Fincen Requirements?

[Stunna]

I've been getting a lot of mixed information lately and would like a simple answer to this if anyone knows.


If you are running any sort of bitcoin exchange, would you have to file as a registration with FINCEN for a MSB (money services business) ? Also can anyone provide me with some other basic things I'd have to do legally to protect myself, for example is a money transmitter license needed?


Would appreciate any input into this.


Thanks.

[Stampbit]

If you have to ask...

[Gavin Andresen]

If you have to ask...

... hire a lawyer.

[Stunna]

If you have to ask...

... hire a lawyer.

Done. I'll post my findings later if anyone is interested

[Delarock]

I'm curious to know what you find out. AFAIK you need both. This is based on conversations I've had with three lawyers. It's too grey of an area for most non-specialized lawyers, but I think if you're at this point, I'm not adding anything new.

I'm assuming you're located in the US and are looking to exchange virtual to fiat and/or the opposite.

[virtuallylaw]

Happy to point you to some attorneys who specialize in this area of the law. PM me or drop me a line: patrick (at) bitcoinfoundation.org.

[Stunna]

Happy to point you to some attorneys who specialize in this area of the law. PM me or drop me a line: patrick (at) bitcoinfoundation.org.

Would appreciate that, PM sent

[Bitcoinpro]

Atm No, alot of posts are  misinformative , id even say companies like mtgox and other exchangers have done things they though where the right thing to do but they where actually not legally required of.

The EU report that covered Bitcoin and money exchanges was just an initial kind of foray into the subject,

Paypal banning users calling them money exchanges is also false.

and declaring anything to Fincen   hilarious

[Zeke_Vermillion]

Atm No, alot of posts are  misinformative , id even say companies like mtgox and other exchangers have done things they though where the right thing to do but they where actually not legally required of.

The EU report that covered Bitcoin and money exchanges was just an initial kind of foray into the subject,

Paypal banning users calling them money exchanges is also false.

and declaring anything to Fincen   hilarious

PayPal was almost destroyed early-on by attempting to launch an e-currency without a compliance program. That is why Peter Thiel seems to be so down on bitcoin (at least per his public statements last year). Also why kickstarter and other crowdfunding platforms all have in their terms of service that they can't be used to fund e-currencies. For a worst-case scenario, look up the Wired article on e-gold. This is no joke, you can go to federal f*-me-in-the-ass prison if you are not savvy about MSB laws and regs on federal and state levels.

[Delarock]

Atm No, alot of posts are  misinformative , id even say companies like mtgox and other exchangers have done things they though where the right thing to do but they where actually not legally required of.

The EU report that covered Bitcoin and money exchanges was just an initial kind of foray into the subject,

Paypal banning users calling them money exchanges is also false.

and declaring anything to Fincen  hilarious

PayPal was almost destroyed early-on by attempting to launch an e-currency without a compliance program. That is why Peter Thiel seems to be so down on bitcoin (at least per his public statements last year). Also why kickstarter and other crowdfunding platforms all have in their terms of service that they can't be used to fund e-currencies. For a worst-case scenario, look up the Wired article on e-gold. This is no joke, you can go to federal f*-me-in-the-ass prison if you are not savvy about MSB laws and regs on federal and state levels.

Anyone who is even thinking about starting any sort of fiat/virtual type business and doesn't believe that this is the case should probably look into starting another type of business.

There are problems before you even get to the state level, let alone federal.

FinCEN is a piece of cake compare to the rest.

[Bitcoinpro]

Atm No, alot of posts are  misinformative , id even say companies like mtgox and other exchangers have done things they though where the right thing to do but they where actually not legally required of.

The EU report that covered Bitcoin and money exchanges was just an initial kind of foray into the subject,

Paypal banning users calling them money exchanges is also false.

and declaring anything to Fincen   hilarious

PayPal was almost destroyed early-on by attempting to launch an e-currency without a compliance program. That is why Peter Thiel seems to be so down on bitcoin (at least per his public statements last year). Also why kickstarter and other crowdfunding platforms all have in their terms of service that they can't be used to fund e-currencies. For a worst-case scenario, look up the Wired article on e-gold. This is no joke, you can go to federal f*-me-in-the-ass prison if you are not savvy about MSB laws and regs on federal and state levels.

e-gold 

[Freebanking.org]

PayPal was almost destroyed early-on by attempting to launch an e-currency without a compliance program. That is why Peter Thiel seems to be so down on bitcoin (at least per his public statements last year). Also why kickstarter and other crowdfunding platforms all have in their terms of service that they can't be used to fund e-currencies. For a worst-case scenario, look up the Wired article on e-gold. This is no joke, you can go to federal f*-me-in-the-ass prison if you are not savvy about MSB laws and regs on federal and state levels.

