Everyone Panic. There's a lawyer among us. [FinCEN Walkthrough on p2]

[MSantori]

Hi everyone. I'm a business attorney in New York City.  I've been involved in cryptocurrency for some time now.  I hope I can be of some help on this board.  I can't give you legal advice via posts, but if you PM me, we may be able to discuss the particulars of your business.

Full disclosure: There's no such thing as an expert or specialist in bitcoin law, and I am certainly not one.  I'm an attorney with experience in securities, civil fraud and other financial matters with particular emphasis in the tech realm.  There is almost zero judicial and legislative guidance out there for us practitioners, so many of us are trying to keep ourselves out in front of every new development as they arise.

I'm daily fascinated by what bitcoin is and what it can become, and I'm looking forward to becoming part of the community!

[Bitcoinorama]

Hi everyone. I'm a business attorney in New York City.  I've been involved in cryptocurrency for some time now.  I hope I can be of some help on this board.  I can't give you legal advice via posts, but if you PM me, we may be able to discuss the particulars of your business.

Full disclosure: There's no such thing as an expert or specialist in bitcoin law, and I am certainly not one.  I'm an attorney with experience in securities, civil fraud and other financial matters with particular emphasis in the tech realm.  There is almost zero judicial and legislative guidance out there for us practitioners, so many of us are trying to keep ourselves out in front of every new development as they arise.

I'm daily fascinated by what bitcoin is and what it can become, and I'm looking forward to becoming part of the community!

This maybe of intertest for you; https://bitcointalk.org/index.php?topic=187683.new#new

[greyhawk]

I want to see NYCesquire and Nolo get into anime style Phoenix Wright inspired slapfights.

[MSantori]

This maybe of intertest for you; https://bitcointalk.org/index.php?topic=187683.new#new

Thanks. I've posted there actually.

[oakpacific]

This question I think you can answer: do you take bitcoins?

[MSantori]

Nope.  My posts are gratis 

[bitcoinstarter]

Shaking in my boots! 

[yacoin]

Do ya think bitcoin will be banned or regulated?

[MSantori]

Speaking at least in the United States, bitcoin will not be banned.  It is and will continue to be regulated on the state and federal level.

Regulation is a good thing. It is the inevitable consequence of widespread adoption and acceptance.  We want regulation: careful, competent regulation.

[Zeke_Vermillion]

Speaking at least in the United States, bitcoin will not be banned.  It is and will continue to be regulated on the state and federal level.

Regulation is a good thing. It is the inevitable consequence of widespread adoption and acceptance.  We want regulation: careful, competent regulation.

I think "we" would prefer no regulation. However, given the inevitability of regulation, it is better to take the initiative and propose a regime that is workable. This is the classic lobbying technique of most well-organized industries. Voluntarily submit to regulation that you propose, to head off more draconian approaches from entrepreneurial politicians.

[TheButterZone]

Or give an inch, and googolplex light years are taken, as with every absolute power.

[Kluge]

Hey! Wanna play, uh... five-ish sometimes-loaded questions? (just as speculation, not legal advice)

If MtGox were to become compliant, do you think they'd need both federal and state FinCEN/MSB compliance (assuming they don't latch onto a national bank/CU somehow)? Most people seem under the impression you can just register with FinCEN and it's done - woohoo, you're fully compliant, and this is the "compliance" most BTC MSBs seem to be talking about. But, these companies do business in all 50 states, and all these states have their own laws, licenses, and usually crazy-expensive fees.

Am I wrong, or is federal FinCEN registration as a MSB not enough?

Do you know of any US-serving exchanges which you believe probably are fully compliant?

Do you believe the USG (particularly, the courts) will accept Bitcoin being treated as a currency, and do you think that premise they're seizing Gox due to should be legally challenged? If you think it should be challenged, who should be challenging it? In an niche economy of startups, maybe we should all chip-in for a legal team to challenge the definition of BTC as a currency?

For almost all of us, we've treated Bitcoin as a commodity rather than a currency for tax purposes - especially relevant because complying with tax regulations as a miner would be an enormous, practically unfeasible pain in the ass. Still, AFAIK nobody's really bringing this up. The implications of letting FinCEN and other bureaucracies call Bitcoin a currency seem pretty unexplored, and there are people just saying "it won't affect me, I'm in the UK" when the US has a tendency for its precedents/definitions to be adopted elsewhere. Do you think the Bitcoin community has under-reacted to the likely changes in definition of Bitcoin will bring, or is it appropriate just to wait until we're explicitly told by a government we're doing something wrong (IF we're doing something wrong)?

[MSantori]

Hey! Wanna play, uh... five-ish sometimes-loaded questions? (just as speculation, not legal advice)

Sure.

If MtGox were to become compliant, do you think they'd need both federal and state FinCEN/MSB compliance (assuming they don't latch onto a national bank/CU somehow)? Most people seem under the impression you can just register with FinCEN and it's done - woohoo, you're fully compliant, and this is the "compliance" most BTC MSBs seem to be talking about. But, these companies do business in all 50 states, and all these states have their own laws, licenses, and usually crazy-expensive fees.

Yes.  Based on my understanding of how MtGox handles money, it and it's subsidiaries are - under the current statutory regime, required to register with FinCEN, together with every state in which they are transmitting money under that state's MSB laws.  Depending upon how they do their business, they are likely required to register in every state with an MSB statute.

Am I wrong, or is federal FinCEN registration as a MSB not enough?

You are correct.

Do you know of any US-serving exchanges which you believe probably are fully compliant?

