FinCen preparing to prosectute some Bitcoin users

[virtuallylaw]

Predicting FinCEN or MTB prosecutions that have a connection to bitcoin is like predicting the sun will rise in the east, you're bound to be right eventually. I've been hearing these rumors for 2+ years now. It's never been a matter of if, but when. Maybe it's soon, maybe not. I know for certain that there is action bubbling up from the States and it's not all bitcoin related.

Part of the Foundation's mission is to protect bitcoin, and that's why we have taken FinCEN's guidance very seriously from the beginning. It's why I spend time interfacing with bank and financial crimes associations to educate them about bitcoin. We are ready, willing and able to work toward educating FinCEN, or if necessary to challenge FinCEN in court.

As I pointed out here: https://bitcoinfoundation.org/blog/?p=152 the guidelines are clear as mud and if FinCEN tried to rely on the guidelines for a prosecution they would very likely face an APA challenge, possibly from me.

In the meantime, it behooves anyone who wants to build or operate an exchange service to discuss these issues with a lawyer. I have a broad network of attorneys (from Top 100 law firms to solo-practitioners) that have experience with these issues and understand bitcoin. I'm happy to continue making connections for anyone in the community, just drop me a line: patrick (at) bitcoinfoundation.org.

[1715525509]

1715525509

[mindtomatter]

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.

Want to talk about the difficulties with operating in the US and why you're looking at south america as an "easier" solution?   I added you on skype and would love to get your perspective as someone building one of these systems and trying to fit within the regulatory structure.

[QuantPlus]

In the meantime, it behooves anyone who wants to build or operate an exchange service to discuss these issues with a lawyer. I have a broad network of attorneys (from Top 100 law firms to solo-practitioners) that have experience with these issues and understand bitcoin. I'm happy to continue making connections for anyone in the community, just drop me a line: patrick (at) bitcoinfoundation.org.

The legal arguments don't matter...
And lawyers will be lining up to TAKE YOUR MONEY while they furrow their foreheads...
<Yawn> Every securities lawyer will tell you straight up you can't run unregulated money exchange.

This is all about "guiding" US banks to cut ties with all things BTC...
Banks will voluntarily comply... it's such small potatoes.

The big one is shutting down Gox...
I doubt it would take more than one phone call from the Fed...
Gox must be in violation of dozens of Japanese securities regulations...
The entire operation looks like a bad SNL skit...
Look at that Funny Fat Guy sitting on a ball = Samurai Exchanger.

http://www.youtube.com/watch?v=LLjlOw3TVc8

Gox shuts down = BTC CRASH.

Linking BTC with Fiat has always been a Big Mistake...
BTC is a commodity... and should always have been linked to gold/silver.

[tvbcof]

...
Gox shuts down = BTC CRASH.
...

I have to doubt that based on historic precedent.  I happened to have gotten serious enough about Bitcoin to use a typical exchange during the fortnight-ish the Mt. Gox was off-line due to their hack.  It seemed to have had a remarkably small impact on the actual valuations.  They were already in decline and continued in much the same trend once Mt. Gox came back.

If you are implying that Mt. Gox would lose significant BTC I highly doubt that.  They have way to much experience, skill, and money not to have a robust cold storage regime.  If they lose BTC it is almost completely certain to be an inside job.

[Trader Steve]

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.

Good point.

[Herodes]

I'm happy to continue making connections for anyone in the community, just drop me a line: patrick (at) bitcoinfoundation.org.

Would it be possible to make such a list public ? Or semi-public ? I'm sure that lawyers that's already been working on bitcoin-related projects have gained experience, that also others could benefit from.

[mindtomatter]

...
Gox shuts down = BTC CRASH.
...

I have to doubt that based on historic precedent.  I happened to have gotten serious enough about Bitcoin to use a typical exchange during the fortnight-ish the Mt. Gox was off-line due to their hack.  It seemed to have had a remarkably small impact on the actual valuations.  They were already in decline and continued in much the same trend once Mt. Gox came back.

If you are implying that Mt. Gox would lose significant BTC I highly doubt that.  They have way to much experience, skill, and money not to have a robust cold storage regime.  If they lose BTC it is almost completely certain to be an inside job.

You're missing the point, he's saying the Japanese Government could shut down Gox in a permanent way and have their assets frozen for years.  I have been wondering this same thing myself...

With all the exchanges being shut down around the world, why has the largest one never been targeted by anything more than unruly hackers?  Gox is the single largest chokepoint and is entirely responsible for determining the price of BTC as most people see it, yet it seems immune to regulatory troubles that increasingly plague exchanges around the world.   Is Japan such an advantageous legal environment to operate in?  Are there other international exchanges taking advantage of this and operating out of Japan?

If Gox was shut down by the Japanese government it would have a MAJOR impact on the price, and while it might recover depending on how other exchanges react and how usable decentralized exchanges are by that point, I think it's obvious the impact would be probably as significant as anything else in Bitcoins lifecycle so far.

It's not about losing BTC to a hack, it's about a sea-change event eliminating the largest player in the currency conversion game

[galambo]

This thread is a nice attempt to scare the readers of the forum into listening to the inaugural episode of this radio show. Luckily, nothing he says is grounded in reality.

[mindtomatter]

This thread is a nice attempt to scare the readers of the forum into listening to the inaugural episode of this radio show. Luckily, nothing he says is grounded in reality.

Nobody associated with the show started this thread - Put yourself in the perspective of FinCEN and see what actions make sense.

Spoiler: They're not nice for Bitcoin.

And I don't care if you listen, if the content isn't interesting enough to warrant your time, you won't.  If we're talking with people in interesting roles about important topics, chances are pretty good you will even if you don't like what's being said.

