40

They'll keep trying to change the rules if local retailers start accepting BTC.
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March 19, 2013, 12:57:35 AM
 #41

There is good and bad in this news, but the net effect is extremely good. Bitcoin demolishes all resistance, and just entered the next phase of its evolution.

I just wonder how miners will cope with this news. Technically they could just buy gold and silver and sell that to avoid needed a license.. but still..

In some places, once you trade a certain volume of precious metals you're subject to AML/CFT regulations and need to register and report just like you'd need to if you were providing a financial services.

This news from FinSEC is less about virtual currencies and Bitcoin than it is about the services which have grown up around them.  It makes abundantly clear that those services will be subject to regulation - which people were pretty much expecting would be the case.  It just pre-empts the possibility of another PayPal style legal battle where a particular service argues that it's non subject to financial services regulations and AML/CFT requirements.


All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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March 19, 2013, 12:59:34 AM
 #42

Maybe I'm just getting cyncial in my old age, but all I see is the billy club they just made for themselves to swing at anyone of us or all of us if they ever see Bitcoin as an economic threat.

Some of my favorite illegal things started out by being "regulated" first before they were banned.
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March 19, 2013, 01:02:30 AM
 #43

One interesting side effect of this is it seems likely that all the 'anonymous' fiat<->Bitcoin services that have sprung up are going to have to start being significantly more nosy about who they do business with...


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March 19, 2013, 01:02:49 AM
 #44

1 million? That is quite expensive. As far as I know that license in Finland costs like 5000 EUR, which our company is prepared to pay if this ruling spreads to Finland. Not sure how much these licenses cost for the whole EU though.

For mining though, I will venture to guess that people will simply not report any of it from now on. If the coins are mixed, there is no way to really know where the coins came from.

And now that you pay for the license, they know who you are and will pester you until the end of time as they keep changing the law to benefit them so they can take more from you.
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March 19, 2013, 01:03:56 AM
 #45



Not yet.
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March 19, 2013, 01:09:03 AM
 #46


With the standard "I Am Not A Lawyer" disclaimer, my read is that miners might be ok if

  • They sell bitcoins for fiat, via a licensed exchange
  • They purchase goods and services entirely within the bitcoin economy

The first is obvious.  The US government is certainly within their rights to regulate the US Dollar, and ditto for other government fiat currencies.

The second is vastly positive.  Stimulative for the bitcoin economy, encouraging a broad market of services priced in bitcoins.

And the third, more general point is implied:  bitcoins are legal for regular users to possess and spend.

It is true that bitcoins were never illegal, but having a big government issuing an affirmative statement "bitcoins are legal" (in effect) is great news.


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March 19, 2013, 01:19:02 AM
 #47

http://en.wikipedia.org/wiki/Everything_which_is_not_forbidden_is_allowed

Everything which is specifically allowed will ultimately be regulated out of the hands of the common man via protectionist, pro-monopoly, anti-economic liberty "legal" requirements in the form of licensing, insurance, etc... ad nauseam. Not even a Constitutional Amendment can save anything, as long as the fed courts bend over backward to please tyrants.

Don't get the $1000 threshold mixed up with the BTC>USD definition. Exchange a SINGLE PENNY for your BTC without fulfilling the requirements, and you're a criminal.

It's like saying "since there was no specific declaration that exhaling CO2 was legal, it's great news that the government has now affirmed it is, subject to your paying carbon credits."

FTFY

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March 19, 2013, 01:23:30 AM
 #48

This is pretty much the best news regarding bitcoin we could have gotten from the government.

Are you out of your fucking mind???

No I agree, it is the best news US peoples could have hoped for. Bitcoin is now explicitly legal and will be regulated like real money (we knew it was already real money, but now the "normal business community" will as well).  I've long said that Amazon will not accept Bitcoin until the legal uncertainty is removed. This just removed it.

There is good and bad in this news, but the net effect is extremely good. Bitcoin demolishes all resistance, and just entered the next phase of its evolution.

I understand why people might think this is a good thing, we all knew it was inevitable so I guess I shouldn't be too surprised. Right now we know very little about the scope and or future enforcement of whatever regulation is being cooked up. What I think we do know very well is that, bitcoin and government don't really mix. At all.

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March 19, 2013, 01:24:44 AM
 #49

From BLOGDIAL's "FinCEN sounds death knell for US based Bitcoin businesses" (it's worth a read):
http://irdial.com/blogdial/?p=3488

"Finally, this is a great opportunity for a country to cause Bitcoin startups to congregate in their territory. A 150 year moratorium on any law that touches anything to do with Bitcoin / Blockchain technology would create a new Hong Kong island of super prosperity, as it becomes the world’s hub for all Bitcoin business, and the trillions of dollars in Bitcoin flowing through it, leaving the pitiful democracies in the dust."

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March 19, 2013, 01:25:05 AM
 #50

I don't think this has anything to do with legality.

This is about regulation: The bureaucrats weapon of choice.

You make a valid and possibly disconcerting point.

Marijuana isn't legal - but the (tax) regulations surrounding it will get you into a hell of a lot more trouble than possession will.

Spitting on the sidewalk might get you a ticket for a fourth degree misdemeanor, if the cop is having a particularly bad day - but agreeing with your buddy to spit together is conspiracy under the law.  That's worth 20 years in a federal pen.

I think Vladimir's exhortation in another (Cyprus-related) thread applies here as well.  Maybe even more so.

Get your BTC into your own wallet.

Clean them up...

Watch how the shitstorm develops.

Dankedan: price seems low, time to sell I think...
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March 19, 2013, 01:26:07 AM
 #51

Is the bitcoin community radical enough to cut the US gov out? Like, if, says, the gov attempts to forbid bitcoin, or create unreasonable restrictions?
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March 19, 2013, 01:30:24 AM
 #52

Is the bitcoin community radical enough to cut the US gov out? Like, if, says, the gov attempts to forbid bitcoin, or create unreasonable restrictions?

Oh sure.

The question is one of balancing anonymity against paying the rent.

Dankedan: price seems low, time to sell I think...
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March 19, 2013, 01:30:43 AM
 #53

Is the bitcoin community radical enough to cut the US gov out? Like, if, says, the gov attempts to forbid bitcoin, or create unreasonable restrictions?
I expect the restrictions will have the same effect the laws in Argentina have on the unofficial exchange rate.
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March 19, 2013, 01:31:31 AM
 #54

Is the bitcoin community radical enough to cut the US gov out? Like, if, says, the gov attempts to forbid bitcoin, or create unreasonable restrictions?

I'm sure some in the community are more than radical enough. The question is, how many innocent people will have their lives destroyed for non-compliance?

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March 19, 2013, 01:49:15 AM
 #55

Also an I Am Not A Lawyer (IANAL) disclaimer.

I was trying to figure if this applies to a hosted (shared) EWallet provider who holds customer's bitcoins and broadcasts bitcoin transactions, but does not convert to fiat or any other type of currency.

Quote
Administrators and Exchangers of Virtual Currency

An administrator or exchanger that (1) accepts and transmits a convertible virtual currency [,,,] for any reason is a money transmitter under FinCEN's regulations,

Because the EWallet provider isn't providing exchange to fiat or other currency (or value that substitutes as currency) the service is not a money transmitter.

That's good.


Quote
An administrator or exchanger that [...] (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations,

a.   E-Currencies and E-Precious Metals

Examples include, in part, (1) the transfer of funds between a customer and a third party by permitting a third party to fund a customer's account;

One example of this is an exchange that lets a customer have cash deposited into the exchange's bank account.  There's no way to prove the funds were the customer's funds and not some third party that had deposited for credit to the customer's exchange account.  

Because of the difficulties exchanges have had in offering that service I've just assumed that was a gray area.  But what if these funds are bitcoins and not dollars?  Does this mean an EWallet provider [Edit: exchange] needs to know that the bitcoins received to my wallet account came from me, and were not the result of a transfer I received from someone else?  That's the whole point of an EWallet .   This is unclear to me if this "no third party payments" restriction applies to bitcoin transfers as well.

Quote
(2) the transfer of value from a customer's currency or commodity position to the account of another customer;

That's the end of redeemable codes and account-to-account (A2A) transfers (unless, of course, the service providing it is an exchange and money transmitter).  But again, is this just for fiat funds, or do BTC transfers apply as well?

Quote
or (3) the closing out of a customer's currency or commodity position, with a transfer of proceeds to a third party.

So the cash-out services where the withdrawal goes to whichever bank account you provide would make them a money transmitter.  Or the ones that will cash out coins and send a Western Union money transfer or make a cash deposit to my bank account at my bank -- those are money transmitters according to this.
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March 19, 2013, 01:59:32 AM
 #56

I don't think this has anything to do with legality.

This is about regulation: The bureaucrats weapon of choice.

Exactly.

As soon as a state officially recognizes bitcoin .. it's like, the start of an avalanche. This is an amazing thing, for freedom and transparency and end end to corrupt bankers and governments and the damn rothchilds and their ilk
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March 19, 2013, 02:06:40 AM
 #57

On the

"Bitcoin and government don't mix"

I'm a politician, I love bitcoin, I belong to a small party (atm, just wait until Cannabis is legaised in the UK Wink

And ye, bitcoin IS the future. Regulation IS key (and as someone rightly mentioned, it's the next stage of its evolution).

https://bitcointalk.org/index.php?topic=152651.0

It would be better to say "current governments (corrupt, greed, banker controlled) and bitcoin don't mix"

But the governments of the future, ohhhh, they're gonna LOVE IT, because using bitcoin will enable the people to love you (as you save them from this horrible state the planet is in).
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March 19, 2013, 02:12:44 AM
 #58

On the

"Bitcoin and government don't mix"

I'm a politician, I love bitcoin, I belong to a small party (atm, just wait until Cannabis is legaised in the UK Wink

And ye, bitcoin IS the future. Regulation IS key (and as someone rightly mentioned, it's the next stage of its evolution).

https://bitcointalk.org/index.php?topic=152651.0

It would be better to say "current governments (corrupt, greed, banker controlled) and bitcoin don't mix"

But the governments of the future, ohhhh, they're gonna LOVE IT, because using bitcoin will enable the people to love you (as you save them from this horrible state the planet is in).

we must have different definitions of the word government. I define government as a group of people who have claimed a monopoly on the use of violence within a geographical area.

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March 19, 2013, 02:13:43 AM
 #59

So does this FinCEN shit apply to anybody trading in BTC ->USD even if they are not from the US?


This is the beginning of the end for no questions asked exchanges,  Me thinks somebody should get working on a decentralised exchange if its even technically feasible.


Anyway they can pry my bitcoin from my cold dead brain.

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March 19, 2013, 02:14:05 AM
 #60

tl;dr...  bitcoins are legal


WOO HOO!!!!!!!!!!!!!!!!!!!!!!!!!!


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March 19, 2013, 02:18:35 AM
 #61

Reverse Midas touch.

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March 19, 2013, 02:27:38 AM
 #62

The anonymous BTC<-->USD exchanges are going to go two ways: Those that comply with FinCen and ask customers for full information, and then those who dispense of their online storefront and just start dealing by PGP encrypted email transactions. The only risk in dealing bitcoins for fiat in such an "alleyway deal" manner is a sting operation, but of course, we all know how successful those have been in shutting down SR. Tongue

Sucks to be an AML officer.
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March 19, 2013, 02:28:38 AM
 #63

But the governments of the future, ohhhh, they're gonna LOVE IT, because using bitcoin will enable the people to love you (as you save them from this horrible state the planet is in).

