FinCen preparing to prosectute some Bitcoin users

[lukestokes]

bam91, I am not sure which person you are referring to. Do you mean, if you are a miner, how do you avoid registering? My view is that a miner is not an issuer or an exchanger simply by virtue of selling their rewards for dollars.

I called FinCEN not long after their ruling and asked them about their interpretation of miners. The guy I talked to said they are still working things out and mentioned having access to the guy who actually wrote the ruling. He said he would keep my contact details and possibly send me more information when he had clearer answers to my questions (specifically about mners). Most likely he meant I'm now on some government watch list. He was really friendly and seemed genuinely interested in working with (not against) the Bitcoin community.

I also talked to the person in charge of money transmitters in my state and he wasn't as familiar with Bitcoin, but he had been researching it. Both people told me about the processes needed to register, and it honestly didn't seem like that big of a deal. I'd like to hope if you follow the law, they will pretty much leave you alone. I have zero experience in these matters, so I'm probably naive there.

Adam did a great job with the podcast, and we were honored to sponsor episode number one. It feels good to contribute in a small way to its future while being part of its history. I'm looking forward to the next show.

[jon@bitcoinads.com]

This isn't clear to me at all:

"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."

My interpretation:

Our business (an ad network) accepts Bitcoin from users (advertisers) and pays users (publishers) in Bitcoin. From the sounds of this we are a money transmitter and an exchanger because:

1) we accept such de-centralized convertible virtual currency from one person (advertisers)
2) as part of the acceptance and transfer of currency (currency and or virtual currency?) (i.e. paying publishers for displaying ads), ..., or other value that substitutes for currency (i.e. virtual currency?)

It's ambiguous. We are not located in the US also. I will speak with a lawyer....

[QuestionAuthority]

The terrible thing about any government agency becoming involved with prosecuting crimes involving Bitcoin is that the little idiot “average Joe” will be the one who suffers. I expect when Bitcoin is finally attacked by ‘merica (I’ve been waiting for it for some time now) it won’t be the rich Bitcoin power brokers that are hurt the most it will be the small time user that the government imprisons as an example. I am shocked by MT Gox decision to have any presence in this country even for the forum.  There must be someplace in the world more suitable than ‘merica.

[Its About Sharing]

The terrible thing about any government agency becoming involved with prosecuting crimes involving Bitcoin is that the little idiot “average Joe” will be the one who suffers. I expect when Bitcoin is finally attacked by ‘merica (I’ve been waiting for it for some time now) it won’t be the rich Bitcoin power brokers that are hurt the most it will be the small time user that the government imprisons as an example. I am shocked by MT Gox decision to have any presence in this country even for the forum.  There must be someplace in the world more suitable than ‘merica.

On a positive note, the best thing about a government agency becoming involved is that they are slow to act and react. A bigger worry for us is the corruption within listening to or following "orders" from corporate interests, politicians, etc. Regardless, if things are kept legit we have a HUGE backing. That is my point in this thread. We need to come together and have a good community of spokespeople, lawyers, etc. to defend and represent us going forward. We will probably be fine as long as another big war isn't started, then those crazy patriot laws get worse.

It would be nice to just have very very small transaction fees applied to legal defense, but then that would be like a tax and we already have that. We are going to need to depend on us, especially the early adopters who already have a good income and lots of bitcoins sitting around. 

Rock on Bitcoin community, Rock on...

IAS

[DigitalDoom]

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.

This is pretty much the scenario my mind devised when first theorizing on how the 'powers that be' (FinCen, Govt, etc) would respond to Bitcoin once it became a serious threat. Total psy-ops operation through major media outlets.

In fact, anyone discussing this thread topic has already fell victim to phase one. All they had to do is make a statement and we're already falling in line like sheeple, trying to figure out how to stay within the guidlines they prescribe. The seed has already been planted, they've made the first move, and we're acting according to their plan. You're all discussing and contemplating a defensive move, which is what they want and expect you to do.

Now they will monitor forums and chatrooms to see how we're all reacting to the news and use the info they gather to plot their next move. They know where we get info and they know where we relay info...they'll use the same places to listen in on us and to "leak info".  Operation: Bitcoin Down" is already underway....probably has been for a while. To the public, they ignore or play down Bitcoin...to us, they "leak" information of impending doom.

Bitcoin (and other cryptos) will ultimately lose as long as we all play their game. Not only did they write the freaking book on how to play, but they write new rules at their discretion.

Working on a defense only is certain death for Bitcoin. We all need to start brainstorming offensive moves. Obviously I don't mean violence of any kind....but, the media will be their battlefield...How could we beat them to it?

Just my 2 cents...

[tvbcof]

If someone participates in illegal stuff, they will be prosecuted no matter what vehicle they use. Now, if bitcoin itself comes under attack - then it's all the reason to get involved and organize opposision.

