I just got off the phone with FinCEN

[kalinka]

The person I spoke with had this to say:

There are no limits which exclude you from registering when dealing with virtual currency. However:

If you are buying/selling from a site such as mtgox.com, who (currently or soon?) will have coinlab which is registered with FinCen, IF you are limited to buying/Selling for speculative purposes (buying, and selling later for gain), AND as a user (trading for goods):

Then you would have the position of a speculator and would not need to register with FinCEN. MtGox/coinlab would have the responsibility in this case to report transactions to FinCEN, since they are registered.

It is only if you decide to branch out and buy/sell directly from other people that you would need to register, as well as be in compliance with their regulations.

Just a summary of what I was told by FinCEN, I can't be responsible for you following this info but seems to be accurate based on what I was told.

------------------Update 4/1/2013--------------------

I talked to Anthony from FinCEN again for further clarifications on our discussion.

It's not so much whether the other party is registered by FinCEN but it's what you are doing with the coins that matters. Basically, if you're only buying/selling coins for speculative, investment purposes then you are a user and don't need to register. That could include buying/selling from another person directly, or buying/selling physical casascius or virtual coins on ebay. If you do the ability to show that it is only for investment purposes, and use as a "user" would be on you if there were any questions.

If you're doing this as part of a business (which includes mining coins probably, since mining leads to profits of income), then you would need to register. Some points about registering, though:

-It's free to register with FinCEN
-You CAN, in fact, be your own compliance officer. He said that many business owners do just that.
-Was pointed to the following page: http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8540ec934b849dc3f899a9454b6f32d4&n=31y3.1.6.1.6&r=PART&ty=HTML

He explained that for the most part, the only things that need to be reported are suspicious transactions, and you can search the web for examples of sample anti-money laundering programs. I asked what forms of identification we needed to collect from those we did business with, he replied that I should read the regulations but in general, MSB don't have the same guidelines, as say, banks do. My interpretation of the guidelines found at http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=b99714739ce703375951af7f060e38ef&rgn=div8&view=text&node=31:3.1.6.1.2.3.3.7&idno=31 is that you only need to verify the identity of the person when the amounts exceed certain thresholds.

I technically am registered as a sole proprietor, so I might or might not register. It honestly doesn't seem to be a big deal after actually talking through it and reading the stuff. I do not know, however, how the state level will impact it as of now.

------------------Update 4/3/2013--------------------

Anthony had this to clarify after checking with his colleagues:

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 is a person engaged as a business in issuing (putting into circulation) a virtual currency , and who has the authority to redeem (to withdraw from circulation) such virtual currency.

SO

Even if you obtain the bitcoins as part of a business, if you are not in the "business in the exchange of virtual currency for real currency, funds, or other virtual currency" and are just selling coins obtained from a user standpoint, including from a business such as sale of items, etc, then that does not require you to register just because you exchange for USD later.

I think this latest clarification will make a great number of users of bitcoin not needing to register. However, if miners are still required to register, I still don't know how transacting with sites such as mtgox will work.

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[joecascio]

Very interesting clarification! And a sigh of relief here.

[ralree]

Yeah that's how I had interpreted it.  Thank you very much for taking the time to clarify!

[kalinka]

Basically when I explained what I wanted to do, the person I spoke with asked "So you are saying you're wanting to purchase it like a stock, and sell it later, not setting up a service where people come to you" and I said yes. He said he would look into it and call me back. Half hour or so later, he called, and clarified what I posted here. I had explained about mtgox and how their partner was registering with FinCEN already.

[freequant]

Kalinka, what in the FinCEN guidance made you think otherwise?

[Big Time Coin]

thanks for checking.  Would be nice if coinlab/gox gave you a document to confirm this as a U.S. customer

[SgtSpike]

Cool.  That was kind of what I had been saying all along - as long as at least one of the parties involved in a currency exchange is licensed, then it is all good by FinCEN.

[MagicBit15]

Wish you would of recorded it, great info though!!

[Dabs]

What about local trades? face to face trades? localbitcoins? I'm not in the US, but I'm still curious.