I think you might be surprised how much political power the people who monetize government deficit spending have. Can you immagine a government that is restricted to actually taxing it's citizens to pay for wars and social programs? And not income withholding either... it will likely have to be funded entirely by taxation that doesn't involve self-reporting, like property and inventory tax.
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March 19, 2013, 02:37:39 AM
 #64

The anonymous BTC<-->USD exchanges are going to go two ways: Those that comply with FinCen and ask customers for full information

Yup.  There's really no way the exchange could prove the withdrawal was not to a third party.
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March 19, 2013, 02:38:29 AM
 #65

This is a "guidance" posting.  It's a summary of how FinCEN feels that the already-existing regulations apply to the situation.  In reality, nothing much has changed except for providing some clarity.  All that verification stuff is required and the fly-by-night folks have got some worrying to do.

I'm wondering how things like the Linden Labs stuff comes out of this.  They have centralized virtual currency with an administrator.   On the other hand, they have third parties doing conversions so they might be ok.


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March 19, 2013, 02:39:12 AM
 #66

Firstly, FinCEN do not make laws, they are an enforcement arm of the govt. Their interpretation is as good as the next best lawyer who wants to come along and argue against them in the courts.

Secondly, the law is so vague as to be basically useless for any objective interpretations so everybody gets to make up whatever flavour of opinion that suits them on the matter.

No one has ever said with any convincing arguments that bitcoins are illegal AFAIK, so they are legal. Nothing new here. FinCEN will say whatever they want to suit their agenda, nothing new there either ... I think they have bigger problems elsewhere than "virtual currencies" right now (note they did not attempt to define what a "virtual currency" is anywhere, or they may happen to include govt. fiat in the dragnet Smiley).

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March 19, 2013, 02:39:46 AM
 #67

damn rothchilds and their ilk

Oh that's so cute! that you believe in conspiracy theories!

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March 19, 2013, 02:40:35 AM
 #68

Oh that's so cute! that you believe in conspiracy theories!

It's even cuter that you believe in coincidences.
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March 19, 2013, 02:41:17 AM
 #69

Me thinks somebody should get working on a decentralised exchange if its even technically feasible.
I've been considering how to do it. I'll need to obtain legal advice, though - there's one piece of it that will probably require a lawyer's advice (especially in the light of the guidance memo's mention of "e-precious metals").

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the prevalence of users convinced that BTC is a magic box that will turn them into millionaires, and of the con-artists who have followed them here to devour them.
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March 19, 2013, 02:44:38 AM
 #70

http://www.fincen.gov/news_room/rp/rulings/pdf/fincenruling2003-9.pdf

This is interesting:

Quote
To the extent that you are exchanging and transporting your own money on behalf of yourself, you are not doing business as a money transmitter or a currency dealer or exchanger for purposes of the BSA, and thus, are not required to register with FinCEN as an MSB.

So does that mean that if I buy and sell my own bitcoins for USD on existing exchanges on behalf of myself, I'm not a money transmitter or exchanger?  I might ask for clarification from them on my business practices.

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March 19, 2013, 03:02:51 AM
 #71

Me thinks somebody should get working on a decentralised exchange if its even technically feasible.
I've been considering how to do it. I'll need to obtain legal advice, though - there's one piece of it that will probably require a lawyer's advice (especially in the light of the guidance memo's mention of "e-precious metals").



/Facepalm 

Why would you set up a decentralised exchange that could be hosted on multiple computers in multiple jurisdictions if you were going to comply with all their endless rules & regs?, especially if you are in multiple countries it will be infeasible to comply. What would be the point of the decentralisation?

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March 19, 2013, 03:03:15 AM
 #72

Oh that's so cute! that you believe in conspiracy theories!

It's even cuter that you believe in coincidences.

This ^^

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March 19, 2013, 03:05:47 AM
 #73



So does that mean that if I buy and sell my own bitcoins for USD on existing exchanges on behalf of myself, I'm not a money transmitter or exchanger?  I might ask for clarification from them on my business practices.


What about online bank account transfers, because of fractional reserve banking most of that money is purely made up and digitally created, so wouldn't it come under the same guidelines as "E-currencies"?

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March 19, 2013, 03:06:36 AM
 #74

Oh that's so cute! that you believe in conspiracy theories!

It's even cuter that you believe in coincidences.

This ^^

Wow.  Watch out!  The Illuminati might get you tonight!  It's funny how crackpots and bitcoin fit together so well.

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March 19, 2013, 03:07:00 AM
 #75



So does that mean that if I buy and sell my own bitcoins for USD on existing exchanges on behalf of myself, I'm not a money transmitter or exchanger?  I might ask for clarification from them on my business practices.


What about online bank account transfers, because of fractional reserve banking most of that money is purely made up and digitally created, so wouldn't it come under the same guidelines as "E-currencies"?

No

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March 19, 2013, 03:08:58 AM
 #76

"An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency. "

This is absurd, no one can withdraw bitcoin from circulation, maybe they think bitcoin is the same as FED's money printing business

There will be better exchanges appear in bahamas and virgin island

That section doesn't apply to Bitcoin. That's in there for stuff like Linden Dollars (Second Life).

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March 19, 2013, 03:09:42 AM
 #77

Is there a lawyer in the house?

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March 19, 2013, 03:15:09 AM
 #78

Why would you set up a decentralised exchange that could be hosted on multiple computers in multiple jurisdictions if you were going to comply with all their endless rules & regs?, especially if you are in multiple countries it will be infeasible to comply. What would be the point of the decentralisation?

SN: "Hark! A tool with which you can create and move wealth away from the prying eyes of government and the grasping hand of banks is at hand! Use it wisely and create a new freedom for yourselves!"

Bitcoin user: "Gee, thanks! Which government agency do I contact to make sure it's ok to use?"

SN: "Nevermind. I'm going to leave now."
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March 19, 2013, 03:18:00 AM
 #79



Wow.  Watch out!  The Illuminati might get you tonight!  It's funny how crackpots and bitcoin fit together so well.

wow ad hominem well done, did i mention the illuminati? if a certain well known banking family has run or been highly involved in certain banking areas for generations does this mean the previous poster believes in "conspiracy theories"? - no it is well known that certain families have dominated large financial institutions and have had very big influence in nations money supply.

Have you ever heard of the bank for international settlements?   

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March 19, 2013, 03:20:40 AM
 #80

Why would you set up a decentralised exchange that could be hosted on multiple computers in multiple jurisdictions if you were going to comply with all their endless rules & regs?, especially if you are in multiple countries it will be infeasible to comply. What would be the point of the decentralisation?

SN: "Hark! A tool with which you can create and move wealth away from the prying eyes of government and the grasping hand of banks is at hand! Use it wisely and create a new freedom for yourselves!"

Bitcoin user: "Gee, thanks! Which government agency do I contact to make sure it's ok to use?"

SN: "Nevermind. I'm going to leave now."

 Grin

It's tragic really.


I wish I was around in the earlier days to see SN reaction to his liberating gift being squandered.

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March 19, 2013, 03:22:45 AM
 #81

The anonymous BTC<-->USD exchanges are going to go two ways: Those that comply with FinCen and ask customers for full information

Yup.  There's really no way the exchange could prove the withdrawal was not to a third party.


Doesn't such an exchange need to be "aware" that a fiat withdrawal was sent to a 3rd party for it to be violating any laws? If fastcash (for example) merely puts in its policy that 3rd party payments are "prohibited" (as they do), then wouldn't they be safe?
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March 19, 2013, 03:27:25 AM
 #82

Have you ever heard of the bank for international settlements?   

Here's one a few years older than BIS.

In 1895, the Rothschilds and JP Morgan Sr. saved the US government from bankruptcy by essentially taking over the gold supply for the government. Here's the contract:

Quote
US Congressional Record, Feb 1895

Contract

This agreement entered into this eighth day of February, 1895, between the Secretary of the Treasury of the United States, of the first part, and Messrs. August Belmont and Company, of New York, on behalf of Messrs. N. M. Rothschild and Sons, of London, England, and themselves, and Messrs. J. P. Morgan and Company, of New York, on behalf of Messrs. J. S. Morgan and Company, of London, and themselves, parties of the second part...

Banking families took over the American money supply in 1895. This isn't conspiracy, it's just simple fact as mentioned by even politicians of the day:

Quote
    “The active cooperation of Grover Cleveland in the manipulation of the currency by the Rothschilds of London and J. Pierpont Morgan of New York was very unpopular with the people. He was accused by both leading Democrats and Republicans of having betrayed his party and of having turned his back upon the Democratic platform of 1884 upon which he was elected.”

    Reminiscences of Senator William M. Stewart (Nevada, 1908)

BS talk about the Illuminati and UFOs are uttered by foolish people that will believe anything, even coincidences.
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March 19, 2013, 03:28:48 AM
 #83

Me thinks somebody should get working on a decentralised exchange if its even technically feasible.
I've been considering how to do it. I'll need to obtain legal advice, though - there's one piece of it that will probably require a lawyer's advice (especially in the light of the guidance memo's mention of "e-precious metals").



/Facepalm 

Why would you set up a decentralised exchange that could be hosted on multiple computers in multiple jurisdictions if you were going to comply with all their endless rules & regs?, especially if you are in multiple countries it will be infeasible to comply. What would be the point of the decentralisation?

look at bitcoinx.  Imagine a bunch of different xxxcoin currencies, all trading on the same blockchain.  Most of them are backed by someone for something (like USD).  Now, you pay the backer 50 BTC (say) and he gives you 250 usdCoins.  First trap... are you "printing" (counterfeiting) USD b/c your usdCoins are not really USD?  Ok this may be avoidable by issuing DUScoins (some other name).  But you have the reputation paradox -- anyone with a good enough reputation and $ to back DUScoins doesn't want to risk going to jail.  And cannot be anonymous.

But let's say it happens.  Someday someone wants to return DUScoins to the backer and get real physical bills (or a wire transfer) of USD.  I'd imagine that that would be the moment when you as the backer need to comply with AML and insist on ID.  

BTW, IANAL.



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March 19, 2013, 03:41:05 AM
 #84

BTC-e.com is going to have to get all it's ducks in a row.

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March 19, 2013, 03:41:59 AM
 #85


Here's one a few years older than BIS.




Did you know JP morgan and Mastercard run the Electronic Benefit Transfer in the US and are funding lobbying groups here in the UK to implement a similar benefits card, obviously profiting from the poor is not new for J P Morgan there are possibilities of such a program turning into an Orwellian nightmare as our economies falter and more people look to the state for help. When things like this are viewed in the context of increasing globalisation and militarisation of police you have to be a dumb ass to not consider the possibility of a conspiracy.


The Rothschild also became majority bond holders in the bank of England or Treasury as may have been at the time, I'm sure you are familiar with the popular story of the the Rothschilds faster courier / horseman bring back news of a British victory at the battle of Waterloo and how Nathan Rothschild promptly sold his bonds to create a fire-sale, thereby buying up everybody else's at much reduced price.

