FinCen preparing to prosectute some Bitcoin users

[jdbtracker]

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.

 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.

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.

Well, I've been looking at it carefully. Following along this line of thinking, this is how I interpret it.

1) as stated by another forum member... you are not creating bitcoins; You are a Employee of a Open Source p2p Corporation, You are being paid in transaction fees(as non-existent as they currently are). As a reward for completing your job you are rewarded with stock in the company(bitcoins).

No one is creating anything, the bitcoins are already in circulation they are held in trust by the Bitcoin p2p Corporation.

The first two statements do not apply to you, in fact they do not make any sense as to what Miners themselves are doing, it is absolute gibberish.

2)The last statement is the tricky one.

 In addition, a person is an ex-changer 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.

    The statement is saying that you can only use this currency once... for purposes of safe transmission over the internet to purchase goods and services.

    The guidelines suggest that you are in deep water if you buy the currency, or accept it for something that is of value,i.e. trade, exchanging the currency for anything of exchangeable value is frowned upon e.g. You cannot buy Gold/Silver with it, you can't even buy another currency under this statement... only goods and services are legal.

If the last statement is dependent on the first two then the last statement is invalid and nonsensical for what Miners actually do... you are not a ex-changer or a Money Transmitter, You are a Employee of the Bitcoin p2p Corporation.

You gotta watch out for those law makers they are sneaky! Please proof read my logic, Is this right? I could be wrong.

Edit: ... I re-read it and I think that last sentence may be valid... if so, it means all transactions with virtual currencies are frowned upon. that includes, anyone who buys virtual currency on EVE Online, WoW, 2nd life etc... it has broad powers, since they are converting real currency into in-game currency, and even paying your EVE Online subscription with in-game currency is frowned upon, same for buying virtual in-game goods that makes you a money transmitter.(notice I did not say illegal, that is in question, but would explain why all banks in the world are shutting down accounts)

Well I guess it's time to spread the mining ethos, buy a rig today for a better tomorrow!

[Its About Sharing]

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.

I started this thread and am a bitcoin holder, user and proponent. i am not interested in scaring the readers of the forum (into listening to the show, or just plain becoming scared). I am not a proponent of cutting off my nose to spite my face. I am interested in bringing something that could be and probably eventually will be dangerous to our community to our attention.

I listened to the podcast and have a bit of a legal and investigative background (college only) I could follow the talk quite well and it was concerning to me. As stated before, it is much much better to prepare for what might happen, rather than to wait comfy like and get smacked when you least expect it.

When one considers that bankers basically run the world, are above prosecution (e.g. - See HSBC money laundering, derivatives crisis tying the EU to American banks, etc. and etc.) you have to take them seriously. These people profit and some might argue make wars. They also have controlling interests in society. If you want to just brush that entity aside, perhaps you should look a bit deeper inside and offer a solution rather than a criticism.

IAS

[tvbcof]

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.

I started this thread and am a bitcoin holder, user and proponent. i am not interested in scaring the readers of the forum (into listening to the show, or just plain becoming scared). I am not a proponent of cutting off my nose to spite my face. I am interested in bringing something that could be and probably eventually will be dangerous to our community to our attention.

I listened to the podcast and have a bit of a legal and investigative background (college only) I could follow the talk quite well and it was concerning to me. As stated before, it is much much better to prepare for what might happen, rather than to wait comfy like and get smacked when you least expect it.

When one considers that bankers basically run the world, are above prosecution (e.g. - See HSBC money laundering, derivatives crisis tying the EU to American banks, etc. and etc.) you have to take them seriously. These people profit and some might argue make wars. They also have controlling interests in society. If you want to just brush that entity aside, perhaps you should look a bit deeper inside and offer a solution rather than a criticism.

IAS

Don't take it personally.  It is human nature to be a 100% fanboy (or enemy) and feel threatened by anything with does not appear on it's face to represent the same posture toward (or against) any particular issue.  That's just the way most humans are wired.  A small percentage of humans are defectively wired in this respect though.

[Luno]

Nice competent summary.

So the money transmitter part, about exchanging Bitcoin for real currencies happens the moment you deposit real money and buy Bitcoin on an exchange and the moment you hold a balance in a real currency on an exchange, after selling deposited Bitcoins and surely the moment you try to cash out?

Thats not a lot to base a law on, as others stated, especially the part of only being an issuer of a virtual currency if you buy money but not if you buy goods. However it's making a path or framework where just about every use of Bitcoin can be prosecuted under existing current American laws.