[kalinka]

I assume for those you'd need to be FinCEN registered.

[Stephen Gornick]

as long as at least one of the parties involved in a currency exchange is licensed, then it is all good by FinCEN.

That's not their position at all.  It depends on the transaction.

[SgtSpike]

as long as at least one of the parties involved in a currency exchange is licensed, then it is all good by FinCEN.

That's not their position at all.  It depends on the transaction.

Please explain?

[kalinka]

Yes, if you are buying or selling from person to person or setting up a service where people can buy or sell from you, then you need to be registered. They actually did tell me this, it doesn't matter if the other person is FinCEN registered or not.

However, if you're buying/selling for speculative purposes as though it were a stock, from a site like mtgox who is FinCEN registered and you're not setting up a service where people are directly buying/selling from you, then you are just a speculator. If you were to buy/sell directly with another person then you would need to register (even if just in small amounts).

[Dr-Rockso]

So, would this be the demise of sites like localbitcoins.com?

[SgtSpike]

So, would this be the demise of sites like localbitcoins.com?

Technically, yes.  Realistically, no.  The government isn't going to be able to regulate cash exchanges for BTC, and they'll be aiming to go after the big fish (unregulated exchanges) anyway.

Source:  The AMALC dude said it, so it must be true.

[Stephen Gornick]

So, would this be the demise of sites like localbitcoins.com?

Technically, yes.  Realistically, no.  The government isn't going to be able to regulate cash exchanges for BTC, and they'll be aiming to go after the big fish (unregulated exchanges) anyway.

Source:  The AMALC dude said it, so it must be true.

Either way, now would be a good time get in contact with other traders who currently list themselves on LocalBitoins.  There may come a time where traders don't advertise but remain active at trading.

[kalinka]

Does anyone even know if registering with fincen is even that much of a hassle? There are no fees or anything. Do you even need to collect info for smaller transactions?

[Dr-Rockso]

Does anyone even know if registering with fincen is even that much of a hassle? There are no fees or anything. Do you even need to collect info for smaller transactions?

That is a great question. Also, as was mentioned, perhaps it is time to warn the peeps on the sites advertising exchange. Great point!

[jgarzik]

Does anyone even know if registering with fincen is even that much of a hassle? There are no fees or anything. Do you even need to collect info for smaller transactions?

There are no fees at the federal level, but you must have a "compliance officer" (who is not you) and many other rules that, if skipped, can land you in jail.

[kalinka]

Does anyone even know if registering with fincen is even that much of a hassle? There are no fees or anything. Do you even need to collect info for smaller transactions?

There are no fees at the federal level, but you must have a "compliance officer" (who is not you) and many other rules that, if skipped, can land you in jail.

I see. Well, I suppose unless it makes sense for me to deal with the mess, buying/selling on mtgox will be enough for me. I try asking for what is required, and they only link me to their website.

[Roger_Murdock]

Did you ask about selling cash in the mail for bitcoins through SR? I want to make sure I'm on the up and up.

Edit: does anyone know if SR has already registered, and if so, does that mean I'm covered? Any clarification would be appreciated. Thanks!

[Bitcopia]

Did you ask about selling cash in the mail for bitcoins through SR? I want to make sure I'm on the up and up.

Edit: does anyone know if SR has already registered, and if so, does that mean I'm covered? Any clarification would be appreciated. Thanks!

Hahahahaha 

[FreshJR]

Can anyone clarify this one

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.

What if you are selling the coins you mined to MTGox, who is a licensed money transmitter?  (In this case i'm assuming a that you are NOT a money transmitter)

What if the you are selling your coins to someone outside the USA, or a organization and not registered with the USA, even for non USD?  (I'm assuming in this case that you ARE a money transmitter)

[smith88]

The person I spoke with had this to say:

There are no limits which exclude you from registering when dealing with virtual currency. However:

If you are buying/selling from a site such as mtgox.com, who (currently or soon?) will have coinlab which is registered with FinCen, IF you are limited to buying/Selling for speculative purposes (buying, and selling later for gain), AND as a user (trading for goods):

Then you would have the position of a speculator and would not need to register with FinCEN. MtGox/coinlab would have the responsibility in this case to report transactions to FinCEN, since they are registered.

