Fincen Requirements?

[MSantori]

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

They are not licensed as money transmitters.

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

It would depend upon whether that person actually held or converted any bitcoins or dollars.

[DeathAndTaxes]

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.

Simple ... they didn't.

As pointed out above there are only 10 companies in the entire WORLD that are registered as Money Transmitters in all 50 states*.  This isn't 10 Bitcoin related companies, this is 10 companies period.

* Well 47ish states (excluding states which don't have an applicable license).

[Stunna]

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

They are not licensed as money transmitters.

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

It would depend upon whether that person actually held or converted any bitcoins or dollars.

Very true thanks for correcting me, From their site:

 

Coinbase is not a money transmitter. Coinbase assists its users in Bitcoin transactions.

I don't fully understand how Coinbase operates, how exactly are they not a money transmitter, you send them money and have bitcoins sent to you. Are they simply having Mtgox send the bitcoins?

[Bitco]

I don't fully understand how Coinbase operates, how exactly are they not a money transmitter, you send them money and have bitcoins sent to you. Are they simply having Mtgox send the bitcoins?

Because bitcoin isn't "money", and buying and selling stuff isn't a money transmitter.

[prophetx]

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.

Really, I do? Just the things I list out (having lawyer, trained staff, formal business plan, lots of money, etc) are easy to do? 

Perhaps I need to work on my writing style? 

[prophetx]

I don't fully understand how Coinbase operates, how exactly are they not a money transmitter, you send them money and have bitcoins sent to you. Are they simply having Mtgox send the bitcoins?

Because bitcoin isn't "money", and buying and selling stuff isn't a money transmitter.

according to the US govt it's convertible virtual currency.  but regardless bitcoin is a store of value, and that's what these state regulations cover. furthermore, one can trade and transmit this value, and then later retrieve it.

they are hiring someone with AML experience... https://coinbase.com/jobs

i have an interesting call with a big state regulator on this matter next week, in particular whether anyone operating a ripple gateway falls under these regulations as well

[Minor Miner]

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.

Simple ... they didn't.
As pointed out above there are only 10 companies in the entire WORLD you are registered as Money Transmitters in all 50 states*.  This isn't 10 Bitcoin related companies, this is 10 companies period.
* Well 47ish excluding states which don't require a license.

And if you grab any newspaper and look at the bank ads, read the fine print, most large banks list the states where the ad is good for.   Huge regional banks seem to only be able to operate in 10 states or so.  Kind of a large barrier to entry.  I guess spending billions on lobbying pays off for them and for the lawyers.

[Bitco]

according to the US govt it's convertible virtual currency.  but regardless bitcoin is a store of value, and that's what these state regulations cover. furthermore, one can trade and transmit this value, and then later retrieve it.

Lots of things can be used as a store of value.  Gold, for example.  Is a gold trader considered a money transmitter?  In which states?

[Zeke_Vermillion]

I don't fully understand how Coinbase operates, how exactly are they not a money transmitter, you send them money and have bitcoins sent to you. Are they simply having Mtgox send the bitcoins?

Because bitcoin isn't "money", and buying and selling stuff isn't a money transmitter.

according to the US govt it's convertible virtual currency.  but regardless bitcoin is a store of value, and that's what these state regulations cover. furthermore, one can trade and transmit this value, and then later retrieve it.

they are hiring someone with AML experience... https://coinbase.com/jobs

i have an interesting call with a big state regulator on this matter next week, in particular whether anyone operating a ripple gateway falls under these regulations as well

If you could share the specifics of your call with the state regulator, I think there are a lot of folks here who would be interested to hear about it...

[Guardian of Forever]

These regulations are simply put a monetary control. The bankers/ money interest of the world will want tighter and tighter control of where money can be sent and how much. Like the proverbial frog in a pot; we have seen over the years governments/bankers create new laws that control the flow money. As the economic situation deteriorates they will place more restrictions on these transactions. Using anti-money laundering as an excuse to regulate the flow of bitcoin is the first step in an attempt to kill it off. Central banking can not have unrestricted flow of currency, this gives to much power to the people.