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March 19, 2013, 03:45:59 AM
 #86

This is a "guidance" posting.  It's a summary of how FinCEN feels that the already-existing regulations apply to the situation.  In reality, nothing much has changed except for providing some clarity.  All that verification stuff is required and the fly-by-night folks have got some worrying to do.

I'm wondering how things like the Linden Labs stuff comes out of this.  They have centralized virtual currency with an administrator.   On the other hand, they have third parties doing conversions so they might be ok.



Interesting point.

It might make better business sense for them to switch to bitcoin.  Less paperwork.

Dankedan: price seems low, time to sell I think...
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March 19, 2013, 03:54:12 AM
 #87

JP morgan and Mastercard run the Electronic Benefit Transfer in the US

JPM controls about half of the EBT cards in the US. If the US govt. lets JPM fail, the 25% or so of Americans that depend on JPM's EBTs would be out of luck. Imagine LA, Chicago, NYC, etc. within two weeks of no EBTs. Cities would burn. JPM has the government, and Americans, by the short hairs.

It's simple extortion as any occupier does to a servant state: prop us up or we'll burn your cities.  



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March 19, 2013, 04:07:49 AM
 #88

Why would you set up a decentralised exchange that could be hosted on multiple computers in multiple jurisdictions if you were going to comply with all their endless rules & regs?, especially if you are in multiple countries it will be infeasible to comply. What would be the point of the decentralisation?
The exchange needs cryptographic objects to buy and sell and trade.

The ones who provide those objects (which, at launch, will probably include me) ought to be aware of the laws that will apply to them - whether in order to comply, or merely so that they know what the risks are if the country in which they live finds them out.

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the prevalence of users convinced that BTC is a magic box that will turn them into millionaires, and of the con-artists who have followed them here to devour them.
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March 19, 2013, 04:16:40 AM
 #89

I don't think this is a big deal.  As already pointed out this is just a clarification of rules that are already in place and it was pointed out it only applies to over $1000/day.  

For practically everything but bitcoin and other cryptocurrencies. Bitcoin->$0.01, no MSB/MT=criminal.

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March 19, 2013, 04:21:03 AM
 #90

Hmmm, so if I just buy bitcoins, and do not resell them later, I am neither a money transmitter nor an exchanger and thus is not subjected to any regulation? OK, thanks government! BUY!BUY!BUY!

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March 19, 2013, 04:26:25 AM
 #91

This is a "guidance" posting.  It's a summary of how FinCEN feels that the already-existing regulations apply to the situation.  In reality, nothing much has changed except for providing some clarity.  All that verification stuff is required and the fly-by-night folks have got some worrying to do.

I'm wondering how things like the Linden Labs stuff comes out of this.  They have centralized virtual currency with an administrator.   On the other hand, they have third parties doing conversions so they might be ok.

While it's true that it's a "guidance" statement, such statements generally indicate how they intend to apply regulations.  The validity of their interpretation of regulations is rarely tested because most businesses can't afford the cost of the legal challenges which would be required.  Services agree to civil forfeitures or to become licensed because the potential sanctions they would face if they lost a court challenge are absolutely staggering - in the millions of dollars per offence (and a single transaction can involve multiple offences).

We've possibly seen the end of the era of under-capitalised exchanges - and that's certainly not a bad thing.  Compliance imposes a significant administrative burden, though, and that may ultimately be reflected in fees charged by exchanges.

Quote
Hmmm, so if I just buy bitcoins, and do not resell them later, I am neither a money transmitter nor an exchanger and thus is not subjected to any regulation?

The transaction itself may be reportable by whoever sells you the Bitcoins, though.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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March 19, 2013, 05:19:18 AM
 #92

I don't think this is a big deal.  As already pointed out this is just a clarification of rules that are already in place and it was pointed out it only applies to over $1000/day.  

For practically everything but bitcoin and other cryptocurrencies. Bitcoin->$0.01, no MSB/MT=criminal.

You are saying that any bitcoin transaction for cash even if its 1 penny requires you to register as a MT? I dont see that.  If you stick to selling under 1k a day this doesn't effect you. 

Maybe I'm reading your thing wrong.
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March 19, 2013, 05:22:05 AM
 #93

So now I'm wondering; is anyone free to use bitcoin? Or, is it only for those granted special permission by FinCEN to use in a specified way?  

I suppose if this community endeavors to interface with the establishment, it will have to get used to being constrained by its rules.  

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March 19, 2013, 05:27:19 AM
 #94

If you stick to selling under 1k a day

For clarity, that "$1K per-day" threshold is for use in determining if you would be considered a Money Service Business (MSB), and is not relevant in the discussion about whether or not an activity causes you to be considered a "money transmitter".

Quote
No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

 - http://www.fincen.gov/financial_institutions/msb/definitions/msb.html
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March 19, 2013, 05:41:18 AM
 #95

If you stick to selling under 1k a day

For clarity, that "$1K per-day" threshold is for use in determining if you would be considered a Money Service Business (MSB), and is not relevant in the discussion about whether or not an activity causes you to be considered a "money transmitter".

Quote
No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.

 - http://www.fincen.gov/financial_institutions/msb/definitions/msb.html

Wow you are correct.  Thats retarded.
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March 19, 2013, 05:54:14 AM
 #96

So now I'm wondering; is anyone free to use bitcoin? Or, is it only for those granted special permission by FinCEN to use in a specified way?  

I suppose if this community endeavors to interface with the establishment, it will have to get used to being constrained by its rules.  
The way I read these rules, the only people affected by it are
1) miners who sell their mined cryptocoins for fiat, and
2) third parties who transfer someone else's cryptocoins as part of an exchange of fiat (i.e. exchanges, BitPay, &c).

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the prevalence of users convinced that BTC is a magic box that will turn them into millionaires, and of the con-artists who have followed them here to devour them.
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March 19, 2013, 06:06:58 AM
 #97

The way I read this is that mining for bitcoins and selling those for USD is now illegal unless you are a corporation with the right licenses (which cost many thousands) and hundreds of thousands (or even millions) of dollars for bonding requirements, etc.
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March 19, 2013, 06:08:40 AM
 #98

After over four years this is the best they could come up with? This is so full of loopholes. Essentially this outlaws all barter and exchange of services. Nowhere does it mention any money. In fact, Bitcoin is not a virtual currency, it is getting help with a math problem. They will have to ban math tutoring. Perhaps the attack on the education system was planned all along.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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March 19, 2013, 06:13:04 AM
 #99

Anyone who thinks this is a good thing for bitcoin is in for a rude awakening.
I had my fingers crossed that bitcoin would get much further along before this happened.

+1

We are still too small to take on uncle sam just yet. Too much btc trade is concentrated in the US. Though as someone pointed out, this isn't a new law but rather FinCen clarifying what they think current regulations mean, we really need to get more decentralized such that uncle sam doesn't have us by the cojones.

Long Live BITCOIN!

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redbeans2012
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March 19, 2013, 06:18:52 AM
 #100

I'll just offer to sell bitcoin wallets instead of bitcoins then, after the sale is made I'll make a donation into their wallet.
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March 19, 2013, 06:20:20 AM
 #101

This is so full of loopholes.

Seriously.  

So, looking at this:

Quote
In 2008, FinCEN issued guidance stating that as long as a broker or dealer in real currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of the real currency or other commodities for or with a customer, such person is not acting as a money transmitter under the regulations.

I interpret that to mean that if I buy your bitcoins and give you dollars, I am "effecting a bona fide sale of the real currency"  (I sold you dollars).    So to me that means I'm not a money transmitter.



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March 19, 2013, 06:20:59 AM
 #102

I'll just offer to sell bitcoin wallets instead of bitcoins then, after the sale is made I'll make a donation into their wallet.

Or I'll sell you a pet rock for $500 and throw in 10 bitcoins on top of the sale.
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March 19, 2013, 06:28:56 AM
 #103

Anyone can make laws, here is one:

Quote
"§1 C. All Bitcoin users are required to send one tenth of their transmissions to Realpra."

It even has fancy numbering!
If you don't, I can and will do.. the same as FinCEN, NOTHING.

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March 19, 2013, 06:41:10 AM
 #104

Does this means we are now on the "they fight you" phase?  Cheesy

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March 19, 2013, 07:20:40 AM
 #105

who are the lobbying groups involved, and who is paying them?
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March 19, 2013, 07:33:45 AM
 #106

What is funny is we don't "create" the virtual currency.  We mine it ("find it").  You can create fiat, but not bitcoins.  This means FinCen's statement on de-centralized currencies don't apply to bitcoin.
No, bitcoins are created, not "found". You have to be naive to think otherwise.

Objects called bitcoins don't even exist in the protocol, so words like "created", "found", "issued", etc. are nothing but metaphors anyhow.

Metaphorically, I would agree that bitcoins are created but not by the miner alone. They are created by the collective effort of the network.

As a miner, how would I prove this in court? Easy. In order to "create" bitcoins, it isn't sufficient to find and publish a block. Even then, that block could still be orphaned. "Creation" is only complete once that block has been accepted into the consensus chain. That final step of "creation" is outside my control.

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March 19, 2013, 07:57:18 AM
 #107

Quote
Definitions of User, Exchanger, and Administrator
[...]
* A user is a person that obtains virtual currency to purchase goods or services.
* An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.
* An administrator [...not relevant...]
As long as I only occasionally sell my own Bitcoins I am not engaged as business. As I see it all of this does not affect private users.

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March 19, 2013, 09:05:33 AM
 #108


With the standard "I Am Not A Lawyer" disclaimer, my read is that miners might be ok if

  • They sell bitcoins for fiat, via a licensed exchange
  • They purchase goods and services entirely within the bitcoin economy

The first is obvious.  The US government is certainly within their rights to regulate the US Dollar, and ditto for other government fiat currencies.

The second is vastly positive.  Stimulative for the bitcoin economy, encouraging a broad market of services priced in bitcoins.

And the third, more general point is implied:  bitcoins are legal for regular users to possess and spend.

It is true that bitcoins were never illegal, but having a big government issuing an affirmative statement "bitcoins are legal" (in effect) is great news.



Agree. I read through the statement, interpret it this way, and see it as positive for BitCoin. The ground is clear and we know where we stand. I don't understand the pessimism about this. It looks like a very pragmatic and commonsense position they are taking.

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March 19, 2013, 09:06:15 AM
 #109

As long as I only occasionally sell my own Bitcoins I am not engaged as business. As I see it all of this does not affect private users.

There's also this exemption:

Quote
31 CFR § 1010.100(ff)(8 )

Limitation. For the purposes of this section, the term “money services business” shall not include:

(iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.
- http://cfr.regstoday.com/31cfr1010.aspx#31_CFR_1010p100

The only time I've seen a definition of "infrequent" was in this report from McGladrey in which the definition mentions "fives [trades] or less [per year] and not done for profit":
 - http://bit.ly/XYi9AF

Now that's for needing to register as an MSB.  That doesn't mean you aren't a money transmitter.
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March 19, 2013, 09:17:35 AM
 #110

The way I read this is that mining for bitcoins and selling those for USD is now illegal unless you are a corporation with the right licenses (which cost many thousands) and hundreds of thousands (or even millions) of dollars for bonding requirements, etc.
A significant downside to the ruling, but one that's easily circumvented; all you need to do is cash in your mining spoils by actually spending them in the Bitcoin economy. Buying 1oz rounds, for instance (which can then easily be exchanged for fiat if that's your thing).