Not a single one.

Do you believe the USG (particularly, the courts) will accept Bitcoin being treated as a currency, and do you think that premise they're seizing Gox due to should be legally challenged? If you think it should be challenged, who should be challenging it? In an niche economy of startups, maybe we should all chip-in for a legal team to challenge the definition of BTC as a currency?

BTC will be considered a currency or a commodity depending upon the particular regulatory framework applied.  Generally speaking, for tax purposes, BTC is treated as a sort of commodity.  Income is realized when BTC is converted to fiat, goods or services.  I believe this will change once BTC is more widely-accepted in exchange for goods and services.  But for MSB purposes, BTC has its feet planted firmly in currency, and the entire money transmitter regulatory framework applies.  As to challenging this designation, well, where to start?  The bar for challenging an administrative rule is a very high one: the rule must be "arbitrary and capricious".  These rules don't strike me as such.  In any event, the cost of challenging the rules would likely top a million dollars for competent litigators in the field to bring such a case to completion.

For almost all of us, we've treated Bitcoin as a commodity rather than a currency for tax purposes - especially relevant because complying with tax regulations as a miner would be an enormous, practically unfeasible pain in the ass. Still, AFAIK nobody's really bringing this up. The implications of letting FinCEN and other bureaucracies call Bitcoin a currency seem pretty unexplored, and there are people just saying "it won't affect me, I'm in the UK" when the US has a tendency for its precedents/definitions to be adopted elsewhere. Do you think the Bitcoin community has under-reacted to the likely changes in definition of Bitcoin will bring, or is it appropriate just to wait until we're explicitly told by a government we're doing something wrong (IF we're doing something wrong)?

I think the regulators are really struggling with this issue.  If I had my way, the larger players in the BTC community would fund a competent industry group that would begin a dialogue with the appropriate policy makers.

[Jobe7]

I think the regulators are really struggling with this issue.  If I had my way, the larger players in the BTC community would fund a competent industry group that would begin a dialogue with the appropriate policy makers.

Bitcoin Foundation, not quite yet, but possibly soon (given that 'soon' is a undecided time period)

[MSantori]

I think the regulators are really struggling with this issue.  If I had my way, the larger players in the BTC community would fund a competent industry group that would begin a dialogue with the appropriate policy makers.

Bitcoin Foundation, not quite yet, but possibly soon (given that 'soon' is a undecided time period)

I've actually reached out to them, but haven't had much experience with them yet.  The foundation looks right up my alley.

[twobits]

Hey! Wanna play, uh... five-ish sometimes-loaded questions? (just as speculation, not legal advice)

Sure.

Am I wrong, or is federal FinCEN registration as a MSB not enough?

You are correct.

I am curious why it is required to get the license in all the states that require them.  Why does it not require a nexus like sales tax currently does as the Quill case decided?

[Bitco]

But for MSB purposes, BTC has its feet planted firmly in currency, and the entire money transmitter regulatory framework applies.  As to challenging this designation, well, where to start?  The bar for challenging an administrative rule is a very high one: the rule must be "arbitrary and capricious".  These rules don't strike me as such.  In any event, the cost of challenging the rules would likely top a million dollars for competent litigators in the field to bring such a case to completion.

What is your basis for this?  The definition of currency in 31 CFR 1010.100 clearly refers to legal tender.  Bitcoin is not legal tender in any country.

Are you supposing that a future change to the regulations could expand the definition of currency to include bitcoin, and then, at that point, someone might challenge that designation?

The definition of 'virtual currency' in the recent FinCEN guidance is not part of any law of regulation.  It's not really clear to me that this guidance has much legal weight, except possibly in relation to the scienter requirement of 18 USC section 1960.  If one follows the guidance, and is accused of breaking the law, they can argue that they did not knowingly do so.  Does the guidance have any applicability beyond that?

[MSantori]

But for MSB purposes, BTC has its feet planted firmly in currency, and the entire money transmitter regulatory framework applies.  As to challenging this designation, well, where to start?  The bar for challenging an administrative rule is a very high one: the rule must be "arbitrary and capricious".  These rules don't strike me as such.  In any event, the cost of challenging the rules would likely top a million dollars for competent litigators in the field to bring such a case to completion.

The definition of currency in 31 CFR 1010.100 clearly refers to legal tender.  Bitcoin is not legal tender in any country.

...18 USC section 1960.

I think that most of your post is on the right track.  Even in the portion above, you identified the correct provision (18 USC 1960).  Indeed, you've identified the provision that proscribes unlicensed money transmitting. But you haven't connected the definition of "currency" to that provision, or even identified why that that definition is relevant.  Let's take it step by step and we can get to an answer

[Bitco]

I think that most of your post is on the right track.  Even in the portion above, you identified the correct provision (18 USC 1960).  Indeed, you've identified the provision that proscribes unlicensed money transmitting. But you haven't connected the definition of "currency" to that provision, or even identified why that that definition is relevant.  Let's take it step by step and we can get to an answer

The prohibition of unlicensed money transmitting businesses is 18 USC § 1960.  This section makes reference to the registration requirements of 31 USC § 5330.  The definition of "money transmitting business" therein makes reference to the reporting requirements of 31 USC § 5313.

The MSB regulations are in 31 CFR 1010.  This part cites 31 USC 5311 et seq (among other sections) as its statutory authority.

Yes, this is all fairly convoluted.  It's certainly possible that I've missed something.

[Viceroy]

The mods evicted my OP from currency exchange and I've found myself here:

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