Lets face it people like to see legitimacy in business, and they ask the government for licenses and permits to give them that aire. Because you want to move large amounts of "money" they want to keep an eye on you and your customers. Until the bitcoin system can become self regulated outside of Government. It is likely to fail. Asking permission from government has never done anything but create a bigger bureaucracy and less freedom.

Instead of seeking legitimacy from government, bitcoin community need to work on self legitimacy through the bitcoin community. For bitcoin to succeed, the bitcoin community need to step up and figure out a better way to interface with the end user. A system that is trustworthy, fast, and decentralized.

[MSantori]

As I research state MSB requirements, it's becoming increasingly clear that some states have a very broad definition of what constitutes "money" and "money transmission". 

California, for example, is notoriously broad.  It defines money transmission as "selling or issuing stored value."  In turn, "stored value" is defined as "monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services."  Yikes!  Many of the bitcoin business ideas I'm approached with are probably within this definition.

New York, on the other hand, doesn't even seem to define "money" in its banking law.  It simply states "No person shall engage in the business of...  receiving money for transmission or transmitting the same, without a license."  Does a particular bitcoin business fall into this broad provision?  That would be a highly fact-based inquiry, and we'd have to dive into the case law.  The answer isn't nearly as clear in NY as it would be in California.

Oh brave new world...

[Jobe7]

Come to the UK, setup here, problem solved

[Zeke_Vermillion]

Come to the UK, setup here, problem solved

If you serve any US customers, the problem is NOT solved

[joesmoe2012]

Come to the UK, setup here, problem solved

Didn't the UK just shut down intersango's accounts?

[Viceroy]

join us here:

https://bitcointalk.org/index.php?topic=217709.0

We are talking about this.

[MSantori]

I tried to break down the federal regulatory regime for everyone here:

https://bitcointalk.org/index.php?topic=206305.20

We go from 18 USC 1960 to the definition of "money transmitter".

[prophetx]

I don't fully understand how Coinbase operates, how exactly are they not a money transmitter, you send them money and have bitcoins sent to you. Are they simply having Mtgox send the bitcoins?

Because bitcoin isn't "money", and buying and selling stuff isn't a money transmitter.

according to the US govt it's convertible virtual currency.  but regardless bitcoin is a store of value, and that's what these state regulations cover. furthermore, one can trade and transmit this value, and then later retrieve it.

they are hiring someone with AML experience... https://coinbase.com/jobs

i have an interesting call with a big state regulator on this matter next week, in particular whether anyone operating a ripple gateway falls under these regulations as well

If you could share the specifics of your call with the state regulator, I think there are a lot of folks here who would be interested to hear about it...

I will try to do that next week.  Have a paper I need to finish for the end of the semester and have to prioritize....

[pilotniq]

My italics:

California, for example, is notoriously broad.  It defines money transmission as "selling or issuing stored value."  In turn, "stored value" is defined as "monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services."  Yikes!  Many of the bitcoin business ideas I'm approached with are probably within this definition.

I would argue that Bitcoin does not fall under that definition, because it has no issuer, and therefore can not represent "a claim against the issuer".
 

[Viceroy]

California, for example, is notoriously broad.  It defines money transmission as "selling or issuing stored value."  In turn, "stored value" is defined as "monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services."  Yikes!  Many of the bitcoin business ideas I'm approached with are probably within this definition.

So if the issue-er was, let's say, FastCashforBitcoins and they sold bitcoin to a person in California they would be a money transmitter acting without a license.  Right?

[MSantori]

My italics:

California, for example, is notoriously broad.  It defines money transmission as "selling or issuing stored value."  In turn, "stored value" is defined as "monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services."  Yikes!  Many of the bitcoin business ideas I'm approached with are probably within this definition.

I would argue that Bitcoin does not fall under that definition, because it has no issuer, and therefore can not represent "a claim against the issuer".
 

For the purposes of that statute, the definition of "issuer" is spectacularly broad:

"Issue" and "issuer" mean, with regard to a payment
instrument, the entity that is the maker or drawer of the instrument
in accordance with the California Commercial Code and is liable for
payment. With regard to stored value, "issue" and "issuer" mean the
entity that is liable to the holder of stored value and has
undertaken or is obligated to pay the stored value. Only a licensee
may issue stored value or payment instruments.

So, yes, I believe that most bitcoin businesses would be snagged by this.