Edit: Of course, you could also just ignore the law, provided you're careful enough about where you cash out (and willing to risk the book getting thrown at you if you're discovered).

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the prevalence of users convinced that BTC is a magic box that will turn them into millionaires, and of the con-artists who have followed them here to devour them.
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March 19, 2013, 09:45:06 AM
 #111

The way I read this is that mining for bitcoins and selling those for USD is now illegal unless you are a corporation with the right licenses (which cost many thousands) and hundreds of thousands (or even millions) of dollars for bonding requirements, etc.
A significant downside to the ruling, but one that's easily circumvented; all you need to do is cash in your mining spoils by actually spending them in the Bitcoin economy. Buying 1oz rounds, for instance (which can then easily be exchanged for fiat if that's your thing).

Edit: Of course, you could also just ignore the law, provided you're careful enough about where you cash out (and willing to risk the book getting thrown at you if you're discovered).

As a miner, you are not "engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency."

If you return from your holiday with 1000 EUR in cash, and change them at a money changer (or do a swap with someone), are you "engaged as a business in the exchange of real currency for funds, or other virtual currency."?

No.


The law only covers those who "create" virtual currency. E.g. Linden Labs for SLL. I don't see how this can cover miners, who are "granted" virtual currency. I think you are drawing conclusions far too soon here.

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March 19, 2013, 10:09:00 AM
 #112

The law only covers those who "create" virtual currency. E.g. Linden Labs for SLL. I don't see how this can cover miners, who are "granted" virtual currency. I think you are drawing conclusions far too soon here.

Quote

c. De-Centralized Virtual Currencies

            A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

            A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.


See my emphasis. This is while not crystal clear but it is difficult to interpret any other way than as bitcoin miners are money transmitters if they sell for fiat. You can interpret it as you like, but what is important is how judges and regulators will interpret it and you can bet they will not be trying their best to bend over in favor of miners, the opposite is more likely.

However, selling for fiat on an exchange is unlikely to make the miner a "money transmitter", because "money transmitting" function is performed in this case by the exchange.

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March 19, 2013, 10:19:47 AM
 #113

bitcoin --->gold---->fiat.

Problem solved.


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March 19, 2013, 10:23:46 AM
 #114

bitcoin --->gold---->fiat.

Problem solved.

Of course! Ben Bernanke told us under oath that gold is not money. If it is not money, then it is certainly not "real money" either or is it?

It seems they are starting getting diminishing return on legislation as well. It is getting more and more complicated because they have turned such a simple thing as money into much more complex one by all this money laundering BS and by adding more and more layers of BS that is self contradictory, sooner or later this heap of BS will fall down under its own weight.


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March 19, 2013, 10:45:01 AM
 #115

What is funny is we don't "create" the virtual currency.  We mine it ("find it").  You can create fiat, but not bitcoins.  This means FinCen's statement on de-centralized currencies don't apply to bitcoin.

[...]

Quote
7 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.

harvesting? lol

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March 19, 2013, 10:52:06 AM
 #116

bitcoin --->gold---->fiat.

Problem solved.

Of course! Ben Bernanke told us under oath that gold is not money. If it is not money, then it is certainly not "real money" either or is it?

It seems they are starting getting diminishing return on legislation as well. It is getting more and more complicated because they have turned such a simple thing as money into much more complex one by all this money laundering BS and by adding more and more layers of BS that is self contradictory, sooner or later this heap of BS will fall down under its own weight.


As lucid as ever Vlad .. this is precisely what is happening. It is the diminishing marginal returns of complexity effect and we are witnessing it as the slow motion collapse of the existing monetary system as more and more layers of complexity, regulation, jobsworth, BS, etc are piled higher and deeper, yet every move makes the situation worse not better. It has already begun to fall under its own weight.

The legitimacy of the state is seriously undermined by all this arbitrariness of course, it is how banana republics evolve.

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March 19, 2013, 11:12:06 AM
 #117

My first thought when I read about this ruling was, like many, "great! bitcoin is legal!". Now I'm unsure again. I've always held nagging doubts about bitcoin, and how amazingly effective it would be as a 1984-esque tool for population control and governance. To recap, just suppose BigGovt gains >51% of mining, and suddenly the only transactions getting through are government-approved transactions, to government-approved bitcoin addresses - it would be the ultimate Big Brother.  Yeah, yeah, yeah, I know, many people more clever than me have suggested measures against this, but I'm still not convinced.

So, now what, are these bitcoin "money transmitters" going to need to register their bitcoin address(es) with some government department so they can be monitored for compliance? How exactly are they going to police this ruling?

This ruling seems positive for bitcoin, but I'm seeing it more as a shot across the bow: "bitcoin: we're coming for you." In fact, many threads have said that the weak point in the bitcoin ecosystem is the fiat exchangers. How about that.

I call on the devs to prioritize a modification to the block approval code in the client, to reject blocks that do not include enough valid and well-broadcasted transactions. We need better discussion on this in order to establish exactly how to proceed.
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March 19, 2013, 11:47:44 AM
 #118

How are businesses that pay bitcoins to independent contractors in exchange for their services, which help the business profit in USD, classified?

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March 19, 2013, 11:59:28 AM
 #119

One more observation. It was mentioned by someone before, that the Cyprus thing makes Euro less fungible. I would observe that all the AML/KYC multilayered legal BS is nothing less than a direct (and suicidal) attack on fungibility of all fiat currencies.

They are making their fiat currencies worse and worse and less competitive as money by making them less fungible. Should have been just doing decent police work instead of making their money vulnerable like that.

Perhaps the key to success of Bitcoin as money is preserving Bitcoin fungibility as much as possible and getting to the point where Bitcoins do not have to cross to fiat world and circulate within Bitcoin economy as much as possible. In this case Bitcoin will simply win because it is better money than less fungible fiat currencies. We are making quite good progress on this so far but this can be improved on a lot.


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March 19, 2013, 12:38:22 PM
 #120

One more observation. It was mentioned by someone before, that the Cyprus thing makes Euro less fungible. I would observe that all the AML/KYC multilayered legal BS is nothing less than a direct (and suicidal) attack on fungibility of all fiat currencies.

They are making their fiat currencies worse and worse and less competitive as money by making them less fungible. Should have been just doing decent police work instead of making their money vulnerable like that.

Perhaps the key to success of Bitcoin as money is preserving Bitcoin fungibility as much as possible and getting to the point where Bitcoins do not have to cross to fiat world and circulate within Bitcoin economy as much as possible. In this case Bitcoin will simply win because it is better money than less fungible fiat currencies. We are making quite good progress on this so far but this can be improved on a lot.
That's how I see it, too. They force people to never come back. Maybe it will be time to cash out into Bitcoin sooner than we think.

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March 19, 2013, 01:04:42 PM
 #121

And probably cash back not into fiat but into PM's and real estate.

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March 19, 2013, 01:16:38 PM
 #122

I kinda seen this coming hence moving my business offshore, As the first person to sell Bitcoin-Key's for credit card and later copied by BTCquick, I talked to a informed member of the gov who warned me of this move. Of course If I would have said anything Like I did about the S.E.C. I would have looked like I was trying to bump off the competition, not only that I seen no need to warn business that are competition or have previously stolen my idea pretty much in a whole.
But I can tell you right now that
BTCquick
ZIGZAP
Cash for Bitcoins LCC

Will all have to comply or cease operations, which sucks, cause its going to cost into the 5 to 6 digits to get all that crap sorted out and be in 100% compliance just ask Bitinstant. Doing this with in the 6 month period will be doable but we are in a sequestration right now and I am sure this will reflect on the processing time.
http://www.fincen.gov/financial_institutions/msb/msbrequirements.html

Now this brings up the states your U.S. registered company does business in, now they want a cut to. So every state you have customers you buy or sell to, you will need to be registered in that state as well, just like good ole paypal.
North Carolina Requires 500k capital <---- They got it posted on the Gas station doors that sell green dot and netspend
http://www.dfi.ca.gov/Licensees/money_transmitters/default.html
3,500 app fee lol
http://www.banking.state.tx.us/forms/forms.htm#msb
I know one of the companies listed above is a a Delaware company
http://banking.delaware.gov/services/applicense/tmvintro.shtml
http://delcode.delaware.gov/title5/c023/index.shtml
Its a little cloudy I just skimmed it quick

But it seems if you register your business in the USA and want to trade coin you are going to need more then 100k to do it.

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March 19, 2013, 01:19:14 PM
 #123

almost time to move the biz to cyprus.

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March 19, 2013, 01:23:12 PM
 #124

almost time to move the biz to cyprus.


If you want them to take 9.9% of your bank account at will lol
But a MAJOR bitcoin business does bank in cyprus I wonder how they faired.

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March 19, 2013, 01:25:10 PM
 #125

Do you mean OKpay reportedly shaving 6.75% on some debit card accounts already? I guess they have not fared that well.

I would not be so certain that one will not get 40% haircut in some other EU banks before long. Cyprus might turn out a safe heaven in coming years, depending on how this will play out. Islandic banks are definitely looking rather as a safe bet at this point.





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March 19, 2013, 01:32:24 PM
 #126

The law only covers those who "create" virtual currency. E.g. Linden Labs for SLL. I don't see how this can cover miners, who are "granted" virtual currency. I think you are drawing conclusions far too soon here.

Quote

c. De-Centralized Virtual Currencies

            A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

            A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.


See my emphasis. This is while not crystal clear but it is difficult to interpret any other way than as bitcoin miners are money transmitters if they sell for fiat. You can interpret it as you like, but what is important is how judges and regulators will interpret it and you can bet they will not be trying their best to bend over in favor of miners, the opposite is more likely.

However, selling for fiat on an exchange is unlikely to make the miner a "money transmitter", because "money transmitting" function is performed in this case by the exchange.


What is bizare is that FinCEN failed to address that obvious exception.  Seems they would have clearly identified that a person selling virtual currency they "created" to an exchange (registered as a MSB) doesn't need to register as an MSB as well. 

We (TC, LLC) will be filing for an administrative ruling asking for clarification on a few points and we have included the one above. 
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March 19, 2013, 01:36:58 PM
 #127

Now this brings up the states your U.S. registered company does business in, now they want a cut to. So every state you have customers you buy or sell to, you will need to be registered in that state as well, just like good ole paypal.
North Carolina Requires 500k capital <---- They got it posted on the Gas station doors that sell green dot and netspend

Just because FinCEN and states use the same term "Money Transmitter" doesn't mean they have the same definitions.  There is no universal legal definition of anything.  One needs to look at the state statute and see if the definition applies.  This is best done with legal counsel and not by making broad and unsubstantiated claims on the intertubes.

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March 19, 2013, 01:58:19 PM
 #128

If I'm interpreting this correctly the definition for Centralized Virtual Currencies would apply not just to Second Life's Linden dollars, but also to WoW gold and any other video game economy?

Quote
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.


