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

[ProfMac]

Interesting that a law firm crawls out of their fucking hole so soon after the FinCEN guidance.

Involved in cryptocurrency for a while you say?

You are just a benevolent community member, right?

What were the key words that convinced your law firm to accept bitcoin?

What a sad circus regulation and the law are.

Go away criminal moron.  Yea, let's all live in in anarchy   

I once lived in FQ/NOLA just off Bourbon street.  Every day, many thousands of people go there wanting to be lawless.  They are surprised when they are surrounded by people who are acting lawless.

[Viceroy]

I bet they are.  I once lived in a college town... then I grew up.

[ProfMac]

I bet they are.  I once lived in a college town... then I grew up.

I always live in college towns.  They are dynamic and hopeful, though with chaos and angst around the corners.  But you would expect that attitude from me, I suppose.  I even get respected as an elder.

But yes, anarchy is not a valid social plan.  Civilization is very nice.  I like it when cars don't menace me when I am walking across an intersection.  I like it that I can move across the country and still speak the same language.  I will keep good records and pay proper taxes on my bitcoin earnings.  I will administer my wallet so that many of my transactions have a good audit trail.

None of that is anti-bitcoin, and none of that is anti-individualism.

[Viceroy]

I should have clarified that it was a large state school.  University towns are awesome, but big state school towns are unlivable... for me at least. I prefer peace and quiet to drunken madness.  

And like our lawyer friend here who now takes bitcoin I am happy to live in a world where reason and bitcoin co-exist and thugs get arrested and tried when they kill unarmed and harmless young hoodie wearing kids.  

* Viceroy looks forward to the conviction, not *another* riot

[CoinEntropy]

Is a day trader who uses an exchange that doesn't realize any USD and leaves their coin/fiat all in the exchange until they're ready to withdraw required to register as an MSB?

[MSantori]

Is a day trader who uses an exchange that doesn't realize any USD and leaves their coin/fiat all in the exchange until they're ready to withdraw required to register as an MSB?

Hi CoinEntropy.  I'll try to give a fact pattern.  Johnny lives in NYC and has a day job.  At night, on breaks and on weekends, he trades crypto in high frequencies and volumes.  It is all for his own account, and all for personal investment purposes.  He does not accept anyone else's money, has no "customers" and uses a (fictional) fully-compliant exchange.  Is Johnny an MSB under the BSA as interpreted by FinCEN's March 2013 guidance?

Unfortunately, there is no explicit exemption from the MSB classification for using a registered and licensed exchange.  This is one of the many curiosities to be found in the guidance, most of which result from the regulations themselves not accounting for digital currency (round peg-square hole).  Nonetheless, there is a threshold requirement for classification as an MSB under the March guidance: operating as a business.  There is no black and white definition that I'm aware of as to what constitutes a business. There are only factors. Here, in my mind, the factors weigh against classification as a business.  Johnny doesn't trade on behalf of any customers - only himself.  He has no investors.  He collects no fees for his services. In fact, he does have a job, and it isn't this.  He doesn't even trade during work hours.  Counting against this is the high volume and frequency of his trades.  It's not a slam dunk, and a court could disagree, but I would be comfortable arguing that Johnny is not operating as a business, and therefore not an MSB.  Hope that helps!

[CoinEntropy]

Is a day trader who uses an exchange that doesn't realize any USD and leaves their coin/fiat all in the exchange until they're ready to withdraw required to register as an MSB?

Hi CoinEntropy.  I'll try to give a fact pattern.  Johnny lives in NYC and has a day job.  At night, on breaks and on weekends, he trades crypto in high frequencies and volumes.  It is all for his own account, and all for personal investment purposes.  He does not accept anyone else's money, has no "customers" and uses a (fictional) fully-compliant exchange.  Is Johnny an MSB under the BSA as interpreted by FinCEN's March 2013 guidance?

Unfortunately, there is no explicit exemption from the MSB classification for using a registered and licensed exchange.  This is one of the many curiosities to be found in the guidance, most of which result from the regulations themselves not accounting for digital currency (round peg-square hole).  Nonetheless, there is a threshold requirement for classification as an MSB under the March guidance: operating as a business.  There is no black and white definition that I'm aware of as to what constitutes a business. There are only factors. Here, in my mind, the factors weigh against classification as a business.  Johnny doesn't trade on behalf of any customers - only himself.  He has no investors.  He collects no fees for his services. In fact, he does have a job, and it isn't this.  He doesn't even trade during work hours.  Counting against this is the high volume and frequency of his trades.  It's not a slam dunk, and a court could disagree, but I would be comfortable arguing that Johnny is not operating as a business, and therefore not an MSB.  Hope that helps!

We need more people like you in this world of crypto. Thank you.

[CoinEntropy]

Would, in this hypothetical scenario, this private day-trading investor be in best hands with a tax lawyer rather than a "business" lawyer?

