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Author Topic: FinCEN addresses Bitcoin  (Read 28110 times)
Stephen Gornick
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March 21, 2013, 09:45:36 AM
 #221

US based pools will be probably required to collect a lot of information from miners and miners will not accept this => I worry that US based pools will be hit the hardest by the FinCEN guidelines => they will go offshore)

FinCEN has extended their reach to include MSBs serving those from the U.S. regardless of where in the world the MSB is based:

Quote
In addition, an entity qualifies as an MSB based on its activity within the United States, not thephysical presence of one or more of its agents, agencies, branches, or offices in the United States. This requirement arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations. FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of their physical location.
- http://www.fincen.gov/news_room/nr/pdf/20110715.pdf


I'm wondering here ... if I mine at a pool then I am getting payout not with newly mined coin but from the pool operator's wallet.    The pool would be, in that instance, the recipient of the "created" coin.  Now the pools that payout generated coin directly to the miners (e.g., Eligius), then that's different.

But this could turn into something that becomes something of a threat to Bitcoin.

If a pool wants to avoid serving those from the U.S., that means it would then need to know where the miner is from.  A pool would then be unable to serve miners who remain anonymous then, unless the pool follows the steps like online casinos follow where they block IP addresses for those trying to access the service from the U.S.   But that means no Tor access either.

So this becomes a choke point where FinCEN regulations could be used to seize equipment at a pool for sending payouts to miners in the U.S. where neither the pool nor the miner have registered as MSBs as money transmitters.  The only protection from this is for the pool to verify ID of all miners.

This may not have been their intention or it may be their tactic to prepare the battlefield.

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Amitabh S
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March 21, 2013, 09:54:27 AM
 #222

Do we non-US people (miners/hoarders/exchanges) have to worry too much about FinCEN?

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March 21, 2013, 10:20:22 AM
 #223

So this becomes a choke point where FinCEN regulations could be used to seize equipment at a pool for sending payouts to miners in the U.S. where neither the pool nor the miner have registered as MSBs as money transmitters.  The only protection from this is for the pool to verify ID of all miners.
even better. once you're accepting transaction fees and not only create BTC from the block reward you are a money transmitter by default.

It's an attempt to institutionalize mining. And while I am an optimist at heart, my bet is on their plan going through, unless the totalitarian power of governments itself will be shaken during the upcoming currency collapse.

The advantage of an institutionalized mining landscape is that it CAN be governed. How bad that may sound, it's a significant improvement over the existing money systems, because bitcoin is a completely transparent system - and transparent government should be embraced.

Unfortunately institutionalized mining also allows for capital control, because it can enforce rules which disrupt the ability to send funds freely around. This may be a problem if the majority of participating countries become totalitarian regimes.

However, there is a silver lining. The evolution of cryptocurrencies has just begun. We need to put more development emphasis on  concepts which disrupt the ability of governments to capture the mining industry - which is the real warrant for economic freedom.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
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March 21, 2013, 11:50:49 AM
 #224

US based pools will be probably required to collect a lot of information from miners and miners will not accept this => I worry that US based pools will be hit the hardest by the FinCEN guidelines => they will go offshore)

FinCEN has extended their reach to include MSBs serving those from the U.S. regardless of where in the world the MSB is based:

Quote
In addition, an entity qualifies as an MSB based on its activity within the United States, not thephysical presence of one or more of its agents, agencies, branches, or offices in the United States. This requirement arose out of the recognition that the Internet and other technological advances make it increasingly possible for persons to offer MSB services in the United States from foreign locations. FinCEN seeks to ensure that the BSA rules apply to all persons engaging in covered activities within the United States, regardless of their physical location.
- http://www.fincen.gov/news_room/nr/pdf/20110715.pdf


I'm wondering here ... if I mine at a pool then I am getting payout not with newly mined coin but from the pool operator's wallet.    The pool would be, in that instance, the recipient of the "created" coin.  Now the pools that payout generated coin directly to the miners (e.g., Eligius), then that's different.

But this could turn into something that becomes something of a threat to Bitcoin.

If a pool wants to avoid serving those from the U.S., that means it would then need to know where the miner is from.  A pool would then be unable to serve miners who remain anonymous then, unless the pool follows the steps like online casinos follow where they block IP addresses for those trying to access the service from the U.S.   But that means no Tor access either.

So this becomes a choke point where FinCEN regulations could be used to seize equipment at a pool for sending payouts to miners in the U.S. where neither the pool nor the miner have registered as MSBs as money transmitters.  The only protection from this is for the pool to verify ID of all miners.

This may not have been their intention or it may be their tactic to prepare the battlefield.


And the plot thickens...

