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Author Topic: FinCEN addresses Bitcoin  (Read 28110 times)
Vladimir
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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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BitcoinINV
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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
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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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BitcoinINV
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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.
Edit
Here is the whole definition

Quote
(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

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


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....

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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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