By the preceding definition, Magic the Gathering: Online tix are a virtual currency, as they have an equivalent cash value (a dollar) and are a substitute for real currency in the game (they are used to pay event entry fees, and are a preferred medium of exchange for purchasing cards when trade partners cannot be found).

The implications of this 'guidance' appear to be pretty far reaching.

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."
-- H.L. Mencken (1918)
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March 19, 2013, 01:59:39 PM
 #129

Never said it was a fact just my view on it. You do not see me going on your page and telling your customers your illegally operating now do you? That would be broad and unsubstantiated claims.
Like it says in the posts
Quote
Now this brings up the states

It does not declare this to be required, I just brought it up. But do you really think if the fed classifies you as that, the state won't?
Fed trumps state? Yes or NO?

Legal Definition of a Money Transmitter Per Fin Cen
http://www.fincen.gov/news_room/rp/rulings/html/fincenruling2003-8.html
 
Quote
The definition of money transmitter for purposes of BSA regulations found at 31 CFR 103.11(uu)(5) includes:

(A) [a]ny person, whether or not licensed or required to be licensed, who engages as a business in accepting currency, or funds denominated in currency, and transmits the currency or funds, or the value of the currency or funds, by any means 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, or an electronic funds transfer network; or

(B) [a]ny other person engaged as a business in the transfer of funds.

FinCEN does not currently interpret the definition of money transmitter to include the third-party origination service that is described in your letter. The nature of the transactions you describe is the transfer of funds through the ACH system from a customer to a merchant as payment for goods and services. [ ]’s role in the transactions is to provide merchants with a portal to a financial institution that has access to the ACH system. [ ] acts on behalf of merchants receiving payments rather than on behalf of customers making payments. For these reasons, the service that [ ] provides through [ ] more closely resembles payment processing/settlement than money transmission. Therefore, to the extent that the role of [ ] in such transactions is limited to submitting payment instructions obtained from a merchant to a bank for ACH processing, and remitting the funds received through the ACH process to the merchant (or in some cases, refunding money to the merchant’s customer through an ACH transaction), FinCEN would not deem [ ] a money transmitter for purposes of 31 CFR 103.11(uu)(5).

In arriving at our decision in this matter, FinCEN relied upon the accuracy and completeness of the representations made in your February 5, 2003 letter. Nothing precludes FinCEN from seeking further action should any of this information prove inaccurate or incomplete. Finally, we note that you have requested that certain information contained in your letter be held in confidence and exempt from disclosure under the Freedom of Information Act, 5 U.S.C. 552. FinCEN reserves the right to publish this letter as guidance to financial institutions with all identifying information about you, [ ], [ ], and [ ], redacted. You will have 14 days after the date of this letter to identify any other information you believe should be redacted and the legal basis for the redaction. Should you have any questions, please telephone Christine Del Toro of my staff at (703) 905-3590.
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Here is the whole definition

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(uu) Money services business. Each agent, agency, branch, or office within the United States of any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the capacities listed in paragraphs (uu)(1) through (uu)(6) of this section. Notwithstanding the preceding sentence, the term ?money services business? shall not include a bank, nor shall it include a person registered with, and regulated or examined by, the Securities and Exchange Commission or the Commodity Futures Trading Commission.

(1) Currency dealer or exchanger. A currency dealer or exchanger (other than a person who does not exchange currency in an amount greater than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions).

(2) Check casher. A person engaged in the business of a check casher (other than a person who does not cash checks in an amount greater than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions).

(3) Issuer of traveler's checks, money orders, or stored value. An issuer of traveler's checks, money orders, or, stored value (other than a person who does not issue such checks or money orders or stored value in an amount greater than $1,000 in currency or monetary or other instruments to any person on any day in one or more transactions).

(4) Seller or redeemer of traveler's checks, money orders, or stored value. A seller or redeemer of traveler's checks, money orders, or stored value (other than a person who does not sell such checks or money orders or stored value in an amount greater than $1,000 in currency or monetary or other instruments to or redeem such instruments for an amount greater than $1,000 in currency or monetary or other instruments from, any person on any day in one or more transactions).

(5) Money transmitter?(i) In general. Money transmitter:

(A) Any person, whether or not licensed or required to be licensed, who engages as a business in accepting currency, or funds denominated in currency, and transmits the currency or funds, or the value of the currency or funds, by any means 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, or an electronic funds transfer network; or

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

(ii) Facts and circumstances; Limitation. Whether a person ?engages as a business? in the activities described in paragraph (uu)(5)(i) of this section is a matter of facts and circumstances. Generally, the acceptance and transmission of funds as an integral part of the execution and settlement of a transaction other than the funds transmission itself (for example, in connection with a bona fide sale of securities or other property), will not cause a person to be a money transmitter within the meaning of paragraph (uu)(5)(i) of this section.

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March 19, 2013, 02:09:30 PM
 #130

Look I sold Flexcoin last year mostly because of this crap.  

Instawallet needs to address their business model as well as several of the exchanges.

You'll also see a few other ewallets eventually get caught up in this regulation.

Overall however it's not terrible news,  there at least NOW guidelines to build a valid bitcoin economy, something that didn't exist as of yesterday morning.




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March 19, 2013, 02:22:58 PM
 #131

By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.

I don't see how this applies to selling mined bitcoins.  Suppose I mine some bitcoins and sell them for cash.  I hand over a private key and receive cash, at the same location.  Where is the other location?  This doesn't meet the definition of a money transmitter.


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March 19, 2013, 02:27:39 PM
 #132

Its the exchange part that gets you, but I think the stipulation is over 1000 USD if you are not a bussiness. But really at this point no one knows.

(1) Currency dealer or exchanger. A currency dealer or exchanger (other than a person who does not exchange currency in an amount greater than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions).

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March 19, 2013, 02:41:34 PM
 #133

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c. De-Centralized Virtual Currencies

            A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

            A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter


See my emphasis. This is while not crystal clear but it is difficult to interpret any other way than as bitcoin miners are money transmitters if they sell for fiat. You can interpret it as you like, but what is important is how judges and regulators will interpret it and you can bet they will not be trying their best to bend over in favor of miners, the opposite is more likely.

However, selling for fiat on an exchange is unlikely to make the miner a "money transmitter", because "money transmitting" function is performed in this case by the exchange.


Soo.. if I contract with a mining pool to provide hashes, and get paid in BTC.. am i a miner?  Or is the Pool Op the miner?  After all, the mined coins go to HIS wallet when first "created" ... 

I'm just providing hashes.. he's the one who's building the new block, and broadcasting it out to the world to be included in the blockchain....

Sigg

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March 19, 2013, 02:44:55 PM
 #134

Can go either way. Chances are that the regulators will want to screw both you and your pool. They will screw the pool for creating bitcoins and then selling them for fiat. I am referring here to functionality of, say, eclipsemc to cash out mined coins via paypal. And then they will screw you for mining and selling bitcoins and having the pool as your agent. Whoever has got better lawyers or a pocket judge wins this one....


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March 19, 2013, 02:51:50 PM
 #135

Incidentally,

AML specialists are hard at work this week for the moneylaundering.com 18th Annual International AML & Financial Crime Conference at the Westin in Miami:





 - http://www.moneylaunderingconference.com/2013/default.asp

They might be overjoyed to learn that through this guidance FinCEN found some new meat to help them generate some billable hours that well allow them to make it through these lean times.
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March 19, 2013, 03:07:15 PM
 #136

Thats pretty funny cause Miami was built on laundered drug money.

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March 19, 2013, 03:29:38 PM
 #137

Its the exchange part that gets you, but I think the stipulation is over 1000 USD if you are not a bussiness. But really at this point no one knows.

(1) Currency dealer or exchanger. A currency dealer or exchanger (other than a person who does not exchange currency in an amount greater than $1,000 in currency or monetary or other instruments for any person on any day in one or more transactions).
This does not apply to bitcoins.  "Currency" is defined in 31 CFR 1010.100(m) as "The coin and paper money of the United States or of any other country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issuance."

Also note that the part you quoted (31 CFR 1010.100(ff)) has been updated recently.  The wording was changed from "Currency dealer or exchanger" to "Dealer in foreign exchange".


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March 19, 2013, 03:34:18 PM
 #138

Well I guess there is no loophole then lol

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March 19, 2013, 03:49:17 PM
 #139

Well I guess there is no loophole then lol
Trading bitcoin isn't "foreign exchange".

If this is relevant to your business, I would advise obtaining an up-to-date version of the regulations, and discussing it with legal counsel.


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March 19, 2013, 04:05:22 PM
 #140

If I'm interpreting this correctly the definition for Centralized Virtual Currencies would apply not just to Second Life's Linden dollars, but also to WoW gold and any other video game economy?

Quote
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.


By the preceding definition, Magic the Gathering: Online tix are a virtual currency, as they have an equivalent cash value (a dollar) and are a substitute for real currency in the game (they are used to pay event entry fees, and are a preferred medium of exchange for purchasing cards when trade partners cannot be found).

The implications of this 'guidance' appear to be pretty far reaching.

I wonder if they could nail every company that sells gift cards? They are virtual currency.

What about Microsoft xbox points? that's a virtual currency?

Every game online store? Blizzard, EA, all screwed.

This is a huge can of worms.
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March 19, 2013, 04:22:41 PM
 #141

Well I guess there is no loophole then lol
Trading bitcoin isn't "foreign exchange".

If this is relevant to your business, I would advise obtaining an up-to-date version of the regulations, and discussing it with legal counsel.
Yup and thats the start of the Thousands and thousands of dollars its going to cost lol

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March 19, 2013, 05:02:13 PM
 #142

I am preparing an article about this and I have a call into Fincen for clarification.

If you get someone knowledgeable on the phone clarify that a miner exchanging Bitcoins for "real currency" using a broker/exchange registered as a MSB, doesn't itself need to register as a MSB.

i.e. Bob the miner exchanges coins for USD at CoinFort (a registered MSB).  Bob is not registered as an MSB is Bob compliant?  Lets say Bob is running his mining operation as a business but never sells coins to other individuals but only to CoinFort is he still compliant?

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March 19, 2013, 05:02:38 PM
 #143

Please link you article when you are finished  Wink

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March 19, 2013, 05:09:22 PM
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Here are my 2 cents

* Any regulation that applies to Money Orders will eventually apply to Bitcoin.

* This includes businesses that accept or resell Money Orders  ( http://www.fincen.gov/financial_institutions/msb/materials/en/prevention_guide.html )

* What explicitly isn't mentioned is that merchants (people who accept BTC) are required to register.  This seems to be partially covered by this sentence

Quote
Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA


If that sentence means that anyone who provides a service for BTC needs to register, then it's possible that miners, who are accepting BTC for securing the network, needs to register.

Aside:

I don't like saying mining "creates units of this convertible virtual currency" like the notice indicates. I think the actual creation occurred in 2009 when the Bitcoin Protocol was launched. I would argue that the protocol "creates" the coins, and USA based miners are just claiming them.
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March 19, 2013, 05:12:07 PM
 #145

I would argue that the protocol "creates" the coins, and USA based miners are just claiming them.