It is only if you decide to branch out and buy/sell directly from other people that you would need to register, as well as be in compliance with their regulations.

Just a summary of what I was told by FinCEN, I can't be responsible for you following this info but seems to be accurate based on what I was told.

this is awesome; exactly what i had read into while deep review of the latest fincen regs, etc...  thank you for calling them and displacing the details here.

[kalinka]

I did not ask about mining, but I would think that you would be considered a transmitter. I think personally that it's dumb, especially because how can you have an AML program when you are the person initiating the trades? It's not like you set up a site where people come to you.

[Stephen Gornick]

What if you are selling the coins you mined to MTGox, who is a licensed money transmitter?  (In this case i'm assuming a that you are NOT a money transmitter)

Mt. Gox is not today a licensed money transmitter in the U.S.   

But even if they were, do you as a miner have an agreement where you are an agent of theirs?   If not then it wouldn't matter where you sell your mined coins.

FinCEN's guidance is pretty clear.  If you convert your mined coins to currency (or value that substitutes as currency) then you are a money transmitter.  It is baffling, but yes -- that very restrictive definition is how they chose to interpret legislation regarding the transmission of money.

[Big Time Coin]

OK so did you read the OP?  And why are you quoting that guy, there is no such thing as "selling coins to gox".

Mtgox holds customer accounts like a bank, where you can deposit your bitcoins or your central bank-issued currency.  It also operates an order brokering service.  It will be complying in the near future with MST/MSB laws through partnership with CoinLab in the U.S.

Therefore, in theory there is no reason for FinCEN to demand you, the miner, to be separately registered.  Because you are not selling your coins for central bank currency. 

MtGox/CoinLab is selling your coins for you, after verifying your identity, to someone who has also been verified by them, for funds that Gox/Coinlab is holding for them.  And they are supposed to be reporting the suspicious activities and currency transactions.  So that is what OP is talking about with his phone call.

[sebastian]

what the OP means, is that if you go to <someone> and buys coins, and then use these coins to buy goods and services - thats OK without FinCEN reg, regardless of the <someone>'s FinCEN reg status.
If you go to <someone> and buy coin, save then, and the sell them again to <someone>, you are trading in speculative purpose and its OK without FinCEN reg - as long as <someone> is FinCEN registred.

However if you mine X coins, and then sell them to MtGox, you need a FinCEN reg.
And if you sell your stereo for X bitcoins, and then sell to MtGox, you also need a FinCEN reg.

Bitcoins are fungible, so FinCEN does not care if you take your 10 mined bitcoins and sell back to MtGox when you have bougt 10 bitcoins from MtGox.
However, you are allowed to mine X bitcoins and purchase good/services for that, except services that can be expressed in real currency, like store gift cards, prepaid cards, mobile top-ups and such.

What FinCEN cares about, is that you DONT sell more bitcoins for real currency than you buy for real currency!

So in short:
If you have goods/services to sell, you are allowed to do that. The Bitcoins for those goods/services may NOT be exchanged to real currency or any good/service that can be expressed in real currency.

If you have Money, you are allowed to buy bitcoins for that Money by anyone. That bitcoins may only be sold to the same person/entity as long as the person has FinCEN registration. Only purchasing bitcoins does not require FinCEN reg at all.

If you have Bitcoins, you are allowed to buy any goods/services for this - EXCEPT goods/services that can be expressed in real currency. In this category, is present, but NOT limited to:
-Store gift cards
-Game cards, Wii Points cards, such*
-Prepaid VISA cards
-Mobile Top-ups*
-Gold, Silver, Oil, and other materials that can be expressed in real currency
-Bonds/shares
-Currency valid in any country
-Discount coupons expressed in a fixed value. (For example, a coupon that gives 1$ off a burger king burger may not be bought with bitcoin without FinCEN reg, but a coupon that gives 10% off is allowed)

* (Only if these are expressed in a currency. A mobile top-up that gives free calls and internet for 30 Days is OK to buy. Same with a game card that gives item X, that does not have a set store price. But a mobile topup for 10$ = forbidden. A game card that gives 50$ ingame store = forbidden.)