TBH, I don't see how FinCEN can enforce this idiotic edict. If I was a pool operator, the most I'd do is move my operation offshore. As far as complying with not accepting US based miners, "err, sorry, I do not recognize your "universal jurisdiction" over the entire planet." They'd need the cooperation of the foreign host government, which they currently do not have regarding matters like closing down domains that infringe "copyright" - Not universally at least. Until I can no longer move to a place that is not cooperating with them, I'll continue to wave my willy in their faces.  Grin

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March 21, 2013, 02:11:23 PM
 #225

This is my future call on this one, I have been right on most of my bitcoin calls so far.
This is the U.S. way of trying to trace illegal transactions, either comply or die. Thats the way they work do as they say or they will make you life living hell until you
A) Give up and go to prison
B) Spend all of your money defending yourself and go to prison broke and pissed
C) They still take all your money and belongings, but you win the case and it takes 3 years to sue the gov for all your belongings back.
D) "Only gonna happen 1 time" You set a president case and win. Or lose and A & C still happen.

I do not see any country sending citizens to the U.S. for bitcoin related crimes lol. But I do see non compliant business getting a generic cease and desist letters if they are not compliant.

Theoritically speaking  all business have not applied are liable to this

http://www.fincen.gov/news_room/ea/ea.msb.html
Quote
Civil and Criminal Penalties for Operating an Unregistered Money Transmitting Business

Any person who fails to comply with any requirement of 31 U.S.C. 5330 or this section [31 CFR 103.41] shall be liable for a civil penalty of $5000 for each violation.BSA registration requirements, in an amount up to $5,000 for each day a registration violation continues.
[31 U.S.C. § 5330(e) and 31 C.F.R. § 103.41(e)]

Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.
[18 U.S.C § 1960(a)]

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March 21, 2013, 06:33:12 PM
 #226

How about if you use bitcoin to purchase bullion from coinabul and sell the bullion at your local dealer? This method legal?
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March 21, 2013, 06:58:32 PM
 #227

How about if you use bitcoin to purchase bullion from coinabul and sell the bullion at your local dealer? This method legal?

Legal, perhaps. Smart? Doubtful. Bullion dealers sell over spot and buy under spot. So unless you're willing to wait for your PM of choice to go up significantly in value to eventually cash out at parity...

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March 21, 2013, 07:09:12 PM
 #228

Would be a viable option unless they just make it illegal to purchase gold or any precious metal online. Furthermore, wouldnt this method mean you would not only not have to purchase the money transmitter license and register as an msb, and you would not pay the significant taxes on it as well. Instead you would treat the bullion sold as capital gains, saving you perhaps thousands in taxes.
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March 21, 2013, 07:20:18 PM
 #229

How about if you use bitcoin to purchase bullion from coinabul and sell the bullion at your local dealer? This method legal?

Legal, perhaps. Smart? Doubtful. Bullion dealers sell over spot and buy under spot. So unless you're willing to wait for your PM of choice to go up significantly in value to eventually cash out at parity...

You may incur a minor loss but the amount you could have made selling btc for cash than purchasing and selling bullion would definitely be offset by not only the fee for the licensing if individual miners are even able to purchase one but related tax as well. Question however is if gold bullion  would be considered a good/commodity purchased online or the equivalent of currency.
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March 21, 2013, 10:26:25 PM
 #230

Again, we need a definition of "real money".

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March 21, 2013, 11:51:52 PM
 #231

I'm more interested in what the Chinese Govt thinks of BTC.

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March 22, 2013, 09:22:45 AM
 #232

Theoritically speaking  all business have not applied are liable to this

http://www.fincen.gov/news_room/ea/ea.msb.html
Quote
Civil and Criminal Penalties for Operating an Unregistered Money Transmitting Business

Any person who fails to comply with any requirement of 31 U.S.C. 5330 or this section [31 CFR 103.41] shall be liable for a civil penalty of $5000 for each violation.BSA registration requirements, in an amount up to $5,000 for each day a registration violation continues.
[31 U.S.C. § 5330(e) and 31 C.F.R. § 103.41(e)]

Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.
[18 U.S.C § 1960(a)]

Not quite. Registration of a money transmitting business under section 5330 is only required if the business is also required to file reports under section 5313, which involve transactions in US currency above a certain amount.  This creates the weird situation where a business that is otherwise exempt from registering could get nailed when they try to cash out.  As others have suggested in this thread, there are possible ways around this, such as not directly receiving US dollars, or doing so through a bank or MSB.

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March 22, 2013, 06:30:04 PM
 #233

Excerpt from prepared remarks of

Jennifer Shasky Calvery,
[...]
Quote
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.

It sounds like they're interested specifically in exchanges.

I just re-read that and am now seeing that part being missed in the various initial interpretations of FinCEN's guidance.   FinCEN's guidance only addressed transfer of virtual currency when "as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency".  

But how would an EWallet provider know if I was sending from my EWallet to someone as part of a transfer of currency or if it was a gift, or perhaps I bought something and was paying with bitcoins.

From the director's remarks, it sounds like an EWallet would be an MSB (and thus need to obtain identity of the users then).   But almost no EWallets require that.     And I don't need an intermediary to transfer bitcoins anyway -- I can send right from my own client, without using an EWallet.

Or, are all peer nodes now considered "money transmitters" that must register with FinCEN as MSBs.

This isn't guidance from FinCEN, this is mis-guidance from the highest level.

