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Author Topic: Does FinCEN regulation legitimates MTGox redeemable codes?  (Read 1759 times)
genuise
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March 24, 2013, 09:56:23 AM
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As long as exchanges have to comply as money transmitters does it mean that then they still can perform isueing and redeeming codes between customer's accounts?

or what I do not get?

thank you

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Stephen Gornick
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March 29, 2013, 12:51:22 PM
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As long as exchanges have to comply as money transmitters does it mean that then they still can perform isueing and redeeming codes between customer's accounts?

In the U.S. a redeemable code that transmits value would probably be the same as "prepaid access", the term used now for stored value instruments. Issuing those requires a Money Service Business registration at the federal level and approval as a Money Transmitter in 47 of the U.S. states. (i.e., which none of the exchanges are likely in a position to do).

Now if this just impacts fiat-denominated codes (e.g., USD, EUR, etc.) or if it also would apply to BTC-denominated stored value instruments I have no idea.

Either way, Mt. Gox is no longer going to be issuing either MTG USD redeemable codes nor MTG CAD redeemable codes to anyone, from anywhere beginning April 10th, 2013.

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March 29, 2013, 12:58:35 PM
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... Issuing those requires a Money Service Business registration at ...
(i.e., which none of the exchanges are likely in a position to do).
...

So they have to geister to continuw exchanging BTC to UDS and BTC to CAD or not?
If yes then they have to register as MSB or how? at Federal level or/and each state level too? or how?

...
Either way, Mt. Gox is no longer going to be issuing either MTG USD redeemable codes nor MTG CAD redeemable codes to anyone, from anywhere beginning April 10th, 2013.

This is clear as they announced, but not clear why exactly? Probably will be clear from the answer to the first part...

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March 29, 2013, 01:25:16 PM
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If yes then they have to register as MSB or how? at Federal level or/and each state level too? or how?

There are not very many companies that are registered as money transmitters.   

Western Union, Moneygram, Amazon Payments, ADP Payroll, Blackhawk network (gift card issuer), Google Payments, Green Dot (Moneypak issuer), PayPal, Sigue (took over money transmitting role for Coinstar), Skrill (Moneybookers issuer), Travelex (travel foreign currency exchange), Xoom.

(and maybe a dozen smaller names as well.)

The reason so few are money transmitters is because each state has its own laws, many require bonding or minimum capital requirements, etc.
 - http://www.law.cornell.edu/wex/table_financial

i.e., don't expect any "redeemable code" issuers like Mt. Gox, AurumXChange/VouchX, BITSTAMP, BTC-E, etc, to become licensed money transmitters.  And if any then do happen to become licensed, then don't expect the instrument to be used anonymously for amounts larger than the $500 range.

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March 29, 2013, 01:31:59 PM
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But what FinCEN tells exchanges? Does CoinLab have to register as MSB in order to continue exchange business in USA? Or what registration they have to made accordningly to FinCEN?

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March 29, 2013, 01:35:16 PM
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If yes then they have to register as MSB or how? at Federal level or/and each state level too? or how?

There are not very many companies that are registered as money transmitters.   

Western Union, Moneygram, Amazon Payments, ADP Payroll, Blackhawk network (gift card issuer), Google Payments, Green Dot (Moneypak issuer), PayPal, Sigue (took over money transmitting role for Coinstar), Skrill (Moneybookers issuer), Travelex (travel foreign currency exchange), Xoom.

(and maybe a dozen smaller names as well.)

The reason so few are money transmitters is because each state has its own laws, many require bonding or minimum capital requirements, etc.
 - http://www.law.cornell.edu/wex/table_financial

i.e., don't expect any "redeemable code" issuers like Mt. Gox, AurumXChange/VouchX, BITSTAMP, BTC-E, etc, to become licensed money transmitters.  And if any then do happen to become licensed, then don't expect the instrument to be used anonymously for amounts larger than the $500 range.


I would think these MtGox codes would fall under the same situation as a gift code. Almost every retailer around the country issues gift cards, they are not all registered as money transmiting businesses. Why would MtGox be any different?

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genuise
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March 29, 2013, 01:39:55 PM
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Am I correct? To continue to operate as exchange they have to register as Money Service Business at Federal level and that's it.

But if they also want to  issue redeemable codes ( own store of value, gift cards) they have to be approved also as Maney Transmitter in every State level wher they plan to operate. And excatly this is stopping them with codes?

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March 29, 2013, 02:23:25 PM
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I would think these MtGox codes would fall under the same situation as a gift code. Almost every retailer around the country issues gift cards, they are not all registered as money transmiting businesses.

The retailer is an agent of the issuer (who is registered as a money service business and money transmitter).  Agents do not need to register, but the issuer does need to provide to FinCEN a list of every agent who sells the gift cards:
 - http://www.fincen.gov/financial_institutions/msb/agentlist.html

Am I correct? To cnotinue to operate as exchange they have to register as Money Service Busines at Federal level and that's it.

I think there are a lot of lawyers getting billable work from BitInstant.com, Ziggap.com, Coinlab.com, Coinbase.com, BitFloor.com, CampBX.com, WeExchange.co, FastCash4Bitcoins.com, BitcoinsDirect.com, Coinsetter.com, and Kraken.com, OKPay.com, BTCPak.com, BitSpend.com, BTCInstant.com, BTCBuy.info, Coinabul.com, and others.

And that's just ones based in the U.S.,   FinCEN has made it pretty clear that if you serve customers from the U.S., the same registration requirements apply -- so include MtGox.com, Bitcoin-Central.net, BITSTAMP.net, BTC-E.com, VirtEx.com, VirWoX.com, BitcoinNordic.com, LocalBitcoins.com, etc., etc, etc, in the list that would want to keep a close eye on how the U.S. law applies to them.  Or not.
 - http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

genuise
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March 29, 2013, 03:09:25 PM
 #9

ok thank you Smiley

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