FinCen preparing to prosectute some Bitcoin users

[RodeoX]

It depends on what they are going after. If it's money laundering and tax evasion then more power to them.

[bam91]

Original statement from fincen:

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Excerpt:

"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.(Self explanatory). 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( This is what makes it illegal in the United States to sell bitcoin whether for cash or at the exchanges. 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(Applies to exchanges and may apply to individuals who offer escrow service)."

[pekv2]

I still don't see what newegg gift card shops like btcbuy has to do with fincen. BTC>Newegg gift card. It never touches USD.

BTCBuy is offline cuz of this fincen bs.

[Zeke_Vermillion]

pekv2, prepaid providers are similarly regulated. often times stores partner with white label prepaid providers, who handle all the technology as well as AML-KYC program

[pekv2]

pekv2, prepaid providers are similarly regulated. often times stores partner with white label prepaid providers, who handle all the technology as well as AML-KYC program

K, so would this fincen block places like newegg n such from using bitcoin as well? Since it would go directly to such places, exchange for computer hardware.

[Zeke_Vermillion]

no, didn't you read the guidance? paying in btc, or accepting btc as payment, does not make you an MSB

edit, also the guidelines state that virtual currency transmission cannot be providing or selling prepaid access b/c that only pertains to real currency

[Zeke_Vermillion]

Original statement from fincen:

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Excerpt:

"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.(Self explanatory). 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( This is what makes it illegal in the United States to sell bitcoin whether for cash or at the exchanges. 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(Applies to exchanges and may apply to individuals who offer escrow service)."

That is a good point, although rather than "illegal" the accurate way to phrase it would be "makes you a money transmitter".

This language needs some clarification to be sure. I still think if you are mining and sell your mined btc on an exchange, you should not have to register separately with FinCen b/c (a) you could not possibly file SARs b/c you don't know who you are trading with, and (b) the exchange already should file SARs, and is the person best equipped to do so.

Please keep in mind these are GUIDELINES and not the law or even administrative regulations. So ultimately if you have real concerns about what you're up to, you probably need to dive deeper. If I were a big mining pool I would pay a good firm to advise me on getting some no-action letter or other comfort on my proposed legal position.

[pekv2]

no, didn't you read the guidance? paying in btc, or accepting btc as payment, does not make you an MSB

edit, also the guidelines state that virtual currency transmission cannot be providing or selling prepaid access b/c that only pertains to real currency

K. Thanks.

I emailed newegg, I will start a new topic pertaining this.

[Its About Sharing]

Thanks for the comments and interests guys. My intention here is purely one of being careful and keeping an eye out.

Yes, it's possible that the man in podcast is lying, but regardless, he sounds very intelligent and familiar with FinCen and we shouldn't overlook that. I'm giving him the benefit of the doubt.
If he is wrong then we have nothing to worry about. But we should prepare in case he is right. It is much better to approach things proactively than purely re-actively.  I think that is fair considering we are dealing in currencies and ALL competitors to the dollar (that I am aware of) have been shut down by FinCen that I can remember. The only ones that haven't I believe are small local currencies.

What we do have on our side are a few things:
1 - We have good intentions it appears
2 - The government traditionally is very very slow to react.

IAS

[matthewh3]

Well, you do have to pay capital gains taxes.

Yeah if anything it will be over this and possibly Pirate@40.

[BCB]

Well, you do have to pay capital gains taxes.

Yeah if anything it will be over this and possibly Pirate@40.

Pirateat40 will be indited by the US SEC

[ArticMine]

Well, you do have to pay capital gains taxes.

Yeah if anything it will be over this and possibly Pirate@40.

Pirateat40 will be indited by the US SEC

Pirateat40 is a rather obvious candidate.

As far as I can see pirateat40 has a lot more to worry about than just the SEC, including the IRS over witholding taxes, and yes FinCen over all sorts of money laundering offenses.  Now as to the impact on the BTC / USD exchange rate of piratat40 in shackles and an orange jumpsuit that is anyone's guess.

