[ANN] Tangible Cryptography, LLC files for registration as MSB

[Viceroy]

I guess you prefer dealing with criminals, huh goat?

Does it make it easy to wash all those BTC you claim to own?

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[BCB]

The recent FinCEN guidance states that any bitcoin business that buys or sells bitcoin for non-personal use (my interpretation and IANAL) must register with the Financial Crimes Enforcement Network (FinCEN) as a Money Service Business (MSB).  

FinCEN is a Federal regulatory agency within the US Department of Treasure entrusted to aid law enforcement in the fight against Money Laundering and Terrorism Finance as per the Currency and Financial Transactions Reporting Act of 1970 which was amended by the USA PATRIOT Act in 2001. A legal framework with falls under the broad umbrella of the Bank Secrecy Act (BSA).

The two most important functions of this regulation are Know Your Customer (KYC) an Anti Money Laundering (AML) regulation.

To my knowledge TC only accepts bank wires for his business.  To send or receive a bank wire you must have a bank account.  And if you have a bank account in the US you know the kind of documentation required. So I doubt there is much anonymous activity going on in his business  TC also has limits on the amounts of funds you can send and receive (I'm assuming as per this guidance).  

I believe payout options also include paypal, dwolla, etc who are also regulated not only by FinCEN but also by Money Transmitter (MT) laws and regulation which provide  consumer protection for citizens of each state in which a MSB has clients.  Which again links these funds and their transfer real people.

To my knowledge NO states except possibly Texas and (depending on your interpretation) possibly New York currently requires a bitcoin business to be licensed in their states.

I am in no way associated or affiliated with TC (but I have used there EXCELLENT and PROFESSIONAL service on a few occasions) so again I would assume that TC is currently complaint with any existing regulations (however gray this area currently is).

Now FinCEN, The Department of Treasury and/or the State may and probably will rule further in this area, but until then, I don't see any reason why TC would be operating illegally.

However the bigger problem for bitcoin businesses and obviously for Liberty Reserve is that it does not matter if regulation applies to a your business because federal criminal laws apply (as we see with the LR case) which prohibit anyone from not only being involved in the movement of the proceeds of criminal activity but also aiding this movement or ignoring the potential source of such proceeds. (SEE E-GOLD)  

As we have seen in the LR case and as we may see in the pending MT Gox case, this gives law enforcement discretion to prosecute criminally.   And since bitcoin businesses are potentially open to abuse from money laundering and other financial crimes, they may now become  targets for prosecution if these businesses enable this type of activity.

What this does mean is that to operate legally,  bitcoin business will be required to abide by these developing regulations (which it seems TC is doing) and the biggest impact will be the end of anonymity in (the regulated) bitcoin economy which is probably not a bad thing.
 
And after all the hacks and scams and financial fiascoes we have seen in bitcoin, if there is one business I see leading the way it is Tangible Cryptography.

just my 2c.

[Viceroy]

You may be correct although bitcoin is probably a commodity in most states.  The OP would do well to cut off NY and Texas IMMEDIATELY.  The problem as I see it is that the OP deals on both sides of the equation and as such they are required to be a money transmitter per the link on the first page to the ny presentation.  

https://bitcointalk.org/index.php?topic=200443.0

The OP needs to take a lesson from bitinstant and get licensed as a money transmitter in each state, though it may be too late even for bitinstant at this point.  You are supposed to register and THEN trade, not the other way around.

[TangibleCryptography]

You may be correct although bitcoin is probably a commodity in most states.  The OP would do well to cut off NY and Texas IMMEDIATELY.  The problem as I see it is that the OP deals on both sides of the equation and as such they are required to be a money transmitter per the link on the first page to the ny presentation.  

Once again there is no "magic" both sides means you are this vs one way transactions means you are not.  Please cite law or regulation to back up your claim.  