If bitcoin is bad in and of itself, then also cell phones, roads, laptops and hammers are bad in and of itself.

+1 to this, and also to crazy_rabbit about paying taxes.

It's technically not possible to launder money if the money is not associated with a crime.  At least the way I read the definition of money laundering.  I'm good here...happy days!

I lost interest in drugs about 25 years ago and have not spent a dime on them since that time.  I'm golden here to, although I think it should be fine for people to waste their money and destroy their bodies with drugs if they choose to do so.

As for capital gains, they won't kill me.  I didn't expect to make any money on Bitcoin at all so any net profit I make is great.  Thanks to the rich fuckers here in the US and our level of political corruption, we have low taxes for people who earn money by having money vs. by actually working for a living it so I'll ride along with them.

Even though I don't like my tax dollars killing kids in the outer reaches of our empire, I'll ante up anyway because it would be monumentally stupid not to.  Particularly when doing something which, although perfectly ethical, corp/gov is probably not going to be real fond of.  Cheating on one's taxes in association with Bitcoin will, I'm projecting, be one of the surest ways to end up in one of our gulags.

[benjamindees]

Operation: Bitcoin Down" is already underway....probably has been for a while.

At least since summer of '11, but yes probably longer.

Bitcoin (and other cryptos) will ultimately lose as long as we all play their game. Not only did they write the freaking book on how to play, but they write new rules at their discretion.

+1

Working on a defense only is certain death for Bitcoin. We all need to start brainstorming offensive moves. Obviously I don't mean violence of any kind....but, the media will be their battlefield...How could we beat them to it?

Hah, I've been trying to point out the next move for a year now.  The media is their battlefield.  We need to remain in our own.  "Fight the enemy where they aren't" -Lao Tzu

[Luckybit]

FinCen - Financial Crimes Enforcement Network

Bradley Jansen of freebanking.org http://www.freebanking.org/author/jansen/ mentioned this on "Let's Talk Bitcoin"'s podcast from today. His words, not mine. A MUST LISTEN! Starting at around the 9 minute mark and roughly half the show.
Show Notes - http://feedproxy.google.com/~r/TheDailyBitcoinShow/~3/LKTs7vLbpLI/lets-talk-bitcoin-episode-001 
MP3 - http://feedproxy.google.com/~r/TheDailyBitcoinShow/~5/v1uhZzA06to/89228962-mindtomatter-lets-talk-bitcoin-episode-001.mp3

I imagine the first prosecutions will clearly be for things related to drug purchases, laundering money, etc. Regardless, when this happens it will affect the largest network of bitcoin users.
He said FinCen has been the single biggest factor in stomping out currency competitors. e.g. - EGold
The Patriot Act has made them all the more powerful.

He said he heard it through the grapevine - that FinCen has prosectutions in the works for Bitcoin broadly speaking. He said FinCen put out the guidance in order to prosecute. And their guidelines were ambiguous as we all noticed. And he reiterated he knew the prosecutions were in the works BEFORE the FinCen guidance. This is something we have to prepare for as a community. I am planning on donating to Freebanking.org as a sort of insurance (and big Thankyou). Any other ideas on defending this en mass? It is better we prepare for this as FinCen is doing. I'm sure some of us have already started. We need a strong group of people, doesn't need to be large, just look at how the gun lobby just won out.

Things like "regulations" (quotes intended) can be a very very big hurdle. Luckily VC's are starting to bring money into bitcoin as well as people all over the world. But, the USA is turning into a bit of a, let's just say, strict State and we need to prepare for the worst. WE are going to have to defend ourselves.

Let's continue our Anti-Fragile nature,
IAS

You just said it. A type of insurance fund to fight prosecutions.

[Bitcoinpro]

FinCen has no authority or jurisdiction over Crypto Currencies, any moves they make will be met in an International Court by the CCCB in defense of the integrity of Crypto Currencies. Contact will be made with FinCen on reguards to there future actions, anything else is just pure speculation!

[mindtomatter]

FinCen has no authority or jurisdiction over Crypto Currencies, any moves they make will be met in an International Court by the CCCB in defense of the integrity of Crypto Currencies. Contact will be made with FinCen on reguards to there future actions, anything else is just pure speculation!

Because everybody knows the  US government has no reach or influence outside the borders of the US.

[axus]

I really need to move my coins off of Mt.Gox!  If I didn't sell at +$200, I never will 

[tvbcof]

FinCen has no authority or jurisdiction over Crypto Currencies, any moves they make will be met in an International Court by the CCCB in defense of the integrity of Crypto Currencies. Contact will be made with FinCen on reguards to there future actions, anything else is just pure speculation!

Because everybody knows the  US government has no reach or influence outside the borders of the US.