[mindtomatter]

Bradley thinks FinCEN is indifferent to the damage they do in pursuit of their larger goals.  I don't think it's as simple as going after drug dealers, the ambiguity is there to cause concern and eventually to spark panic.

I expect the targets to be unknown, relatively small and to all appearances harmless individuals operating businesses moving value from bitcoin to dollars or the other way around.  I expect the infractions to be small and omissions rather than obvious criminal acts.  I expect this to cause a panic as it dawns on people that anyone moving from dollars to bitcoin or vice-versa on a regular basis are subject to all kinds of legal implications.

I expect this to cause a shift in the way some people think about money, and I expect there to emerge a class of people who transact entirely in Bitcoin because it more appropriately suits their lifestyle while discarding the legal implications involved in currency conversion.

Adam B. Levine

[bitchris]

Original statement from fincen:

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Excerpt:

"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.(Self explanatory). 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( This is what makes it illegal in the United States to sell bitcoin whether for cash or at the exchanges. 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(Applies to exchanges and may apply to individuals who offer escrow service)."

I disagree with the interpretation above that it is illegal in the United States to sell bitcoin whether for cash or at the exchanges.

The sentence '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' only refers to miners if I am not mistaken. I don't know what the implications would be for miners selling bitcoins though.

[Eich]

Read:

Code:

http://bitcoinmagazine.com/fincen-bitcoin-users-not-regulated-exchanges-are/

[hiima]

Sounds like they are making up rules on the fly. They're scared of bitcoins, now they'll start trying to shut it down.

[Stephen Gornick]

Excerpt:

If you are going to give your interpretation as well then you might want to edit that to make it more clear what is the original FinCEN content being excerpted. (quotes, italics,  line spacing, ...  all are tools available to help distinguish the two.)

[bam91]

Excerpt:

If you are going to give your interpretation as well then you might want to edit that to make it more clear what is the original FinCEN content being excerpted. (quotes, italics,  line spacing, ...  all are tools available to help distinguish the two.)

    The bold font in the parenthesis doesnt suffice?

[nazgulnarsil]

Here's the legal argument that I think gets made if FinCEN goes after a business that accepts BTC:
The business accepted money for goods, this is fine under the guidelines.
The business then transmitted the BTC to an exchange.
The exchange then transmitted fiat money to the business, which is also fine as long as the exchange is following relevant laws and is licensed.

The room for argument is step #2.  Is transmitting BTC to an exchange going to be something they try to stop.  I don't see how they will go after this, but I don't put insane legal arguments past them.

[benjamindees]

The business accepted money for goods, this is fine under the guidelines.
The business then transmitted the BTC to an exchange.

There is absolutely no way this will ever fly.  If Bitcoins are "convertible money" or "funds" or whatever for the purpose of sending them to an exchange, then the same standard applies to trading them for goods and services.  Their whole so-called regulatory scheme is based on a distinction that doesn't actually exist.

Let me tell you how this will actually go down.  It will be done on a case by case basis, to people with specific circumstances that plausibly fit whatever obfuscated legal definition of cronyist, state-supported profit they come up with.  But it will be made to seem like the regulations apply generally.  It will be a total psy-op case, just like 'Wickard'.

They will pick some small-time guy who took out a fiat loan and used it to buy Bitcoins, which then went up in value.  They will make a huge deal about how he bought a tablet pc or something worthless at a Bitcoin store, but that this is fine because it's just "normal" everyday business.  Then they will harp on how he "profited" by trading a bunch of those Bitcoins at an exchange, and how that's "speculating" and "money laundering" and "unlicensed trading" and whatnot.

This will mostly happen in the media, of course.  The actual court case will probably just be settled with a plea bargain.

The important thing is that they will never once point out that the only reason they are prosecuting this guy is because he took advantage of the normal, everyday, licensed fraud that is the fiat money system.  The whole point will be to sweep that under the rug, while setting a precedent in people's minds and deflecting blame to Bitcoin.