[MSantori]

Would, in this hypothetical scenario, this private day-trading investor be in best hands with a tax lawyer rather than a "business" lawyer?

Well, if Johnny was concerned with his tax liability for those trades, my sense is he would go to a CPA first, and then a tax lawyer if that was necessary.

[CoinEntropy]

Would, in this hypothetical scenario, this private day-trading investor be in best hands with a tax lawyer rather than a "business" lawyer?

Well, if Johnny was concerned with his tax liability for those trades, my sense is he would go to a CPA first, and then a tax lawyer if that was necessary.

How much of an issue would it be if there can be found no definitive proof of buying BTC? Say Johnny bought MoneyPaks and threw away the receipt (cashloaded cards that have instant redeem-ability) to trade for someone's bitcoins? Months pass and he ends up with 10x as much BTC as he originally bought, but his original buy cannot be proved. '

Scenario 2: What if Johnny, instead of "cashing out," uses a service, such as amagimetals, to buy equivalent gold/silver directly for his bitcoin. Is this "realization?" I recall a quote from some government agency about virtual goods to real goods not needing to be... something.

[MSantori]

How much of an issue would it be if there can be found no definitive proof of buying BTC? Say Johnny bought MoneyPaks and threw away the receipt (cashloaded cards that have instant redeem-ability) to trade for someone's bitcoins? Months pass and he ends up with 10x as much BTC as he originally bought, but his original buy cannot be proved. '

Sorry, Entropy. That's not something I can help with, and certainly not on a public forum!

Scenario 2: What if Johnny, instead of "cashing out," uses a service, such as amagimetals, to buy equivalent gold/silver directly for his bitcoin. Is this "realization?" I recall a quote from some government agency about virtual goods to real goods not needing to be... something.

The tax professionals I work with are investigating something similar to that right now.  The question is whether trading one commodity for a dissimilar commodity is a taxable event. I'm not a tax lawyer, so I don't have anything intelligent to say about that.

[CoinEntropy]

How much of an issue would it be if there can be found no definitive proof of buying BTC? Say Johnny bought MoneyPaks and threw away the receipt (cashloaded cards that have instant redeem-ability) to trade for someone's bitcoins? Months pass and he ends up with 10x as much BTC as he originally bought, but his original buy cannot be proved. '

Sorry, Entropy. That's not something I can help with, and certainly not on a public forum!

Scenario 2: What if Johnny, instead of "cashing out," uses a service, such as amagimetals, to buy equivalent gold/silver directly for his bitcoin. Is this "realization?" I recall a quote from some government agency about virtual goods to real goods not needing to be... something.

The tax professionals I work with are investigating something similar to that right now.  The question is whether trading one commodity for a dissimilar commodity is a taxable event. I'm not a tax lawyer, so I don't have anything intelligent to say about that.

“A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN’s regulations. Such activity, in and of itself, does not fit within the definition of “money transmission services” and therefore is not subject to FinCEN’s registration, reporting, and recordkeeping regulations for MSBs”

[Jazkal]

“A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN’s regulations. Such activity, in and of itself, does not fit within the definition of “money transmission services” and therefore is not subject to FinCEN’s registration, reporting, and recordkeeping regulations for MSBs”

This guidance is only relevant for determining if you qualify as a MSB, this doesn't have anything to do with the IRS and what they consider a taxable event. Apples and Oranges.

[NewLiberty]

Scenario 2: What if Johnny, instead of "cashing out," uses a service, such as amagimetals, to buy equivalent gold/silver directly for his bitcoin. Is this "realization?" I recall a quote from some government agency about virtual goods to real goods not needing to be... something.

The IRS reporting requirements of precious metals varies with both the type of metal, quantity, and it's form according to the commodity futures trading commission (CFTC).
Oddly enough, if your precious metals purchases is something traded on an ETF, you probably have an IRS reporting requirement.

http://www.coinworld.com/Articles/ViewArticle/what-coins-are-reportable

There is no ETF for New Liberty Dollars, so all my customers are safe here.
Some but not all of Amagi's are also not IRS reportable depending on quantity.

Another gotcha: If you have had US$10K of "value" in a foreign account which you control (even if it is only Bitcoin).  There is a very serious reporting requirement, for which failure to report could cost you the whole account, or even more depending on how long you fail to report.
http://bitcoinmagazine.com/real-compliance-getting-your-way-by-giving-in/

"Control" of the account is measured by whether you can get the value out of the account while on foreign soil without going through a US financial entity.  This is a weird and not very well known requirement.  It is likely to be the single strongest weapon the IRS has to take bitcoins from US taxpayers who remain unaware of it.

----------
The foregoing is not to be construed as legal or tax advice.  Do your own research, and hire your own advisers upon which you may rely.

[kjj]

Scenario 2: What if Johnny, instead of "cashing out," uses a service, such as amagimetals, to buy equivalent gold/silver directly for his bitcoin. Is this "realization?" I recall a quote from some government agency about virtual goods to real goods not needing to be... something.