After roundly defeating the US in it's struggle for independence during WW-II, Japan has enjoyed an unprecedented degree of autonomy.

[Zedster]

Correct thread title:

Some random guy says that he's heard from "anonymous sources" (aka other random guys), that the government is preparing to prosecute some bitcoin users

It was not some random guy, it was part of a fairly reasonable discussion about FinCEN as a whole and he compared what is happening currently to prior FinCEN actions.  I think what he said has a fairly reasonable chance of happening to a small player who cannot fight.  Something sparked those rule clarifications and, as he pointed out in the interview, the rules are unclear and may exceed their statutory authority.  

The first time I tried to buy Bitcoin the first site I found was Bruce Wagner who had a web site that said I could go to one of the banks he used, make, what he claimed was an "anonymous cash deposit" into his account, and have Bitcoins sent me.  I searched on him and decided against it.  I can see FinCEN prosecuting something like this as he was using large banks (including my bank).

+1 If you go to freebanking.org and read just a little you will see this guy is not some idiot off the street.  I truly don't think what he is saying hear should be taken with a grain of salt.  His agenda appears to pro-BTC as he is offering to be that needed liaison between BTC and FINcen. 

I definitely believe that if someone that knows what they are talking about doesn't sit down with them soon from the BTC community then they will do whatever they please.  No matter what the discussion, ignoring FINcen and letting them just regulate as they think is right will not be good for BTC in anyway.  It is way to easy for them now to say, it's main use is for laundering terrorist money.  (They have way too much power under The Patriot Act)  That is pretty much game over in the USA.

[abbyd]

These guys know what they're talking about - they are not just random wingnuts.

FinCEN will be going after people to try to scare everybody. The irony is that they
may accidentally drive the bitcoin economy by unbalancing trading.  If people can't safely cash
out into USD, there is more incentive to buy and sell with bitcoin - and STAY in bitcoin.

Also they will fail when trying to regulate international transactions. My guess is that
smart Americans will quickly move their cryptocoin->fiat transactions out of that country...

[mindtomatter]

These guys know what they're talking about - they are not just random wingnuts.

FinCEN will be going after people to try to scare everybody. The irony is that they
may accidentally drive the bitcoin economy by unbalancing trading.  If people can't safely cash
out into USD, there is more incentive to buy and sell with bitcoin - and STAY in bitcoin.

Also they will fail when trying to regulate international transactions. My guess is that
smart Americans will quickly move their cryptocoin->fiat transactions out of that country...

Yup.

The trick about predicting the future is to look at the broad motives and means of the interested parties, look at the situation through their eyes and think about what the next few logical steps are to achieve those goals with those means.

FinCEN is a big player because the US is a big player, might not be so if Congress stepped up once in a while but I don't think that's likely given the last few years - My expectation is a Bitcoin-Only economy will pop up for individuals who want to avoid the tax implications - They'll be paid in bitcoin, they'll fund their lives in bitcoin - Thanks to FinCEN    I wonder if they'll pay taxes

[geoburke]

My team is currently developing a meta-exchange for crypto-currencies - Crypto Street - and we're physically located in the US but we're considering overseas incorporation. 

Looking for recommendations on lawyers well-versed in foreign incorporation in Caribbean or Central/South American countries with easier money transaction and banking laws.

P.M. me.  Thanks.

[glendall]

 I really don't see how FinCen would be able to effectively track bitcoin purchases and sells in any way sufficient to prosecute someone if said person was doing only a minimal amount of things to make it difficult to do so.

Also don't see how they could prosecute folks who did stuff prior to any official ruling on the subject.

Could change in the future with some new laws, but currently would not see how they could charge bitcoin users, unless they had a great deal of resources into monitoring someone and tracking their BTC actions, and additionally linking these to some blackmarket venture.

[xcsler]

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)."

So to summarize the FinCen categories we have:

1)Users
2)Transmitters
3)Exchangers

FinCen uses the term "create" which I am translating as miners because they are the only ones that actually create bitcoins. So...

Users- Miners and I assume non-miners that use bitcoins to buy stuff.

Transmitters- Miners that sell bitcoins for real currency or its equivalent

Exchangers- People who accept bitcoins and then sell bitcoins for currency, funds, or other value that substitutes for currency


My understanding is that the FinCen rules do not apply to Users. If as a user I buy bitcoins on an exchange and sell them for cash I am not violating any laws so long as I pay the appropriate taxes.

[bam91]

The last line may apply to you as you are recieving the currency and transmitting it to the exchange. Again we need more and clear clarification more Fincen

[Gabi]

Satoshi created bitcoin, not miners! Miners only get paid to secure the network. They don't create anything. The mined transaction is a transaction just like every other. So miners are not "money transmitter"