If you have Bitcoins, you are also allowed to sell them to a FinCEN registred entity, but ONLY if you bought the bitcoins from the EXACT same entity. However, since bitcoins are fungible, it does not matter which coins (eg which outputs) you use.

[kalinka]

I talked to Anthony from FinCEN again for further clarifications on our discussion.

It's not so much whether the other party is registered by FinCEN but it's what you are doing with the coins that matters. Basically, if you're only buying/selling coins for speculative, investment purposes then you are a user and don't need to register. That could include buying/selling from another person directly, or buying/selling physical casascius or virtual coins on ebay. If you do the ability to show that it is only for investment purposes, and use as a "user" would be on you if there were any questions.

If you're doing this as part of a business (which includes mining coins probably, since mining leads to profits of income), then you would need to register. Some points about registering, though:

-It's free to register with FinCEN
-You CAN, in fact, be your own compliance officer. He said that many business owners do just that.
-Was pointed to the following page: http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8540ec934b849dc3f899a9454b6f32d4&n=31y3.1.6.1.6&r=PART&ty=HTML

He explained that for the most part, the only things that need to be reported are suspicious transactions, and you can search the web for examples of sample anti-money laundering programs. I asked what forms of identification we needed to collect from those we did business with, he replied that I should read the regulations but in general, MSB don't have the same guidelines, as say, banks do. My interpretation of the guidelines found at http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=b99714739ce703375951af7f060e38ef&rgn=div8&view=text&node=31:3.1.6.1.2.3.3.7&idno=31 is that you only need to verify the identity of the person when the amounts exceed certain thresholds.

I technically am registered as a sole proprietor, so I might or might not register. It honestly doesn't seem to be a big deal after actually talking through it and reading the stuff. I do not know, however, how the state level will impact it as of now.

[TheButterZone]

I wish we could have a binding legal opinion from a higher court on that, so we know exactly which bitcoin users *should be* immune from prosecution and which aren't. You can literally be prosecuted for anything, and need a factual finding of innocence at the end of malicious prosecutions that are dismissed with prejudice.

[SgtSpike]

I talked to Anthony from FinCEN again for further clarifications on our discussion.

It's not so much whether the other party is registered by FinCEN but it's what you are doing with the coins that matters. Basically, if you're only buying/selling coins for speculative, investment purposes then you are a user and don't need to register. That could include buying/selling from another person directly, or buying/selling physical casascius or virtual coins on ebay. If you do the ability to show that it is only for investment purposes, and use as a "user" would be on you if there were any questions.

If you're doing this as part of a business (which includes mining coins probably, since mining leads to profits of income), then you would need to register. Some points about registering, though:

-It's free to register with FinCEN
-You CAN, in fact, be your own compliance officer. He said that many business owners do just that.
-Was pointed to the following page: http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8540ec934b849dc3f899a9454b6f32d4&n=31y3.1.6.1.6&r=PART&ty=HTML

He explained that for the most part, the only things that need to be reported are suspicious transactions, and you can search the web for examples of sample anti-money laundering programs. I asked what forms of identification we needed to collect from those we did business with, he replied that I should read the regulations but in general, MSB don't have the same guidelines, as say, banks do. My interpretation of the guidelines found at http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=b99714739ce703375951af7f060e38ef&rgn=div8&view=text&node=31:3.1.6.1.2.3.3.7&idno=31 is that you only need to verify the identity of the person when the amounts exceed certain thresholds.

I technically am registered as a sole proprietor, so I might or might not register. It honestly doesn't seem to be a big deal after actually talking through it and reading the stuff. I do not know, however, how the state level will impact it as of now.

Interesting.

Seems like if I'm mining coins for a speculative purpose, I don't need to register.  Sounds good to me!

Thanks for posting the details of these phone conversations, btw.