Depending on your circumstances, yes, you'll have to register with FinCEN *and* your state MSB regulator.  You'll have reporting requirements, have to show a compliant anti-money laundering program, and have record-keeping requirements.

[BitCoinUser123]

Same conversation going on in this thread.

Only thing I can say with a high degree of confidence based on reading the FinCEN guidelines is that a miner who does not exchange BTC for any currency is NOT an MSB.  Almost any other scenario may put you in that category.  Checking with a lawyer is a good idea.

[prophetx]

If you are running an exchange where you are taking or sending US dollars, you need to have an MSB permit from each state of the USA where you do business.

Now isnt that jolly... have fun filling out those forms, you might as well be applying for the FBI or getting a rectal exam.

[prophetx]

For example:

Completed applications for new money transmitter license, along with the non-refundable fee of five thousand dollars ($5,000), should be addressed to Mr. Patrick Carroll, Strategic Support Manager, Department of Financial Institutions, 45 Fremont Street, #1700 San Francisco, CA 94105-2219. Contact him at (415) 263-8559 or by email at patrick.carroll@dfi.ca.gov

www.dfi.ca.gov/Licensees/money_transmitter/default.html

5 Gs is no joke...

[Bitcopia]

This is not to be taken as legal advice, or any kind of advice for that matter, but any bitcoin exchange will have to register as a money transmitter federally and with every state whose residents it conducts business with. The fees associated with such registration are incredible. To think otherwise seems naive. Look at what just happened to MtGox. It doesn't necessarily have to do with bitcoin, but the fact that you are holding customer funds for later delivery. This is textbook money transmission.

[prophetx]

This is not to be taken as legal advice, or any kind of advice for that matter, but any bitcoin exchange will have to register as a money transmitter federally and with every state whose residents it conducts business with. The fees associated with such registration are incredible. To think otherwise seems naive. Look at what just happened to MtGox. It doesn't necessarily have to do with bitcoin, but the fact that you are holding customer funds for later delivery. This is textbook money transmission.

Yup, look at California.  5K fee just for the chance to register.  there are only about 25 companies registered for the entire state (google, square, western union).

You need to have an employee that is familiar with the regulations.  You need to submit a business plan.

You need to spend probably 25K per state minimum for the first year, and then have at least 1 lawyer on staff, retainer with firms in all states, and train enough compliance people.  

Better to go to Panama or Malta or whatever...

[CallMeDan]

Yup, look at California.  5K fee just for the chance to register.  there are only about 25 companies registered for the entire state (google, square, western union).

You actually make it sound easy.  So that everyone knows, it is not the Federal government that is the problem, it is in fact the states.

For an internet-based MSB that wants to service the entire US, said company must obtain 47 licenses.  Taking a look at just one, California, the company needs $100k-$500k in net worth alone; audited financials, owner(s) financials, surety bond and more.  

Now do that 46 more times.

This is why only about 10 companies nation-wide have achieved all 47 licenses; such as Amazon, PayPal, and Western Union.

http://www.aarongreenspan.com/writing/essay.html?id=86

If you really want to understand this then watch this in full:
https://www.youtube.com/watch?v=gmiY35brih0

Congress is really needed to resolve this issue.

The petition by FaceCash is here:
http://www.change.org/petitions/the-u-s-senate-reform-money-transmission-laws-to-allow-mobile-payments


PayPal's licenses are listed here:
https://www.paypal-media.com/state_licenses.cfm

[MSantori]

Dan nailed it. 

We can assist new businesses in money transmission licensing, but the bar is quite high on the state level.  Well-funded startups can surmount hurdles like net worth requirements and legal fees (I'll take the blame for that).  The greatest cost, though is still bonding. Bonding, Bonding, Bonding.  No matter what industry you're in, insurance and bonding is the kicker.

[Stunna]

Dan nailed it.  

We can assist new businesses in money transmission licensing, but the bar is quite high on the state level.  Well-funded startups can surmount hurdles like net worth requirements and legal fees (I'll take the blame for that).  The greatest cost, though is still bonding. Bonding, Bonding, Bonding.  No matter what industry you're in, insurance and bonding is the kicker.

What I've been pondering is how current major exchanges and transmitters such as coinbase managed to get all of these licenses when they first started up.


If one were to hypothetically only accept Paypal as payment and not accept other forms of payment, would they still need these licenses?


I've gotten introduced to a lawyer regarding this but have not yet called to seek his legal advice. At the moment I have a lot on my plate and am just curious.