Your belief that bitcoin is a commodity in most states runs contrary to all legal advice (not just from our own counsel) but everything reported and presented to date.  Bitcoin is almost certainly not considered a commodity.  Honestly if it WAS a commodity it would make regulation and compliance much clearer and simpler.  Hint:  if Bitcoin is a commodity then FinCEN guidance on MSB licensing is invalid as commodity dealers as NOT Money Service Businesses.  Just because one functionary in an email told you he thinks Bitcoin might be a commodity doesn't make it case law.

As for "cutting off" certain states that is something we are currently in talks with counsel about.  There are at least five states where the laws are vague enough that prosecutor could make the case that Bitcoin falls under the definition.  We have sent letters requesting clarification and if necessary will drop those states.

You are supposed to register and THEN trade, not the other way around.

You are suppose to register as a MSB as your self described activities include the regular exchange of Bitcoins in a for profit venture but since you don't follow your own advice why should anyone take anything you say seriously?

[BCB]

Viceroy,

You are not a regulator nor a state or federal legislator (or are you??) so it does not matter what you "see" or think.   Legitimate business have attorney's and advisers to help them navigate this uncharted path and if they want to stay in business they will comply.  Others will close or be shut down.

I can't imagine that every legitimate bitcoin business (including bitinstant) is not scrambling to understand what the recent FinCEN guidance, MT GOX action  and/or additional regulation/legislation may mean for the future of their respective businesses.

For many of the bitcoin businesses this was THE topic of conversation at the recent conference in San Jose.

Regardless, TC is one of the good guys.  Why don't you go troll one of the many BLF threads, or better yet drive down to Texas and see if you can track down Trendon Shaver or something else useful.

Can't imagine why you have a stick up your butt for TC except that you are envious that that he is building a trusted, well-regarded and successful bitcoin business.

[TangibleCryptography]

The recent FinCEN guidance states that any bitcoin business that buys or sells bitcoin for non-personal use (my interpretation and IANAL) must register with the Financial Crimes Enforcement Network (FinCEN) as a Money Service Business (MSB).  

FinCEN is a Federal regulatory agency within the US Department of Treasure entrusted to aid law enforcement in the fight against Money Laundering and Terrorism Finance as per the Currency and Financial Transactions Reporting Act of 1970 which was amended by the USA PATRIOT Act in 2001. A legal framework with falls under the broad umbrella of the Bank Secrecy Act (BSA).

The two most important functions of this regulation are Know Your Customer (KYC) an Anti Money Laundering (AML) regulation.

To my knowledge TC only accepts bank wires for his business.  To send or receive a bank wire you must have a bank account.  And if you have a bank account in the US you know the kind of documentation required. So I doubt there is much anonymous activity going on in his business  TC also has limits on the amounts of funds you can send and receive (I'm assuming as per this guidance).  

I believe payout options also include paypal, dwolla, etc who are also regulated not only by FinCEN but also by Money Transmitter (MT) laws and regulation which provide  consumer protection for citizens of each state in which a MSB has clients.  Which again links these funds and their transfer real people.

To my knowledge NO states except possibly Texas and (depending on your interpretation) possibly New York currently requires a bitcoin business to be licensed in their states.

I am in no way associated or affiliated with TC (but I have used there EXCELLENT and PROFESSIONAL service on a few occasions) so again I would assume that TC is currently complaint with any existing regulations (however gray this area currently is).

Now FinCEN, The Department of Treasury and/or the State may and probably will rule further in this area, but until then, I don't see any reason why TC would be operating illegally.

However the bigger problem for bitcoin businesses and obviously for Liberty Reserve is that it does not matter if regulation applies to a your business because federal criminal laws apply (as we see with the LR case) which prohibit anyone from not only being involved in the movement of the proceeds of criminal activity but also aiding this movement or ignoring the potential source of such proceeds. (SEE E-GOLD)  

As we have seen in the LR case and as we may see in the pending MT Gox case, this gives law enforcement discretion to prosecute criminally.   And since bitcoin businesses are potentially open to abuse from money laundering and other financial crimes, they may now become  targets for prosecution if these businesses enable this type of activity.