I live in Europe and the ECB has to rule too before such an interpretation comes into effect here. However international bank compliance with FinCen might be enough for throwing "liquid Nitrogen" on bank accounts in a number of countries, after which laws can be made without any rush while the possible confiscate-able user funds stay put?

This is surely a bleak future. The "good" news from an European point of view, is that we have the European "supreme" court where any EU decision can be challenged and where the complainant is allowed to present technical evidence. That could be relevant if the definition prevails of "mining" as equivalent to being an issuer of a virtual currency under American law.

But of course, all this would be enough to scare away legitimate business globally in the foreseeable future!

Edit: It just occurred to me: Bitcoin though recognized as a "virtual currency" is not recognized, despite it's name, as a real currency meaning that it's considered as an "in game" token that is allowed under strict regulation to be used for payment in real life trades. These possible future laws would include WOW-gold also for the exact same reasons as Bitcoin.

If that's the case, that Bitcoin is not a currency in the normal sense, the prerequisites about it being minted and sold for $$ before the seller is considered an issuer, is really treading on new ground from a legal perspective, so if FinCen translates their recommendations into law, there will be numerous revisions as such a law would challenge existing financial laws in all other areas. Actually a Bitcoin law could have serious drawbacks regarding prosecuting other types of financial crimes as it would create a giant loop hole!

[jdbtracker]

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.

I started this thread and am a bitcoin holder, user and proponent. i am not interested in scaring the readers of the forum (into listening to the show, or just plain becoming scared). I am not a proponent of cutting off my nose to spite my face. I am interested in bringing something that could be and probably eventually will be dangerous to our community to our attention.

I listened to the podcast and have a bit of a legal and investigative background (college only) I could follow the talk quite well and it was concerning to me. As stated before, it is much much better to prepare for what might happen, rather than to wait comfy like and get smacked when you least expect it.

When one considers that bankers basically run the world, are above prosecution (e.g. - See HSBC money laundering, derivatives crisis tying the EU to American banks, etc. and etc.) you have to take them seriously. These people profit and some might argue make wars. They also have controlling interests in society. If you want to just brush that entity aside, perhaps you should look a bit deeper inside and offer a solution rather than a criticism.

IAS

This is important, so no fear hear? and if anyone feels that retched feeling of fear, recite the litany against fear.  

Remember Fear is the Mind Killer.

these are important issues that our community has to grapple with right now before they begin... They did the same thing to Paypal... I think I know why the president of paypal was happy in that interview, I think he's glad something like Bitcoin is able to challenge them.  There simply is no way to destroy Bitcoin short of a EMP bomb, and I don't think that they are going to justify sending out a Trojan worm onto the internet to erase all copies of Bitcoin... though it wouldn't hurt to be prepared for that eventuality.

We are an Intelligent community of individuals, with the determination to know where we stand and I am sure as soon as one of us finds a solution to our problems they will share that knowledge to the community so like Bitcoin our Human BlockChain can be upgraded with the latest known facts, making it indestructible and irreversible; Knowledge cannot be erased from the human mind.

[QuantPlus]

http://www.americanbanker.com/bankthink/fincen-regulations-choking-bitcoin-entrepreneurs-1058606-1.html?pg=1

[Its About Sharing]

http://www.americanbanker.com/bankthink/fincen-regulations-choking-bitcoin-entrepreneurs-1058606-1.html?pg=1

The article is a bit of a rehash from the podcast. It is a bit of a misnomer saying it's "choking bitcoin entrepreneurs", rather it is choking exchanges. Still a good read though. (edit - I guess exchange owners are big entrepreneus! Just meant the regulations are not yet affecting other businesses that I have noticed.)

The big thing we have on our side is the state of the world. Just look at the currency situation. The government will mostly be slow to react. I am thinking the continued
currency collapse will occur faster than they can even try to stifle bitcoin and other cryptocurrencies. It may not be smooth, but I have a feeling "We are on a mission from God."  
Bitcoin to governments and banks might seem like a problem now, but bitcoin isn't going to really hasten there collapse, they are doing a fine job on their own.

IAS

[virtuallylaw]

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.

Great idea, I'll ask around and see if I can publish a list on bitcoinfoundation.org.

[Luno]

Just another rambling:

To get around the "miner is an issuer of virtual currency if he sells for $$". The workaround is off course to buy another virtual currency for your mined coins which you then sell. That way you are spending your mined Bitcoins and not selling them which would make you a money transmitter.

Selling bought altcoins does not make you a money transmitter!

Taa daa.. problem solved.

