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

[Saman]

Hi,

I am a bit confused about the "all 50 states" assumption. I understand that this is state law and that a US business might or might not need to register in all 50 states. But for a non US business as MtGox - they would have to apply for licenses in all 50 states? What if they have a bank account in one state and clients from all 50 states ACH or wire money to the account. Is accepting payments from the other 49 states considered "doing business" there?

PS: Great to have you here!

[MSantori]

Hi,

I am a bit confused about the "all 50 states" assumption. I understand that this is state law and that a US business might or might not need to register in all 50 states. But for a non US business as MtGox - they would have to apply for licenses in all 50 states? What if they have a bank account in one state and clients from all 50 states ACH or wire money to the account. Is accepting payments from the other 49 states considered "doing business" there?

PS: Great to have you here!

Thanks!

Many state regulators have explicitly stated that a transmitter is subject to their laws if the transmitter solicits or services their residents.  The location of the bank account isn't determinative.  Other states are expected to follow suit.

[JonSnow]

What MSantori has posted is pretty much in line with what my attorney has said as well.  Since I can't afford the MT licensing, I've had no choice but to dissolve my bitcoin-selling business, in spite of being fully registered with FinCEN.  Sad times. 

[MSantori]

What MSantori has posted is pretty much in line with what my attorney has said as well.  Since I can't afford the MT licensing, I've had no choice but to dissolve my bitcoin-selling business, in spite of being fully registered with FinCEN.  Sad times.  

Are you sure that your business actually requires licensing under the relevant state laws?  One of the services I can provide (Spam Alert!) is analyzing your business closely under any or all of the states and determining whether you really do require licensing.  Your business (whatever it is) likely does not require licensing in every state.

One of the ways that a new business can find success is doing a "rollout" by offering services to customers in foreign countries and ten or fifteen "safe states" in which it would not require a license.  It develops an operating history, revenue, cachet, etc in those states, and then rolls out into the next group of states when it can afford the license for those states.  Also, by then, many states will probably have given more guidance on BTC businesses.

Entrepreneurs can make money because they think big.  But if there's one thing I've learned representing them over the years, it's that the ones who actually do make money don't forget how to think small, too.

In my opinion, that's the path to profit.

[MSantori]

JonSnow, are you talking about CryptoCurrent?  If all you did was exchange BTC for USD, I'm surprised you didn't look into a "safe state" rollout.

[Saman]

....But for a non US business as MtGox - they would have to apply for licenses in all 50 states?...
PS: Great to have you here!

Many state regulators have explicitly stated that a transmitter is subject to their laws if the transmitter solicits or services their residents.  The location of the bank account isn't relevant.  Other states are expected to follow suit.

I looked through some of the states rules and procedures to obtain licenses - all I saw demand bonds and presence in the state. So this means that any MtGox would have to set up 50 local branches, one in each state and have them obtain a license?

Is that how.... say Paypal... operates?

-SM

PS: Would you mind to mention some of the states that do not demand a license? The one you mentioned under "small rollout"...

[Bitco]

Is that how.... say Paypal... operates?

Yeah, pretty much.  See https://www.paypal-media.com/state_licenses.cfm

PS: Would you mind to mention some of the states that do not demand a license? The one you mentioned under "small rollout"...

AFAIK, Montana and South Carolina do not require licenses for money transmitters.

Some other states (eg New Mexico, Pennsylvania) only regulate negotiable instruments such as money orders, and not electronic transfers.

Other states have broader laws, but still only apply to a third-party business holding the money, so sending bitcoins between two parties isn't regulated.

It really depends on what you're planning to do, and the exact wording of the laws.

[MSantori]

It really depends on what you're planning to do, and the exact wording of the laws.

Bingo, Bitco.

[ktttn]

How illegal could this possibly be? Any comment appreciated.
https://bitcointalk.org/index.php?topic=223930.msg2354682#msg2354682

http://peopleslibrary.wordpress.com/2013/04/09/media-round-up-ows-v-bloomberg-settlement/
I'm beginning to work on obtaining consensus from folks involved in the Occupy Wall Street People's Free Library about converting the USD won from the recent settlement into BTC in a shared wallet.

If you have a BTC offer for what may turn out to be a lump sum of around $47,000, please post ITT.
The BTC is likely to be donated to organizations of the librarians' choosing.

If you have advice about how to go about doing any of this, please share. I for one, am new to this.

I will post updates as the internal conversation develops.

To be clear, I do not officialy represent the opinions and decisions of the OWSL and I will not be handling the exchange or providing escrow. The purpose of this thread is to network, gather information about the process, gauge the enthusiasm of potential buyers, and inform the btc community about the possibility of this move. I am acting on my own accord to facilitate communication.
Anyone interested in how the OWSL won this money, or other related subjects should ask away

[MSantori]

Why do you think it might be illegal?