What this does mean is that to operate legally,  bitcoin business will be required to abide by these developing regulations (which it seems TC is doing) and the biggest impact will be the end of anonymity in (the regulated) bitcoin economy which is probably not a bad thing.
 
And after all the hacks and scams and financial fiascoes we have seen in bitcoin, if there is one business I see leading the way it is Tangible Cryptography.

just my 2c.

Thank you BCB.  As an "outsider" your insight is spot on.   We have taken steps to comply with existing regulations.  We have in the past (and will continue to in the future) prevent the exchange of virtual currency we know are the result of illegal activity.  One may wonder how we might know and the reality is sometimes people tell us.  Not really sure why they do or why they think it is a good idea but they do.  Since registering as a MSB we are also required to file a SAR if that happens and we will comply with the reporting requirements.  

You are right that we do not transact in cash, or cashier's checks, or negotiable (i.e. check made out to "cash") instruments as that complicates KYC and AML requirements.  We limit clients to directing the proceeds to accounts under their control and prohibit (and actively police) third party transactions.  We use existing banking (and pseudo banking structure like PayPal & Dwolla) as those accounts are already required to be KYC & AML compliant.  We are working with a banking partner to allow us to authenticate bank accounts once we restart ACH & Wire service.  It is all tedious, boring, and time consuming but we do it because while we feel that while OTC is important many people just need an easy and trusted way to buy or sell Bitcoins.

Lastly I would say regulation and compliance is a moving target.  I am sure state regulators will move to expand their laws (or provide guidance similar to FinCEN thus defacto creating new law) it is only a matter of time.  If necessary we will modify our procedures and as a last resort restrict transactions involving certain locations.

[Viceroy]

Your belief that bitcoin is a commodity in most states runs contrary to all legal advice (not just from our own counsel) but everything reported and presented to date.

I sent you what the regulator said but you refuse to deal with my pm's.  Ask any state for their official position on "is bitcoin a commodity" and they will happily confirm what I said.  Start with New York, it will be VERY VERY clear when they tell you that they believe bitcoin is a commodity.

Once again there is no "magic" both sides means you are this vs one way transactions means you are not.  Please cite law or regulation to back up your claim.  

Perhaps you should challenge the author of the article I cited or the prosecutors prosecuting for EXACTLY this reason.

Hint:  if Bitcoin is a commodity then FinCEN guidance on MSB licensing is invalid as commodity dealers as NOT Money Service Businesses.

It's good that you recognize this.  This is EXACTLY what is being discussed at the federal level.  It is not clear that FINCEN has the RIGHT to regulate this.  (I'm looking for the article now).  And state laws are COMPLETELY independent of the Fed.  Some states CLEARLY believes bitcoin is a commodity per my email with the regulators about my desire for them to regulate ME.

Ignore my posts at your own peril,  I suspect the regulators are now reading.

Can't imagine why you have a stick up your butt for TC except that you are envious that that he is building a trusted, well-regarded and successful bitcoin business.

I don't have a 'stick up my butt' about TC.  I have concerns about regulations.  Unlike the guy you clearly admire above I am trying to stay WITHIN the framework of the law.  It is abundantly clear from my post at the top of this page that TC is probably in trouble per NY state's laws.  Don't worry about me, worry about your own activities.

[TangibleCryptography]

I sent you what the regulator said but you refuse to deal with my pm's.  

What one regulator thinks might be the case stated in an unofficial (and thus not legally binding) email doesn't make it case law.  No state (or country) anywhere has issued anything formal indicating Bitcoin is treated as a commodity for regulatory purposes.  As I pointed out commodity dealers are generally LESS regulated than other financial institutions but until that happens it is meaningless.  