[franky1]

5 pages of blah

put simply

rule 1
if you touch fiat read the regulations and learn the rules and follow them

rule 2 over $1000 / Euro1000 / £850 in a single transaction or multiple transactions deemed as linked (same day/same recipient/payee) requires Identification

rule 3
over $10,000 / Euro15,000 / £12500 in a year requires identification

rule 4
if payee / recipient makes it obvious that the use of the transaction is crime related, or details of the people are linked to a criminal hotlist then a SAR's report has to be made.

rule 5
have policies/ coding features to log any /all info you can gather to recognise repeat business to then warn the transactors they are approaching limits, then requiring ID. gathering ID if they wish to continue.

rule 6
fincen dont just shut down a exchange on a whim. they do however shutdown exchanges if a report gets received to them which they then back track to an exchange and it is found that the exchange aint following the rules... so follow the rules

rule 7
dont be dumb thinking you can be lazy by not having policies inplace, as sometime/someplace if your bank just asks a simple question and you dont have the answer they may end up investigating you.

rule 8
even scammers that try chargebacks trigger the banks involved to then internally investigate and pass on info to fincen if an exchange can't give valid explanations.

rule 9
there are more rules but the simple ones above have been neglected by previous exchanges and so they get shut down and then blame regulators, and not the 17yo zit faced guys behind the exchanges for being lazy to not learn the rules.

many exchanges such as intersango got shut down because the lazyness of not even reading the UK FSA guidelines to even bother following the rules.

the rules are simple. talking to fincen SEC, FSA etc is simple. if you follow them you are fine. but the main thing is rule 1
if your going to touch FIAT READ AND FOLOW THE RULES

rule 10
if you don't want to follow the rules. don't touch FIAT

[QuestionAuthority]

5 pages of blah

*snip*

rule 10
if you don't want to follow the rules. don't touch FIAT

But BTCBuy was not exchanging directly for fiat they were doing gift cards in fiat denominations. If I can't even get a gift card with btc why should I mine. I don't want drugs off of SR so I guess I'm left with just trading with scammers in the Marketplace section of this forum, right?

[abbyd]

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

I wouldn't have too much faith in your congressional critters - they've been bought and sold for 30 years now.
FinCEN is mostly working to obfuscate the massive fraud known as Wall St. - the crimes they end up prosecuting are laughable.

They enlarged their jurisdiction last year without any oversight or authority:
http://www.zerohedge.com/news/guest-post-long-arm-uncle-sam-just-got-longer

FinCEN's latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES "even if none of its agents, agencies, branches or offices are physically located in the United States."

[micalith]

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

I wouldn't have too much faith in your congressional critters - they've been bought and sold for 30 years now.
FinCEN is mostly working to obfuscate the massive fraud known as Wall St. - the crimes they end up prosecuting are laughable.

There is corruption, but you can still influence Congress. Just look at the recent gun licencing bill. It was revoked in part because congressmen were under pressure from their constituents. It was only a small minority of constituents, who happened to be NRA puppets, but as their lobbying was so intense and relentless, and the majority of people for the bill didn't vocalise nearly as much, this influenced the outcome. It should be a similar situation with keeping things reasonable with fincen. If enough US citizen bitcoiners write repeatedly to their congressmen, there should be better odds for a better situation, or at least to prevent it from getting worse. (I'm paraphrasing from Bradley Jansen on the podcast)

[franky1]

5 pages of blah

*snip*

rule 10
if you don't want to follow the rules. don't touch FIAT

But BTCBuy was not exchanging directly for fiat they were doing gift cards in fiat denominations. If I can't even get a gift card with btc why should I mine. I don't want drugs off of SR so I guess I'm left with just trading with scammers in the Marketplace section of this forum, right?

i highlighted your statement at where btcbuy went wrong, and will leave them to read the full length of regulations as to why/how they went wrong.

if you want to get fiat (in any form) above $1000 in a small period of time or above $10k over a year and no ID is ever asked. then don't expect that service to run for very long.

i too dont want/do drugs. but this is where the media has brainwashed you. bitcoin is not used just for scamming people/drugs/playing the markets.

buy a computer or a tv www.bitcoinstore.com
buy some food https://www.foodler.com/user/Bitcoin.do
plus thousands of other things.

and remember bitcoin is still new. its still in the victorian age of currency. where its just moved away from only being used to trade on market places and whorehouses (cam4bitcoins) and is now moving onto being useful for more of a variety.

so the reason to mine is not to spend today. but to spend later.

if you really need FIAT and your only desire is fiat then only withdraw a couple hundred dollars/euros/pounds just to pay the bills.