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March 22, 2013, 07:06:14 PM
 #234

Excerpt from prepared remarks of

Jennifer Shasky Calvery,
[...]
Quote
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.

It sounds like they're interested specifically in exchanges.

I just re-read that and am now seeing that part being missed in the various initial interpretations of FinCEN's guidance.   FinCEN's guidance only addressed transfer of virtual currency when "as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency".  

But how would an EWallet provider know if I was sending from my EWallet to someone as part of a transfer of currency or if it was a gift, or perhaps I bought something and was paying with bitcoins.

From the director's remarks, it sounds like an EWallet would be an MSB (and thus need to obtain identity of the users then).   But almost no EWallets require that.     And I don't need an intermediary to transfer bitcoins anyway -- I can send right from my own client, without using an EWallet.

Or, are all peer nodes now considered "money transmitters" that must register with FinCEN as MSBs.

This isn't guidance from FinCEN, this is mis-guidance from the highest level.

Yes, that's a good point. I think eWallets would also be regulated.

The difference I think between you sending to a recipient directly vs. using an eWallet as intermediary is something we've discussed on this forum, which is fractional reserve. An eWallet holding user funds MyBitcoin.com style can abscond with the funds or misrepresent the amount of funds they had. With virtual currencies having real value and FinCEN essentially saying that's ok, I think it makes sense they want to cover any entities dealing with funds.
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March 22, 2013, 07:21:44 PM
 #235

Or, are all peer nodes now considered "money transmitters" that must register with FinCEN as MSBs.

All nodes that generate blocks (transmitters) must register and (I assume) to be compliant must know both parties of all transactions included in the block. This is impossible and thus the guidelines make Bitcoin illegal [in the US and wherever FinCEN thinks it has jurisdiction :-)]

I would urge the US Bitcoin community to discuss Bitcoin with FinCEN. There are positive statements:
- bitcoin is not a currency
- Users of bitcoin do not need to register.
There is good will from the other party :-)
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March 22, 2013, 07:35:21 PM
 #236

This isn't guidance from FinCEN, this is mis-guidance from the highest level.

Yep. As I said on one of the many other FinCEN threads...
We see this type of BS "guidance" in the self-defense rights movement all the time. California Department of Justice's Bureau of Firearms loves chilling the exercise by making shit up (formally called "underground regulation"). Gotta report their shit to the Office of Administrative Law, which overrules the underground regulations. Maybe there is a similar office to OAL charged with weenie-whacking corrupt bastards in the fed gov.

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March 22, 2013, 07:48:37 PM
 #237

Or, are all peer nodes now considered "money transmitters" that must register with FinCEN as MSBs.

All nodes that generate blocks (transmitters) must register and (I assume) to be compliant must know both parties of all transactions included in the block. This is impossible and thus the guidelines make Bitcoin illegal [in the US and wherever FinCEN thinks it has jurisdiction :-)]

I would urge the US Bitcoin community to discuss Bitcoin with FinCEN. There are positive statements:
- bitcoin is not a currency
- Users of bitcoin do not need to register.
There is good will from the other party :-)

That wouldn't make any sense. If you look at the complete FinCEN statement they clearly spell out three categories - users, administrators, and exchangers - and the difference between them. I imagine FinCEN had some help understanding the underlying way Bitcoin works, which is why they address it so specifically. If this is true then they would know simply running the software as a full node is a way to be only a user, the one category they say requires no regulation.

I don't think they're looking at the way the underlying network works. I think they're talking about the infrastructure built on top of it.
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March 22, 2013, 08:07:15 PM
 #238

This is what happens when You generate a block:
"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"
(... this is vague: as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency ...)
FinCEN also "goes after" miners :-)

=> I could not find anything in the guidelines that would exempt block-generators from registering.

(A user [not miner] does not generate a block)
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March 22, 2013, 08:12:01 PM
 #239

I don't think they're looking at the way the underlying network works. I think they're talking about the infrastructure built on top of it.

I am not saying they made Bitcoin illegal intentionally. I am saying they made this by mistake. This is why we should discuss this with them.
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March 22, 2013, 08:16:53 PM
 #240

I don't think they're looking at the way the underlying network works. I think they're talking about the infrastructure built on top of it.

I think you're exactly right.

FinCEN cares mostly about big-time money laundering and terrorist financing. If I was running a cash-for-bitcoins service in the US and started moving more than a few hundred bitcoins a month through my bank account, then I'd talk to a lawyer. If I was running an exchange, I would have already talked to a lawyer. If I was a US-based miner exchanging more than a few hundred freshly-made bitcoins for cash every month, then I would talk with a lawyer. If you hold other people's bitcoins... then I'd talk with a lawyer (even if you're not a money transmitter, there might be consumer protection or banking laws that might apply).

Otherwise, I wouldn't worry. If I was a miner transferring my bitcoins to an exchange and selling them, then FinCEN won't come after me. FinCEN will get reports from the exchange, and that's what they really care about. The IRS might come after me if I don't report the income, but I think they'd charge me with tax evasion, not being an unlicensed money transmitter.

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