Perhaps you should challenge the author of the article I cited or the prosecutors prosecuting for EXACTLY this reason.

Neither the article nor the complaint (have you actually read the complaint) indicate that the dual nature of transactions suddenly made prosecution possible when a single direction business would have been compliant.  That is just your flawed analysis (and I use the term loosely).  

Ignore my posts at your own peril,  I suspect the regulators are now reading.

No doubt they are and I am happy to discuss it with them.  info@tangiblecryptography.com it still doesn't make your posts any more meaningful.  Why don't you do something useful like register your virtual currency exchange business with FinCEN.

Unlike the guy you clearly admire above I am trying to stay WITHIN the framework of the law.

You haven't done anything to comply with the law.  You stated you regularly exchange Bitcoins for profit outside of registered exchanges and thus you by FinCEN guidelines are an "exchanger".  To date you have no registered with FinCEN.

Still you have "helped" enough here.  I am sure you will now go "help" every other Bitcoin related business on the planet that has US customers.   I am sure they will all appreciate your help.

[Viceroy]

You haven't done anything to comply with the law.  You stated you regularly exchange Bitcoins for profit outside of registered exchanges and thus you by FinCEN guidelines are an "exchanger".  To date you have no registered with FinCEN.

Proof or it never happened, stop the FUD.  And btw attacking me doesn't excuse your flagrant abuse.

[BCB]

Clearly Tangible Cryptology is doing everything right.

Viceroy I have no idea who you are what you do except my first impression of you as some dude on the internet with a bad attitude.

However if you are another bitcoin business or just a bitcoin proponent I don't understand what you are getting out of this attack.

Many bitcoin businesses and individuals are talking and working together to as an industry to help understand what this regulation means to us all.

And for what ever you think of the Bitcoin Foundation, a number of the largest bitcoin players have banded together and for better or worse (I'm not going to debate that [yet]) to help guide the industry forward and to hopefully effect future regulation and legislation.

And I'm sure you have many responses that that so anyway....

[Viceroy]

Clearly Tangible Cryptology is doing everything right.

That made me cringe.  Are you a lawyer?  Me thinks you have no idea of what you speak if thou thinkest this.  (Hey readers, you want another story?  Read the article about "Inaba's Con" in my signature below.... it's one heck of a story... the kind of thing that is so frightening you can't even make it up).

[JonSnow]

All I know is that our attorney for my FinCEN-registered MSB advised me after the Bitcoin Conference to stop selling immediately, in spite of being registered with FinCEN and having a great compliance program.  What he took away from the conference, the other attorneys he spoke with, and some of the panels was that unless you have the resources/funding available to register with whichever states you want to trade in, you will run the risk of prosecution.

But that's just our attorney.  It is quite possible that TC's team has found some better way to continue selling bitcoins in accordance with even the state laws (meaning that they operate in a way that doesn't define them as money transmitters) ... so I'm not sure anyone here can pretend to know TC's situation, legally speaking. 

What I can say is that TC is intelligent, dedicated, and has a good team to help him figure out how best to proceed.  Since my own btc company is now closing its doors, I can only hope that TC finds a way forward where the rest of us were not able to.

This is all to say to Viceroy that it's not really your place to judge here because none of us know all of the details here, and if anything, we should be supporting and encouraging those companies still operating because if we all have to shut down, that will be a sad day for many of us bitcoin enthusiasts!

[Viceroy]

I think your lawyer is 100 percent correct in his advice and anybody in the 'business' blatantly ignoring such advice is a fool.

[helpsthewife]

So you filed the FINCEN application but you have not become a Money Transmitter in any state, correct?

Tangible Cryptography is registered as a MSB with FinCEN it is not registered as a Money Transmitter in any state.  No state entity as of yet defines the exchange of virtual currency as Money Transmission.  It may only be a matter of time but that time has not arrived yet.

I was told that if your profits are in BTC your not acting as a money transmitter??...