[ktttn]

Why do you think it might be illegal?

Liability?
Federal reserve notes are frightening.
Paranoia. Needing perspective check.
Mabye its obviously illegal in tons of ways I cant tell.
How might one make it out to be illegal?

[MSantori]

If you're asking "Is it illegal to convert USD to BTC when not operating as a business?" I think the answer is clearly no.  If you're asking "Is it illegal to donate BTC to an organization?" I think the answer is still no.

I'd need more information to give a less vacuous response.

[solex]

One of the ways that a new business can find success is doing a "rollout" by offering services to customers in foreign countries and ten or fifteen "safe states"..

Good suggestion, but I am intrigued. Which are the 10 or 15 safe states, and is there a ranking list which can be maintained publicly on this forum for BTC-trading businesses to be aware of? It might help new start-ups to get going knowing they have lower red tape hurdles in their jurisdiction.

Or, would such a list be info (professional advice) which needs paying for...?

[MSantori]

One of the ways that a new business can find success is doing a "rollout" by offering services to customers in foreign countries and ten or fifteen "safe states"..

Good suggestion, but I am intrigued. Which are the 10 or 15 safe states, and is there a ranking list which can be maintained publicly on this forum for BTC-trading businesses to be aware of? It might help new start-ups to get going knowing they have lower red tape hurdles in their jurisdiction.

Or, would such a list be info (professional advice) which needs paying for...?

Thanks!

Yes, such info would need paying for, but not (just) because I'm a greedy capitalist-type.  It's because the question of a "safe state" is not one that can be answered generally.  It is a highly fact-specific inquiry.  I would need a very detailed rundown of your business model to apply each state's law to that model.  For (almost) every business model, there are some states wherein that model does not trigger the licensing requirements, some states in which it might, and maybe even some states in which it certainly does.

Bitcoin businesses are new, unwieldy creatures for most states' law, and even a close analysis by a professional will yield, at best, a risk assessment.  There are no absolute answers in this area of the law.

[solex]

Understood. That makes a lot of sense.

[Viceroy]

You are up to 10-15 states that you'd roll out in?  I'm almost ready to take you up on that free initial consult...

Tell me:

What would it cost to become licensed as a money transmitter in:

Cali, NY, PA, TX and i dunno...  WA

I value your service but I need to know what it realistically costs.

[MSantori]

The 10-15 state number is a hypothetical number for a hypothetical business.  I have no way of knowing which -if any- states are low, medium and high risk for any particular business without knowing what that business is.

Feel free to reach out to my privately if you want to share your business details greater confidence.

[Viceroy]

I'm wondering what it might cost for a hypothetical business, hypothetically, to operate as an exchange in Cali, NY, PA, TX and perhaps WA. ..  

What does it cost for an exchange like gox to become licensed as a money transmitter in the biggest five states in the union? (In ballpark non-committal I don't intend to hold anyone to the cost kind of "back of the napkin" ballpark price type pricing sorts of terms).

[MSantori]

I'm wondering what it might cost for a hypothetical business, hypothetically, to operate as an exchange in Cali, NY, PA, TX and perhaps WA. ..  

What does it cost for an exchange like gox to become licensed as a money transmitter in the biggest five states in the union? (In ballpark non-committal I don't intend to hold anyone to the cost kind of "back of the napkin" ballpark price type pricing sorts of terms).

Sorry if I'm not being clear, Viceroy.  The costs depends greatly upon the business.  Taking New York, for example the cost of registration as a money transmitter could include:

$3,000: "investigation" fee paid to the state
$5,000-$55,000: bonding fee paid to bonding agent yearly (depends largely upon credit and prior dealings)
$Varies: Fingerprinting and background checks for control persons
$Varies: Auditing financial statements (unless a new business)
$Varies: State fees and legal fees associated with creating a legal entity and associated agreements (varies depending upon business structure)
$Varies greatly: Legal fees associated with developing agency policies and pro forma agency contract, preparation of organizational charts, review of specimens and other exhibits submitted by the applicant, development and review of AML, KYC, physical and network security, assembly and review of application, etc.

I know that a "ballpark" estimate would be helpful.  There's just no such thing.  There are some fixed costs and there are costs that vary greatly.  Unfortunately, the ones that vary greatly are the high ones. I can't stress enough how fact-dependent this pricing would be.  I will only say this: to take on the obligations of money transmission, you should be well-funded.  Most tend to have access to OPM.

[Viceroy]

Most tend to have access to OPM.

You make me almost want to go to tradeFortress and ask for an illegal bitcoin business funding loan.