This is a fair point (not that my opinion is relevant, as no court case or other precedent has yet established either way)




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March 19, 2013, 05:13:53 PM
 #146

I think the actual creation occurred in 2009 when the Bitcoin Protocol was launched. I would argue that the protocol "creates" the coins, and USA based miners are just claiming them.
It's a point that a hostile regulator or judge would not likely accept.
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March 19, 2013, 05:20:57 PM
 #147

I think the actual creation occurred in 2009 when the Bitcoin Protocol was launched. I would argue that the protocol "creates" the coins, and USA based miners are just claiming them.
It's a point that a hostile regulator or judge would not likely accept.

However someone would have a legit argument if they wanted the cost and complexity of a court case.  A Bitcoin miner can't make any Bitcoin not allowed by the protocol.  The protocol has always allowed only 21M coins.  On day zero there were 21M coins available (for someone with sufficient hashing power).  The protocol decides how and when a Miner will receive a coin (as a subsidy for securing the network).

^ Note the above shouldn't be seen as legal advice.  Ultimately on this or any other issue what matters is what the old guy in a robe thinks, still many judges are logical and a logical argument can be made that Bitcoin miners aren't "creating" coins anymore than gold miners are creating gold.  They are simply "unlocking" them.
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March 19, 2013, 05:26:01 PM
 #148

However someone would have a legit argument if they wanted the cost and complexity of a court case.
I agree that it's a logically valid conclusion and I'm not optimistic about logical validity being very reliable when it comes to the US court system. Perhaps I'm overly cynical, but I expect a smart hostile regulator would levy a fine of $1 less than the cost of winning that case.
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March 19, 2013, 05:36:04 PM
 #149

Jesus, you people really don't pay attention to anything at all.

A "money services business" is someone who holds (fiat) money for someone else.

A "money transmitter" is someone who holds (fiat) money for someone else and carries it across jurisdictional boundaries.

"Money" is guaranteed future value.

None of this has anything to do with Bitcoin, although they would like you to believe it does.  It's a hoax.  It's a psy-op.  All they are doing is telling you how they will respond if you try to peg your "virtual currency" to the US dollar.  And they are telling you this because they have to give you notice in order to limit their own liability for any assumptions made regarding their defective ponzi money.  They are limiting their own liability for their practice of transmitting the use of force via scrip, in arbitrarily regulating its value by money-printing and confiscation.

Bitcoin is not pegged to anything.  It does not have "equivalent value" in "real" US dollar currency.  It is not a "substitute" for "real" US dollar currency.  It is not given arbitrary value by anyone and thus is not based on the transmission of force.  It is not "convertible" for anything.  It isn't even "money" technically.

This is 100% nonsense that only applies to perhaps a couple of businesses in the Bitcoin community that peg their vouchers to the US dollar.

If you idiots respond to this in the way in which it was designed for you to respond, and stop mining and increase the centralization of Bitcoin and voluntarily sign up for regulations that don't actually apply to you, then you might as well just flush your Bitcoins down the toilet.

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March 19, 2013, 05:48:12 PM
 #150

I am preparing an article about this and I have a call into Fincen for clarification.

If you get someone knowledgeable on the phone clarify that a miner exchanging Bitcoins for "real currency" using a broker/exchange registered as a MSB, doesn't itself need to register as a MSB.

i.e. Bob the miner exchanges coins for USD at CoinFort (a registered MSB).  Bob is not registered as an MSB is Bob compliant?  Lets say Bob is running his mining operation as a business but never sells coins to other individuals but only to CoinFort is he still compliant?



Fincen called me back.  I asked about the definition of "Money Transmitter" and whether the definition applied to one-time or rare transactions by businesses or individuals trigger.  He said that doing even one transaction by an individual requires them to register as  "Money Transmitter"  (I had not seen the rules that requires transmitters to register, only MSB's.)  He then started to talk about travelers checks and check cashing services.

I explained I was writing an article about the new clarifications and how it relates to Bitcoin.  I explained that all kinds of questions arose about who is a Money Transmitter or Money Services Business and what rules they had to follow.  I also asked the Bitcoin mining question. 

He had no idea what Bitcoin was and he said he had to research it and call me back.   
Thanks for the update

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March 19, 2013, 05:50:44 PM
 #151

Fincen called me back. ... He had no idea

Yeah this is the hard part
Quote
If you get someone knowledgeable on the phone

MSB is an umbrella term.  A money transmitter (or check casher, or issuer of prepaid access) are all MSB.  All Money transmitters are MSB but not all MSB are money transmitters.  FinCen has no specific "Money Transmitter" registration.  They register MSBs.  They register check cashers as MSB, issuers of prepaid access (stored value) as MSBs, and Money Transmitters as MSB.  There are seven activities which a company can declare when registering as a MSB.  It is possible for a single entity to be registered as an MSB conducting more than one activity (i.e. WU is a money transmitter and also issues money orders).

From the source....
Quote
(ff) Money services business. A person wherever located doing business , whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States.

(1) Dealer in foreign exchange. ...

(2) Check casher ...

(3) Issuer or seller of traveler's checks or money orders. ...

(4) Provider of prepaid access ...

(5) Money transmitter ...

(6) U.S. Postal Service. ...

(7) Seller of prepaid access. ...

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=1308d21216c7d185f6892cfa3276c899&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.2.3.1


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March 19, 2013, 06:11:05 PM
 #152

At least the regs are acknowledging bitcoin and haven't outlawed in completed. They seem to even be embracing its existance here with a special clause for it.

One has to wonder why they are doing this. Presumably there has been a request passed to them from a higher body to put in a law about Bitcoin. I would speculate: the CIA/FBI were aware of the technology a while ago and have passed on an opinion that it does not require heavy regulation at this stage.

So thats what Id say this shows. The federal government are probably not going to take any real action against the currency at this stage of its growth. By extension (given the world follows the US), let's say the US isn't.

IMO we can take from this a very positive message about federal regulation.
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March 19, 2013, 06:11:19 PM
 #153

Bitcoin is not pegged to anything.  It does not have "equivalent value" in "real" US dollar currency.  It is not a "substitute" for "real" US dollar currency.  It is not given arbitrary value by anyone and thus is not based on the transmission of force.  It is not "convertible" for anything.  It isn't even "money" technically.

This is what Bitcoin businessmen actually believe.
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March 19, 2013, 06:22:50 PM
 #154

Right, standard I'm not a lawyer disclaimer but here is my interpretation.

Anyone trading bitcoins for fiat with another person is a money transmitter regardless of amount or frequency (though perhaps not if they are using a licensed exchange who takes on the role of MSB). All money transmitters are MSBs. All MSBs have to register and are then subject to expensive fees and regulatory practices by their states.

I would like a lawyer to explain why this interpretation by FinCEN is legal

It does not make sense to me that I grew carrots and sold them I would be a farmer, but if I mined bitcoins and sold them, or earned in game Diablo gold and sold it, or earned second life dollars and sold them, that I would now be subject to extremely expensive regulation.

Apparently anyone selling any type of virtual currency on ebay or craiglist is now a money transmitter, and as such a MSB, and as such now in violation of FinCEN interpretation if they haven't registered as an MSB.

There has to be some lawyer out there who is interested in Bitcoins and who can offer their interpretation on this matter.
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March 19, 2013, 06:28:50 PM
 #155

Jesus, you people really don't pay attention to anything at all.

A "money services business" is someone who holds (fiat) money for someone else.

A "money transmitter" is someone who holds (fiat) money for someone else and carries it across jurisdictional boundaries.

"Money" is guaranteed future value.

None of this has anything to do with Bitcoin, although they would like you to believe it does.  It's a hoax.  It's a psy-op.  All they are doing is telling you how they will respond if you try to peg your "virtual currency" to the US dollar.  And they are telling you this because they have to give you notice in order to limit their own liability for any assumptions made regarding their defective ponzi money.  They are limiting their own liability for their practice of transmitting the use of force via scrip, in arbitrarily regulating its value by money-printing and confiscation.

Bitcoin is not pegged to anything.  It does not have "equivalent value" in "real" US dollar currency.  It is not a "substitute" for "real" US dollar currency.  It is not given arbitrary value by anyone and thus is not based on the transmission of force.  It is not "convertible" for anything.  It isn't even "money" technically.

This is 100% nonsense that only applies to perhaps a couple of businesses in the Bitcoin community that peg their vouchers to the US dollar.

If you idiots respond to this in the way in which it was designed for you to respond, and stop mining and increase the centralization of Bitcoin and voluntarily sign up for regulations that don't actually apply to you, then you might as well just flush your Bitcoins down the toilet.

Good one...

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March 19, 2013, 06:29:45 PM
 #156

All MSBs have to register and are then subject to expensive fees and regulatory practices by their states.

This part ("are then") is not quite correct.

The state and federal laws are disconnected, even if they are intentionally similar in many cases.  Becoming an MSB or MT at the federal level does not immediately trigger a state requirement.  A state requirement to -- for example -- undergo a background check or provide a surety bond is not triggered by becoming an MSB.  The state requirement is triggered by... your transmitting money in a regulated fashion.

A couple US states do not require money transmitter/MSB-like licenses, leaving only the federal requirements to handle.



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March 19, 2013, 06:32:36 PM
 #157

If I'm interpreting this correctly the definition for Centralized Virtual Currencies would apply not just to Second Life's Linden dollars, but also to WoW gold and any other video game economy?

Quote
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.


By the preceding definition, Magic the Gathering: Online tix are a virtual currency, as they have an equivalent cash value (a dollar) and are a substitute for real currency in the game (they are used to pay event entry fees, and are a preferred medium of exchange for purchasing cards when trade partners cannot be found).

The implications of this 'guidance' appear to be pretty far reaching.

I wonder if they could nail every company that sells gift cards? They are virtual currency.

What about Microsoft xbox points? that's a virtual currency?

Every game online store? Blizzard, EA, all screwed.

This is a huge can of worms.


yes, What about bearer bonds and letters of Credit, Or Stock futures, this guideline is ridiculous

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March 19, 2013, 06:42:26 PM
 #158

This is bad, bad news.

First they got your attention, then they regulate, then they take over.

Then they kill it.

I think the real freedom is going to be found on the BTC-e exchange with the Russians and the Chinese. At least you know you can't trust them!
With the US making noises, the EU will copy them, and before you know it, bitcoin will be rebuilt, minus the bits that made it a threat to governments.

Oh well, lets just ride this sucker until it runs out of steam! Smiley

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March 19, 2013, 06:50:24 PM
 #159

All MSBs have to register and are then subject to expensive fees and regulatory practices by their states.

This part ("are then") is not quite correct.

The state and federal laws are disconnected, even if they are intentionally similar in many cases.  Becoming an MSB or MT at the federal level does not immediately trigger a state requirement.  A state requirement to -- for example -- undergo a background check or provide a surety bond is not triggered by becoming an MSB.  The state requirement is triggered by... your transmitting money in a regulated fashion.

A couple US states do not require money transmitter/MSB-like licenses, leaving only the federal requirements to handle.




http://www.fincen.gov/forms/files/fin107_msbreg.pdf

For those curious, this is the actual federal form.
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March 19, 2013, 06:59:21 PM
 #160

This is bad, bad news.

First they got your attention, then they regulate, then they take over.

Then they kill it.

I think the real freedom is going to be found on the BTC-e exchange with the Russians and the Chinese. At least you know you can't trust them!
With the US making noises, the EU will copy them, and before you know it, bitcoin will be rebuilt, minus the bits that made it a threat to governments.

