FinCEN addresses Bitcoin

[Stephen Gornick]

This is so full of loopholes.

Seriously.  

So, looking at this:

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.

[1714794717]

1714794717

[1714794717]

1714794717

[Severian]

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.

[Realpra]

Anyone can make laws, here is one:

"§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.

[Gabi]

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

[paulie_w]

who are the lobbying groups involved, and who is paying them?

[Timo Y]

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.

[phelix]

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.

[BitPirate]

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.

[Stephen Gornick]

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:

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.

[Qoheleth]

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).

[BitPirate]

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.

[Vladimir]

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.

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.

[Monster Tent]

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

Problem solved.

[Vladimir]

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.

[phelix]

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.

[...]

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

[marcus_of_augustus]

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.

[fergalish]

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.

[bitcoinget]

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

[Vladimir]

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.

[phelix]

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.