[kalinka]

No problem. I don't know, however, that "mining for speculative purposes" is an actual thing, he is more talking about investing money into virtual currency, rather than creating it. IMO mining is a business activity. Should I ask?

[TiagoTiago]

But are bitcoins really ever created, past the first time the network got online? The way i see it Satoshi Nakamoto is the only person (or group) in the world to have ever created bitcoins, all 21billion of them...

[Big Time Coin]

I talked to Anthony from FinCEN again for further clarifications on our discussion.

It's not so much whether the other party is registered by FinCEN but it's what you are doing with the coins that matters. Basically, if you're only buying/selling coins for speculative, investment purposes then you are a user and don't need to register. That could include buying/selling from another person directly, or buying/selling physical casascius or virtual coins on ebay. If you do the ability to show that it is only for investment purposes, and use as a "user" would be on you if there were any questions.

He explained that for the most part, the only things that need to be reported are suspicious transactions, and you can search the web for examples of sample anti-money laundering programs. I asked what forms of identification we needed to collect from those we did business with, he replied that I should read the regulations but in general, MSB don't have the same guidelines, as say, banks do. My interpretation of the guidelines found at http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=b99714739ce703375951af7f060e38ef&rgn=div8&view=text&node=31:3.1.6.1.2.3.3.7&idno=31 is that you only need to verify the identity of the person when the amounts exceed certain thresholds.

That's about as clear as mud as applied to mtgox.  How are you supposed to identify the counter-party in a automatic trading system where mtgox acts as the order book, broker, and account administrator for all trades.  And trades are filled from multiple counter-parties with different order sizes and no method exists to pre-screen the people you are going to be matched to.  Impossible.

The deeper you try to understand the FinCEN guidance, the more you realize it makes no sense as applied to bitcoin.  It only makes sense when applied to centralized virtual currencies.

Registering as an MSB for "administrating" a decentralized  currency is ridiculous.  There is no administrator of a decentralized currency.  Hence the term "decentralized".  It's all rather frustrating from a standpoint of a law-abiding citizen who wants to comply, but cannot because the regulators propose nonsense regulations.  They are obviously just making things up as they go along with the idea that helping bitcoin succeed is not the goal, but trying to make it fail isn't the goal either, just leave it murky at best for a while.

[Stephen Gornick]

They are obviously just making things up as they go along

Or maybe they were asked to help form the chokepoint.  With a list of everyone who has control of hashing capacity (since mining pools and solo miners are the ones who control what transactions go in the blockchain), the next step is to force them to comply with "later guidance", such as KYC on each party submitting a transaction.  Like .. no more P2P, if you want a transaction through one of these "licensed" miners, you connect to them directly.   And then Bitcoin is toast.  Muahahahahaha!!!

I'm probably seeing more to it than exists, but this is one possible direction.

[doobadoo]

If you register you invite regulation, and audits.  Just saying. 

Thats why gun rights people are against registering the fire arms, cause then they know who to demand they be turned in when they later ban them.

When it comes time to attack bitcoin they know who to tell to stop bitcoining.  Just saying.  You register, you disclosed your usage, then a cease and desist letter will come in a year or two.  Who knows?

[kalinka]

Update 4/2/2013

From FinCEN's perspective, if you mine coins and sell them, you would be considered an administrator.

Anthony is checking with his colleagues as to how you would go about trading on sites such as MtGOX if you decide to register as a business rather than a user.

If you register you invite regulation, and audits.  Just saying. 

Thats why gun rights people are against registering the fire arms, cause then they know who to demand they be turned in when they later ban them.

When it comes time to attack bitcoin they know who to tell to stop bitcoining.  Just saying.  You register, you disclosed your usage, then a cease and desist letter will come in a year or two.  Who knows?

FinCEN probably does not care about bitcoin at all. They just care about using bitcoin to launder money.

[SgtSpike]

If you register you invite regulation, and audits.  Just saying. 

Thats why gun rights people are against registering the fire arms, cause then they know who to demand they be turned in when they later ban them.