Oh well, lets just ride this sucker until it runs out of steam! Smiley

It's not too late to buy back in.......

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March 19, 2013, 07:27:14 PM
 #161

I was just looking at some of the fines for failure to register

Quote
IV. CIVIL MONEY PENALTY
FinCEN may impose civil money penalties against a money transmitter, or any person who
owns or controls a money transmitter, for violations of money services business registration
requirements.14 FinCEN may assess a civil money penalty for failure to register as a money
transmitter, in an amount up to $5,000 per violation. Each day a violation continues constitutes a
separate violation. FinCEN may assess civil money penalties against a money transmitter, or any
partner, director, officer, or employee thereof, for each willful violation of anti-money laundering
program requirements. A penalty of $25,000 per day may be assessed for failure to establish and
implement an adequate written anti-money laundering program.
15 A separate violation occurs for
each day the violation continues.

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March 19, 2013, 07:28:41 PM
 #162

I was just looking at some of the fines for failure to register

Good luck tracking a crypto-currency. Wink
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March 19, 2013, 07:29:39 PM
 #163

Disclaimer: I am not a lawyer.

tl;dr - if you people want to say your thing has value, and swap that amongst yourselves, then our hands are off. However, if you want to say your thing can be traded for our thing then we regulate that.
------------

First, note this applies to the U.S., but Bitcoin is global. So any one govt's reaction to it never affects all of Bitcoin.

The U.S. reaction I think can be viewed in simple terms: use of Bitcoin in its own economy is fine and not subject to regulation. The govt appears to concede it can't prohibit people bartering with bitcoins if they choose to. That's huge.

At the same time, the govt isn't going to stand idly by while bitcoin merges with its own monopolistic hold on "real" currency. Therefore, the reaction appears to target the two points at which this, in their view, happens: mining (bringing bitcoins into existence) which sucks away USD value into bitcoins; and exchanges which allow the trade of bitcoins for things of financial value, thus establishing their value.
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March 19, 2013, 07:30:38 PM
 #164

This is bad, bad news.

First they got your attention, then they regulate, then they take over.

Then they kill it.

I think the real freedom is going to be found on the BTC-e exchange with the Russians and the Chinese. At least you know you can't trust them!
With the US making noises, the EU will copy them, and before you know it, bitcoin will be rebuilt, minus the bits that made it a threat to governments.

Oh well, lets just ride this sucker until it runs out of steam! Smiley

It's not too late to buy back in.......

I'm just going to milk what I have. Wink

Having seen how the libertarian ideal of the internet of the early 90s got regulated to hell, I'm not holding out much hope for bitcoin, but I'm not selling until I have enough to buy some land! Wink

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March 19, 2013, 10:07:31 PM
 #165

Excerpt from prepared remarks of

Jennifer Shasky Calvery,
Director,
Financial Crimes Enforcement Network

She gave the keynote in Miami this morning for today's session of the MoneyLaundering.com's 18th annual AML conference.

Quote
To date, FinCEN’s analysts have explored and produced reference products for law enforcement on many traditional and emerging payment systems. These include: cross border funds transfers and correspondent accounts, money transmitters, online payment systems, prepaid cards, and mobile payments. FinCEN’s analysts then follow up this work by providing in-person analysis and training to thousands of investigators each year.

In addition to developing products to help law enforcement follow the financial trails of emerging payments methods, FinCEN also develops guidance for the financial industry to clarify their regulatory responsibilities as they relate to emerging areas.

In fact, just yesterday, FinCEN issued interpretive guidance to clarify the applicability of BSA regulations to virtual currencies. The guidance responds to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of persons who use virtual currencies or make a business of exchanging, accepting, and transmitting them.

FinCEN’s rules define certain businesses or individuals as money services businesses (MSBs) depending on the nature of their financial activities. MSBs have registration requirements and a range of anti-money laundering, recordkeeping, and reporting responsibilities under FinCEN’s regulations. The guidance considers the use of virtual currencies from the perspective of several categories within FinCEN’s definition of MSBs.

The guidance explains how FinCEN’s “money transmitter” definition applies to certain exchangers and system administrators of virtual currencies depending on the facts and circumstances of that activity. Those who use virtual currencies exclusively for common personal transactions like receiving payments for services or buying goods online are not affected by this guidance. Those who are intermediaries in the transfer of virtual currencies from one person to another person, or to another location, are money transmitters that must register with FinCEN as MSBs unless an exception applies. Some virtual currency exchangers are already registered with FinCEN as MSBs, though not necessarily as money transmitters. The guidance clarifies definitions and expectations to ensure that businesses engaged in similar activities are aware of their regulatory responsibilities.

 - http://www.fincen.gov/news_room/speech/pdf/20130319.pdf
 - http://bit.ly/YpohMG  <-- PDF Viewer in Google Docs.
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March 19, 2013, 10:35:41 PM
 #166

This is good news. With clear rules the economy can really begin to prosper. For the paranoid among us: ASIC IS YOUR SAVIOR.

more or less retired.
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March 19, 2013, 10:41:37 PM
 #167


Apparently anyone selling any type of virtual currency on ebay or craiglist is now a money transmitter, and as such a MSB, and as such now in violation of FinCEN interpretation if they haven't registered as an MSB.

There has to be some lawyer out there who is interested in Bitcoins and who can offer their interpretation on this matter.

Yes, me. I wrote up a quick take for the Bitcoin Foundation here: https://bitcoinfoundation.org/blog/?p=152
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March 19, 2013, 10:51:35 PM
 #168

Excerpt from prepared remarks of

Jennifer Shasky Calvery,
Director,
Financial Crimes Enforcement Network

She gave the keynote in Miami this morning for today's session of the MoneyLaundering.com's 18th annual AML conference.

Thanks for finding this, interesting follow-up.
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March 19, 2013, 10:53:45 PM
 #169

Yes, me. I wrote up a quick take for the Bitcoin Foundation here: https://bitcoinfoundation.org/blog/?p=152

Good blog, thanks for the write up.

Quote
2. If a person receives real money in exchange for their bitcoin they MAY have to register with FinCEN.

I read the "guidance" as being this type of individual would have to register with FinCEN since they would be "a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.” (depending, as you say, on the definition of 'engaged as a business').

Why do you come to the alternative conclusion of MAY rather than MUST - is it just the uncertainty around the definition of 'engaged as a business'?

Will

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March 19, 2013, 11:05:20 PM
 #170

It's probably worth pointing out that the requirement to register with US Treasury also applies to those outside the US who do business as a money transmitter in the US.

Quote
(2) Foreign-located money services business. Each foreign-located person doing business, whether or not on a regular basis or as an organized or licensed business concern, in the United States as a money services business shall designate the name and address of a person who resides in the United States and is authorized, and has agreed, to be an agent to accept service of legal process with respect to compliance with this chapter, and shall identify the address of the location within the United States for records pertaining to paragraph (b)(1)(iii) of this section.

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=532af3285642b30728036e7a8059b718&rgn=div8&view=text&node=31:3.1.6.1.6.3.5.9&idno=31

This provision doesn't require that you act as a money transmitter on a regular basis or that you be an organised/licensed business concern.  It has a lot of potential to be interpreted very broadly.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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March 19, 2013, 11:13:59 PM
 #171


I read the "guidance" as being this type of individual would have to register with FinCEN since they would be "a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.” (depending, as you say, on the definition of 'engaged as a business').

Why do you come to the alternative conclusion of MAY rather than MUST - is it just the uncertainty around the definition of 'engaged as a business'?

Will

Thanks Will. I said "May" rather than "Must" for a couple of reasons.

1. "Engaged as a business" is a whole can of worms that FinCEN left untouched for now. As you correctly pointed out.

2. This "Guidance" is FinCEN's way of identifying a few common facts and circumstances that they definitively view as money transmission. They don't directly say that receipt of money would place you in the category of "Exchanger" but one could easily infer that from rest of the guidelines. Therefore, I went with "may" be required to register not "must". I try to use my "musts" sparingly Smiley
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March 19, 2013, 11:17:31 PM
 #172

This is good news. With clear rules the economy can really begin to prosper.

The problem is the rules aren't clear.  The guidance simply says (simplified) virtual currency exchangers are money transmitters.  Well that is all well and good except the guidance doesn't provide any guidance on complying with the BSA.  Just registering as a MSB is easy.  Anyone (company or individual) can do it in about five minutes by filling out a 4 page form. 

The problem is compliance.  Registering is saying "yes I am in compliance" and if you aren't well that is lose all your money or jail time.  The problem is that "compliance" isn't possible if you can figure out how to comply. 

Just on example of the inconsitencies and vagueness of applying money transmitter rules/requirements to currency exchangers. Money transmitters are required to collect and record information on money transmissions in excess of $3,000.  If I buy 100 BTC from you and pay you $5,000 by bank wire.  Who is the sender?  Who is the receiver?  In a classic money transmitter scenario (the one in all FinCEN courses, and documents) the money transmitter is the middle man.   Sender -> Money Transmitter -> Receiver.  The MT records the information both both entities.  Is the MT both the MT AND the sender?  Are you the sender and receiver?  Are we both MT and one of the roles?  Who knows.  There are some plausible "guesses" but get it wrong and you could be fined up to $250,000 for each inaccuracy.

The "guidance" is nothing of the sort.  Paraphrased version of FinCEN "guidance":
Quote
Um you guys are money transmitters and stuff, so figure out how what we expect you to do without us telling you what we expect you to do and BTW if you get it wrong or we later change our mind and decide you got it wrong well you go to jail.

Below is the regulation in question, now figure out what needs to be recorded.  

Quote
(e) Nonbank financial institutions. Each agent, agency, branch, or office located within the United States of a financial institution other than a bank is subject to the requirements of this paragraph (e) with respect to a transmittal of funds in the amount of $3,000 or more:

(1) Recordkeeping requirements. (i) For each transmittal order that it accepts as a transmittor's financial institution, a financial institution shall obtain and retain either the original or a microfilm, other copy, or electronic record of the following information relating to the transmittal order:

(A) The name and address of the transmittor;

(B) The amount of the transmittal order;

(C) The execution date of the transmittal order;

(D) Any payment instructions received from the transmittor with the transmittal order;

(E) The identity of the recipient's financial institution;

(F) As many of the following items as are received with the transmittal order: 1

1  For transmittals of funds effected through the Federal Reserve's Fedwire funds transfer system by a domestic broker or dealers in securities, only one of the items is required to be retained, if received with the transmittal order, until such time as the bank that sends the order to the Federal Reserve Bank completes its conversion to the expanded Fedwire message format.

( 1 ) The name and address of the recipient;

( 2 ) The account number of the recipient; and

( 3 ) Any other specific identifier of the recipient; and

(G) Any form relating to the transmittal of funds that is completed or signed by the person placing the transmittal order.

(ii) For each transmittal order that it accepts as an intermediary financial institution, a financial institution shall retain either the original or a microfilm, other copy, or electronic record of the transmittal order.

(iii) For each transmittal order that it accepts as a recipient's financial institution, a financial institution shall retain either the original or a microfilm, other copy, or electronic record of the transmittal order.