Adam B. Levine

[galambo]

This thread is a nice attempt to scare the readers of the forum into listening to the inaugural episode of this radio show. Luckily, nothing he says is grounded in reality.

Nobody associated with the show started this thread - Put yourself in the perspective of FinCEN and see what actions make sense.

Spoiler: They're not nice for Bitcoin.

And I don't care if you listen, if the content isn't interesting enough to warrant your time, you won't.  If we're talking with people in interesting roles about important topics, chances are pretty good you will even if you don't like what's being said.

Adam B. Levine

What you need to do is find ONE example of FinCEN prosecuting anyone -- ever.

[mindtomatter]

If you've got an accusation to make, do it.  I don't hide behind fake names and I don't lie either by intention or omission. 

If you've got evidence to the contrary, I encourage you to publicly post it - I live by my reputation.

[galambo]

If you've got an accusation to make, do it.  I don't hide behind fake names and I don't lie either by intention or omission.  

If you've got evidence to the contrary, I encourage you to publicly post it - I live by my reputation.

FinCEN does not "prosecute." You need to provide proof for your guest's irrational claims or issue a correction.

[tvbcof]

You're missing the point, he's saying the Japanese Government could shut down Gox in a permanent way and have their assets frozen for years.  I have been wondering this same thing myself...

With all the exchanges being shut down around the world, why has the largest one never been targeted by anything more than unruly hackers?  Gox is the single largest chokepoint and is entirely responsible for determining the price of BTC as most people see it, yet it seems immune to regulatory troubles that increasingly plague exchanges around the world.   Is Japan such an advantageous legal environment to operate in?  Are there other international exchanges taking advantage of this and operating out of Japan?

If Gox was shut down by the Japanese government it would have a MAJOR impact on the price, and while it might recover depending on how other exchanges react and how usable decentralized exchanges are by that point, I think it's obvious the impact would be probably as significant as anything else in Bitcoins lifecycle so far.

It's not about losing BTC to a hack, it's about a sea-change event eliminating the largest player in the currency conversion game

I have to think that most people do try to limit the BTC and fiat they have on account at Mt. Gox out of general principle.  I did when I was actively trading (through Tradehill.)  This, a freeze may not damage as many people as badly as bad as you might imagine.  (But I could be wrong.)  It could be disruptive if rather than freezing the BTC the government used them to actively de-stabilize global trade, but I have a hard time imagining that occurring.

I myself have hypothesized that Mt. Gox appears to receive relatively little harassment due to they being a useful monitoring chokepoint and cooperative with the authorities.  While that remains in my mind a viable hypothesis, I currently consider it less likely than the null hypothesis for a variety of reasons.

Your hypothesis about keeping centralized exchanges going to reduce the pressure for de-centralized ones (and presumably private transactions and in-system utilization) to develop is also one which strikes me as entirely valid.

I currently consider the strongest hypothesis as being simply that nobody in corp/gov has really come up with a concrete plan for dealing with things.  I have little doubt that the last run-up was an eye opener however, and I'll be surprised NOT to see some effort put into corralling things a bit and some observations of these efforts popping up.

I continue to believe that you may over-estimate the effect that such things will have on BTC valuations.  You may even have the sign wrong.

[jjiimm_64]

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"

This is a good point.. i list on my taxes 'computer leasing'  not minting money!

[galambo]

This is a good point.. i list on my taxes 'computer leasing'  not minting money!

Hahaha, that is a surprisingly accurate statement. I think FinCEN's poor guidance and inclusion of miners as a "money transmitter" comes from their lack of understanding the mining process and that the government doesn't really care as much about Bitcoin as we'd like to believe.

[mindtomatter]

If you've got an accusation to make, do it.  I don't hide behind fake names and I don't lie either by intention or omission.  

If you've got evidence to the contrary, I encourage you to publicly post it - I live by my reputation.

FinCEN does not "prosecute." You need to provide proof for your guest's irrational claims or issue a correction.

FinCEN takes regulatory actions against those it deems in violation, we can argue semantics if you insist.

Is that all?  You take issue with his choice of specific term?

[mindtomatter]

If you've got an accusation to make, do it.  I don't hide behind fake names and I don't lie either by intention or omission.  

If you've got evidence to the contrary, I encourage you to publicly post it - I live by my reputation.

FinCEN does not "prosecute." You need to provide proof for your guest's irrational claims or issue a correction.

I reached out to Bradley Jansen for a response to your comment, his reply:

No, FinCEN does not "prosecute" but they do set the AMLs.  The regulators and law enforcement follow them.
Good elaboration here
http://www.americanbanker.com/bankthink/fincen-regulations-choking-bitcoin-entrepreneurs-1058606-1.html

Did you have anything else you feel needs correction?  I am running an interview with Paul Hughes in episode 2 which provides counterpoint to Bradleys claim, but even that results in a more nuanced but still not-great outlook for Bitcoin.

[galambo]

I reached out to Bradley Jansen for a response to your comment, his reply:
"No, FinCEN does not "prosecute" but they do set the AMLs.  The regulators and law enforcement follow them."

Oh, well, that's a completely different claim than was made on your radio program. Did your guest not do any research before going on the air?

[QuestionAuthority]

Does anyone know if FinCEN actually contacted BTCBuy and requested their closure or they just chickened out after reading the FinCEN March 18, 2013 announcement? I always wondered if Jeremy from Spendbitcoin was approached about doing business with ‘mericans and bailed out of the U.S. market.

[saddambitcoin]

Promise you I will ream Fin CEN in the end