When it comes time to attack bitcoin they know who to tell to stop bitcoining.  Just saying.  You register, you disclosed your usage, then a cease and desist letter will come in a year or two.  Who knows?

"Oh, my old .22 rifle?  Yeah, I sold that at a yard sale years ago."

[Dr-Rockso]

I saw this link in another thread in the forum but believe it applies to this one.

https://bitcoinfoundation.org/blog/?p=163

"Is a “miner” of bitcoin, a person who receives “new” bitcoin in exchange for his computing efforts, considered a “creator” under the guidance? A person who obtains bitcoin by his own manufacturing effort is not differentiated from an ordinary “user” under the guidance, and informal communications from regulatory sources indicate that it is unlikely the guidance intended to consider every “miner” a “creator”. This is confusing because in the bitcoin community, a successful miner might be thought of as creating new coin."

Take it for what you will after reading the blog entry, however it seems like a pragmatic interpretation of the FinCEN statement.  I for one generally approach legal issues a bit cautiously, however am a small miner with no intention of making a business about it. I just want to understand how to cover my bases, without unnecessarily "poking the bear", which is just bad practice in general.
 

[jubalix]

I'm sure "Anthony's" view will stand up in the Supreme Court, and influence the Parliament and statutory agencies to make laws

[Dr-Rockso]

I'm sure "Anthony's" view will stand up in the Supreme Court, and influence the Parliament and statutory agencies to make laws

The all powerful blog. It's free speech, which is worth nothing, except a possible momentary distraction from the mundane. Your sarcasm is justified.

Unfortunately, just like with a great many things, the only thing that may motivate our illustrious governments, and people creating all of these wonderful laws is $$$.

[kalinka]

Update 4/3/2013

Anthony had this to clarify after checking with his colleagues:

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 is a person engaged as a business in issuing (putting into circulation) a virtual currency , and who has the authority to redeem (to withdraw from circulation) such virtual currency.

SO

Even if you obtain the bitcoins as part of a business, if you are not in the "business in the exchange of virtual currency for real currency, funds, or other virtual currency" and are just selling coins obtained from a user standpoint, including from a business such as sale of items, etc, then that does not require you to register just because you exchange for USD later.

I think this latest clarification will make a great number of users of bitcoin not needing to register. However, if miners are still required to register, I still don't know how transacting with sites such as mtgox will work.

[ColdHardMetal]

An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency , and who has the authority to redeem (to withdraw from circulation) such virtual currency.

Kind of comes down to how serious they are about that bolded "and". Miners can't withdraw coins from circulation, so maybe that excludes them from the "Administrator" label.

[Big Time Coin]

Registration requirements for miners or mining pools would break de-centralization by barring all but the largest miners from operating legally.  This de-centralization and distribution of mining is a core feature of bitcoin, it is a critical security feature, so any attempt to regulate miners by imposing registration requirements is an attack on a core feature of bitcoin and the security of the bitcoin network.

If you are having a dialogue with a regulatory agency on this point, try to make them aware of this.

[justusranvier]

Registration requirements for miners or mining pools would break de-centralization by barring all but the largest miners from operating legally.  This de-centralization and distribution of mining is a core feature of bitcoin, it is a critical security feature, so any attempt to regulate miners by imposing registration requirements is an attack on a core feature of bitcoin and the security of the bitcoin network.

If it's too bad the miners would simply operate in other countries.

If you are having a dialogue with a regulatory agency on this point, try to make them aware of this.

Why would you assume that's not their goal?

[Big Time Coin]

Because most transactions in bitcoin are USD transactions and most bitcoins are owned by americans and US companies will benefit most from its success, like the internet, so they should try not to attack it but rather let it thrive because that is what is best for America.

[SgtSpike]

Because most transactions in bitcoin are USD transactions and most bitcoins are owned by americans and US companies will benefit most from its success, like the internet, so they should try not to attack it but rather let it thrive because that is what is best for America.

That's a valid point.

Also, not everyone in government is evil.  Most of them are just regular people working a day job to get by.  They might listen to what you have to say and seriously consider it.