(2) Transmittors other than established customers. In the case of a transmittal order from a transmittor that is not an established customer, in addition to obtaining and retaining the information required in paragraph (e)(1)(i) of this section:

(i) If the transmittal order is made in person, prior to acceptance the transmittor's financial institution shall verify the identity of the person placing the transmittal order. If it accepts the transmittal order, the transmittor's financial institution shall obtain and retain a record of the name and address, the type of identification reviewed, and the number of the identification document ( e.g., driver's license), as well as a record of the person's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. If the transmittor's financial institution has knowledge that the person placing the transmittal order is not the transmittor, the transmittor's financial institution shall obtain and retain a record of the transmittor's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, if known by the person placing the order, or a notation in the record of the lack thereof.

(ii) If the transmittal order accepted by the transmittor's financial institution is not made in person, the transmittor's financial institution shall obtain and retain a record of the name and address of the person placing the transmittal order, as well as the person's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof, and a copy or record of the method of payment ( e.g., check or credit card transaction) for the transmittal of funds. If the transmittor's financial institution has knowledge that the person placing the transmittal order is not the transmittor, the transmittor's financial institution shall obtain and retain a record of the transmittor's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, if known by the person placing the order, or a notation in the record of the lack thereof.

(3) Recipients other than established customers. For each transmittal order that it accepts as a recipient's financial institution for a recipient that is not an established customer, in addition to obtaining and retaining the information required in paragraph (e)(1)(iii) of this section:

(i) If the proceeds are delivered in person to the recipient or its representative or agent, the recipient's financial institution shall verify the identity of the person receiving the proceeds and shall obtain and retain a record of the name and address, the type of identification reviewed, and the number of the identification document ( e.g., driver's license), as well as a record of the person's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. If the recipient's financial institution has knowledge that the person receiving the proceeds is not the recipient, the recipient's financial institution shall obtain and retain a record of the recipient's name and address, as well as the recipient's taxpayer identification number ( e.g., social security or employer identification number) or, if none, alien identification number or passport number and country of issuance, if known by the person receiving the proceeds, or a notation in the record of the lack thereof.

(ii) If the proceeds are delivered other than in person, the recipient's financial institution shall retain a copy of the check or other instrument used to effect payment, or the information contained thereon, as well as the name and address of the person to which it was sent.

(4) Retrievability. The information that a transmittor's financial institution must retain under paragraphs (e)(1)(i) and (e)(2) of this section shall be retrievable by the transmittor's financial institution by reference to the name of the transmittor. If the transmittor is an established customer of the transmittor's financial institution and has an account used for transmittals of funds, then the information also shall be retrievable by account number. The information that a recipient's financial institution must retain under paragraphs (e)(1)(iii) and (e)(3) of this section shall be retrievable by the recipient's financial institution by reference to the name of the recipient. If the recipient is an established customer of the recipient's financial institution and has an account used for transmittals of funds, then the information also shall be retrievable by account number. This information need not be retained in any particular manner, so long as the financial institution is able to retrieve the information required by this paragraph, either by accessing transmittal of funds records directly or through reference to some other record maintained by the financial institution.

(5) Verification. Where verification is required under paragraphs (e)(2) and (e)(3) of this section, a financial institution shall verify a person's identity by examination of a document (other than a customer signature card), preferably one that contains the person's name, address, and photograph, that is normally acceptable by financial institutions as a means of identification when cashing checks for persons other than established customers. Verification of the identity of an individual who indicates that he or she is an alien or is not a resident of the United States may be made by passport, alien identification card, or other official document evidencing nationality or residence ( e.g., a foreign driver's license with indication of home address).

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March 19, 2013, 11:18:31 PM
 #173

Quote
c. De-Centralized Virtual Currencies

            A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

            A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

This part gets ignored but I am a bit confused by it.

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency".   It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)."  Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

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March 19, 2013, 11:20:22 PM
 #174

That they are discussing bitcoin at all is a clear victory. People should be investing more than ever as they say no such thing as bad publicity. Bitcoin is going up so people hearing about it through any avenue and for any reason is a solid win as they will start paying attention and seeing it jump $10 is sure to get them involved.

Me? I'm just the cynical voice floating in the sea of unchecked optimism.
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March 19, 2013, 11:31:47 PM
 #175

It's probably worth pointing out that the requirement to register with US Treasury also applies to those outside the US who do business as a money transmitter in the US.

...

This provision doesn't require that you act as a money transmitter on a regular basis or that you be an organised/licensed business concern.  It has a lot of potential to be interpreted very broadly.

You're absolutely right, if you provide "Exchanger" services in the US you would come under FinCEN jurisdiction. Also, right that this rule could be and has been very broadly interpreted.
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March 19, 2013, 11:34:35 PM
 #176

The bottom line to all this is that bitcoin shouldn't be thought of as a means of evading the law.

"They" don't seem to care too much about what happens inside our sandbox - especially since the blockchain is public record - but they do care when it goes near fiat or out of public view (eg: into an exchange account for off-blockchain transactions or conversions).

Remember.. Cash is hard to track.  The blockchain as a transaction record in public view is a dream come true.

"They" are probably trying to figure this all out.

First they ignore you, then they laugh at you, then they fight you, then you win.
- Mahatma Gandhi
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March 19, 2013, 11:39:16 PM
 #177

Whenever I bring up Bitcoin to people most of them say something like "they'll find a way to make it illegal".

I can now say, "the US government has acknowledged Bitcoin and has put regulations in place for businesses exchanging dollars for bitcoins but are perfectly fine with people using bitcoins to buy and sell things"

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March 19, 2013, 11:46:29 PM
 #178

The bottom line to all this is that bitcoin shouldn't be thought of as a means of evading the law.
This is absolutely right but as a currency its only real uses (99% of the time. I am using bitcoins for legal purchases right now for my business but is a very specific and almost nonexistent circumstance) are for illegal things/evading the law. It offers no benefits to a consumer vs traditional money/ways to manage money (credit/debit cards).

No chargebacks is not a benefit to consumers. The transactions take way too long. The exchange rate is way too volatile/inconsistent. You are absolutely right that it shouldn't be but when is the community going to start modifying bitcoin to move it away from this?

Me? I'm just the cynical voice floating in the sea of unchecked optimism.
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March 19, 2013, 11:48:30 PM
 #179

Just to clarify, is there anything in this that affects the direct exchange of bitcoins for goods and services?
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March 19, 2013, 11:50:06 PM
 #180

Just to clarify, is there anything in this that affects the direct exchange of bitcoins for goods and services?

The guidance specifically states that is NOT a MSB or an activity regulated by FinCEN.
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March 19, 2013, 11:51:23 PM
 #181

Just to clarify, is there anything in this that affects the direct exchange of bitcoins for goods and services?

No. FinCEN seems to be focusing on the exchange of virtual currency (bitcoin) for "real money". The direct exchange of bitcoin for goods and/or services was specifically excluded from FinCEN registration requirements.
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March 19, 2013, 11:55:26 PM
 #182

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency".   It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)."  Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".
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March 19, 2013, 11:58:26 PM
 #183

Yes, me. I wrote up a quick take for the Bitcoin Foundation here: https://bitcoinfoundation.org/blog/?p=152

Patrick, do we also run up against the issue of people laying themselves open to sanctions if they take intermediate steps to avoid these provisions - such as purchasing something with BTC they have mined but then selling their purchases?  As the original source of the BTC isn't a "serious crime" or predicate offence (which is key in relation to how FATF defines money laundering), then it's hard to argue such a strategy is money-laundering per se and yet my instinct is that taking such steps could well be an offence in its own right (especially if done repeatedly).

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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March 20, 2013, 12:10:23 AM
 #184

Just to clarify, is there anything in this that affects the direct exchange of bitcoins for goods and services?

No. FinCEN seems to be focusing on the exchange of virtual currency (bitcoin) for "real money". The direct exchange of bitcoin for goods and/or services was specifically excluded from FinCEN registration requirements.

Great! So a purely Bitcoin sub-economy is still OK. Although, presumably if your earnings are purely in Bitcoin, you'd have to exchange some of them into USD to pay income tax.
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March 20, 2013, 12:14:13 AM
 #185

Although, presumably if your earnings are purely in Bitcoin, you'd have to exchange some of them into USD to pay income tax.

Why bother? If you only use BTC for payments you can stay anonymous enough to be safe from govt extortion.
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March 20, 2013, 12:21:04 AM
 #186

A US business selling goods for BTC is a vital element of the BTC economy. The business must convert the BTC to USD.
1. does converting it at a registered exchange solve the FinCEN requirements (apparently NOT! getting USD for BTC MAY require registration and this would kill the BTC economy)
2. is mtgox registered at FinCEN (or any other exchange) ?
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March 20, 2013, 12:23:22 AM
 #187

Well the problem is the rules aren't clear.  The guidance simply says (simplified) virtual currency exchangers are money transmitters.  Ok well the problem is the pages and pages of documents related to money transmitters have absolutely nothing to do with buying and selling virtual currencies.

One example.  Money transmitters are required to collect and record information on money transmissions in excess of $3,000.  If I buy 100 BTC from you and pay you $5,000 by bank wire.  Who is the sender?  Who is the receiver?  In a classic money transmitter scenario (the one in all FinCEN courses, and documents) the money transmitter is the middle man.   Sender -> Money Transmitter -> Receiver.  The MT records the information both both entities.  Of course even complying with the regulation becomes impossible if as it doesn't even make sense in this case.  Is the MT both the MT AND the sender?  Are you the sender and receiver?  Who knows.  Get it wrong and you could be fined up to $250,000 for each inaccuracy.

The "guidance" is nothing of the sort.  It is more like "Um you guys are money transmitters and stuff no figure out how to be compliant or go to jail".

You have a reasonable argument that you are not a money transmitter.

Quote
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.

Since you refuse to pay third parties, the only way it could be claimed that you are a money transmitter is if the money is sent to another location.  Is depositing money into someone's bank account transmitting money to another location?  If so, arguably it is the bank that is transmitting the money and not you.

Maybe if you mail out checks, you could insist on only sending to the customer's primary residence, and to no other location.

OTOH, localbitcoins sellers are in the clear, as the money doesn't go to any other location during an in-person exchange.


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bam91
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March 20, 2013, 12:28:46 AM
 #188

http://www.fincen.gov/news_room/rp/rulings/pdf/fincenruling2003-9.pdf

This is interesting:

Quote
To the extent that you are exchanging and transporting your own money on behalf of yourself, you are not doing business as a money transmitter or a currency dealer or exchanger for purposes of the BSA, and thus, are not required to register with FinCEN as an MSB.


Does this still hold true?
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March 20, 2013, 12:34:15 AM
 #189

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency".   It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)."  Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".

Yeah, because "currency" here means US and foreign currency.  This is a limitation of 31 USC § 5312 (a)(3).  They can not just throw "virtual currency" in there.  They really deserve to get slapped for trying.


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March 20, 2013, 12:40:36 AM
 #190

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency".   It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)."  Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".

Yeah, because "currency" here means US and foreign currency.  This is a limitation of 31 USC § 5312 (a)(3).  They can not just throw "virtual currency" in there.  They really deserve to get slapped for trying.

Ok, that makes things more clear.

But what is meant by "value that substitutes for currency"?

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