The IRS reporting requirements of precious metals varies with both the type of metal, quantity, and it's form according to the commodity futures trading commission (CFTC).
Oddly enough, if your precious metals purchases is something traded on an ETF, you probably have an IRS reporting requirement.

http://www.coinworld.com/Articles/ViewArticle/what-coins-are-reportable

There is no ETF for New Liberty Dollars, so all my customers are safe here.
Some but not all of Amagi's are also not IRS reportable depending on quantity.

Another gotcha: If you have had US$10K of "value" in a foreign account which you control (even if it is only Bitcoin).  There is a very serious reporting requirement, for which failure to report could cost you the whole account, or even more depending on how long you fail to report.
http://bitcoinmagazine.com/real-compliance-getting-your-way-by-giving-in/

"Control" of the account is measured by whether you can get the value out of the account while on foreign soil without going through a US financial entity.  This is a weird and not very well known requirement.  It is likely to be the single strongest weapon the IRS has to take bitcoins from US taxpayers who remain unaware of it.

----------
The foregoing is not to be construed as legal or tax advice.  Do your own research, and hire your own advisers upon which you may rely.

1. In order to determine whether or not the FBAR is required, all of the following must apply:
A. The filer is a U.S. person; (or person equivalent, partnership, corp, etc)
B. The U.S. person has a financial account(s);
C. The financial account is in a foreign country;
D. The U.S. person has a financial interest in the account or signature or other authority over the foreign financial account; and, (you have the password)
E. The aggregate amount(s) in the account(s) valued in dollars exceed $10,000 at any time during the calendar year.

Seems like a stretch.

[champbronc2]

and here's the kicker:

...Any other person engaged as a business in the transfer of funds.

So, to complete the thought: someone is a money transmitter subject to 18 USC 1960 whenever that person is engaged in the business of the transfer of funds.  The definition of currency is certainly relevant, but it is not necessary to the analysis.

Okay so far, but we're not done.  Section 1010.100(w) defines "funds transfer" as follows:

The series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order. Funds transfers governed by the Electronic Fund Transfer Act of 1978 (Title XX, Pub. L. 95-630, 92 Stat. 3728, 15 U.S.C. 1693, et seq. ), as well as any other funds transfers that are made through an automated clearinghouse, an automated teller machine, or a point-of-sale system, are excluded from this definition.

Note that ACH payments (eg Dwolla) are excluded from this definition.  And bitcoin transactions are not "completed by acceptance by the beneficiary's bank".

For any particular defendant, this statutory analysis is only the beginning.  There are additional definitions that might be applicable to your particular business, and a competent attorney will be able to analyze the case law to determine just how this very general road map might apply to you.

All of this leaves me wondering just what it is that Mutum Sigillum allegedly did wrong.  Clear as mud, eh?

Am I reading this right, or does that mean if you transfer BTC solely via the BTC network, it really isn't transfer?

edit: lol wishful thinking

[MSantori]

Just a quick note: I will be at the Inside Bitcoins conference here in NYC tomorrow.  If you see me, please tap me on the shoulder and say hello!

[MSantori]

Just a quick note: I will be at the Inside Bitcoins conference here in NYC tomorrow.  If you see me, please tap me on the shoulder and say hello!

Thank you to everyone who came up to me at the conference and introduced yourselves.  I was really overwhelmed by the outpouring of support and kindness.  Someone actually came up and said "you're Marco Santori?  Like, the Marco Santori from Bitcointalk?! I've learned a lot from your posts."  I was completely floored. Thank you all so much. I'm happy to do what I can to help out here.

I hope to see you all at the next Inside Bitcoins conference on December 11 in Las Vegas.  I believe I'll be one of the speakers this time around, giving a 30-45 minute talk.

[Bitcopia]

Just a quick note: I will be at the Inside Bitcoins conference here in NYC tomorrow.  If you see me, please tap me on the shoulder and say hello!

Thank you to everyone who came up to me at the conference and introduced yourselves.  I was really overwhelmed by the outpouring of support and kindness.  Someone actually came up and said "you're Marco Santori?  Like, the Marco Santori from Bitcointalk?! I've learned a lot from your posts."  I was completely floored. Thank you all so much. I'm happy to do what I can to help out here.

I hope to see you all at the next Inside Bitcoins conference on December 11 in Las Vegas.  I believe I'll be one of the speakers this time around, giving a 30-45 minute talk.

Great to see you at the conference. It's definitely nice to have an attorney so active in the community. There aren't enough of you. I'm looking forward to seeing you speak in December!

[thezerg]

what's your interpretation of the buttonwood in-person exchanges?  Clearly, if you just show up and buy that's ok.  But what if you are willing to buy/sell a spread?  Not as a primary source of income, etc... but just to help disseminate the currency?