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Author Topic: FinCEN addresses Bitcoin  (Read 28110 times)
BitcoinINV
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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
 #144

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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BitcoinINV
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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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Gerald Davis


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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


xavier
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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.
conv3rsion
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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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