cashing out every single bitcoin you mine for fiat defeats the entire reason for even using bitcoin

[jdbtracker]

5 pages of blah

*snip*

rule 10
if you don't want to follow the rules. don't touch FIAT

But BTCBuy was not exchanging directly for fiat they were doing gift cards in fiat denominations. If I can't even get a gift card with btc why should I mine. I don't want drugs off of SR so I guess I'm left with just trading with scammers in the Marketplace section of this forum, right?

i highlighted your statement at where btcbuy went wrong, and will leave them to read the full length of regulations as to why/how they went wrong.

if you want to get fiat (in any form) above $1000 in a small period of time or above $10k over a year and no ID is ever asked. then don't expect that service to run for very long.

i too dont want/do drugs. but this is where the media has brainwashed you. bitcoin is not used just for scamming people/drugs/playing the markets.

buy a computer or a tv www.bitcoinstore.com
buy some food https://www.foodler.com/user/Bitcoin.do
plus thousands of other things.

and remember bitcoin is still new. its still in the victorian age of currency. where its just moved away from only being used to trade on market places and whorehouses (cam4bitcoins) and is now moving onto being useful for more of a variety.

so the reason to mine is not to spend today. but to spend later.

if you really need FIAT and your only desire is fiat then only withdraw a couple hundred dollars/euros/pounds just to pay the bills.

cashing out every single bitcoin you mine for fiat defeats the entire reason for even using bitcoin

+100

agree!

Stay informed, stay involved, know the law, if you aren't part of the process your against it.

Check the Bitcoin Wiki first, educate yourself, and update it with any relevant information for the community.

I highly recommend everyone get a News reader and set it up, ask help from the community to set it up and trade news lists so that new people don't have to struggle with putting every news site one by one into their new Reader.

http://www.jetbrains.com/omea/reader/


Get good information from the internet, Download the YaCy(you see) p2p search engine, same as above ask for help to set it up. help build a uncensored map of the internet and tailor your searches for good balanced information sources.

http://yacy.net/en/index.html  or get it from your favourite torrent client.


We are a conglomeration of users from mostly Democratic countries, I think we should act like it and get involved with our governments so they know our position.

I know there are many here who wish for nothing more than the demise of governments, but that's not going to be possible if we isolate ourselves thinking that we are free to do what we want without having to consider someone else's position, That is just not feasible, sooner or later we must agree to co-operate; After all what would we do if we did not have the Farmer to feed us? or the Trucker to deliver that food? maybe the grocer to keep the food fresh for consumption?

Alone we fall, together we stand.

[justusranvier]

he's saying the Japanese Government could shut down Gox in a permanent way and have their assets frozen for years.

What would it do to the exchange rate if all of a sudden the BTC held by Mt Gox were taken completely out of the market for a few years?

[QuantumQrack]

I doubt if Gox is that stupid to have their btc "seized" on the premises.  I am sure if the Japanese government shut gox down, they or some associates would still have plenty of access to their btc.  Isn't btc cool?

[tvbcof]

I doubt if Gox is that stupid to have their btc "seized" on the premises.  I am sure if the Japanese government shut gox down, they or some associates would still have plenty of access to their btc.  Isn't btc cool?

I would not be confident about that at all.  I have as much confidence in Mark as I do just about anyone in the Bitcoin community at this point, but I don't believe that ANYONE is likely willing to spend significant time in a gulag to protect someone else's BTC or fiat.*  And if they are subject to 'extraordinary rendition' and 'enhanced interrogation', the chance they would not cough up the desired item is probably near zero.

Mark/Mt. Gox could win my trust here by outlining a credible protection strategy capable of withstanding the types of attacks that are known with certainty to be applied against by adversaries such as the US government, and some incontrovertible evidence that such strategies are being employed.  Such strategies are quite possible, if cumbersome, with split secrets and so on.  I'm not holding my breath for such evidence and in the mean time consider any BTC or USD I might have on account with Mt. Gox to be subject with a fair likelihood to total loss.

(*) I feel it technically incorrect to classify BTC I have on account at Mt. Gox as 'mine', but it's convenient shorthand.

Edit: fix

[virtualmaster]

Meeting the Regulators:
http://www.cnbc.com/id/100675118

[DeeSome]

Meeting the Regulators:
http://www.cnbc.com/id/100675118

From that article this is the most important bit regarding Satoshi.

"The Financial Crimes Enforcement Network, or FinCen, has signed off regarding online currencies, saying that it would not prosecute their originators so long as no criminal behavior is taking place."

That is why he can't come back. If they can't find him "the originator" they can't prosecute him.