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Author Topic: How are TradeHill, Bitcoin7, Britcoin, MtGox etcetera licensed/regulated?  (Read 1052 times)
pjce
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June 22, 2011, 08:53:04 PM
 #1

Hi,

I can't wrap my head around how exactly the bitcoin exchanges are licensed/regulated in their respective home countries.

Given that all of them accept money from account holders they must at the very least file as an "exchange" in their home countries, because otherwise all deposits hitting their bank account would be considered revenue for their company (and thus taxable), right?

I've been reading around and below is my understanding of the market right now:

1) Mt Gox
Licensed in Japan, bank accounts around the world but not licensed outside Japan

2) TradeHill
Chilean company, no special financial exchange license?

3) Britcoin
UK company, no special financial exchange license but applying under UK regulation

4) Bitcoin7
No idea, seems amateuristic given that prices in USD and EUR stay exactly the same in their website so I fear the worst

5) Others I'm forgetting?

Could people who understand the situation better please chime in so we can make this thread an overview of the market situation from a legal point of view?

Thanks!
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June 22, 2011, 09:02:33 PM
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I find the concept of registering bitcoin businesses for local regulation and taxation makes me shudder.

Want to chill a new market? Force  businesses to register under regulations that don't specifically describe the business being undertaken.

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bitcoinconnection
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June 22, 2011, 09:02:54 PM
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This interesting, you wanted to it these market can be regulated?









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June 22, 2011, 09:04:26 PM
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5) Others I'm forgetting?

Could people who understand the situation better please chime in so we can make this thread an overview of the market situation from a legal point of view?

  ExchangeBitcoins.com just recently launched
  The about page shows "pending registration as a currency exchange business with the US Department of the Treasury"
  - https://www.exchangebitcoins.com/about
 
Other exchanges:
 -  http://en.bitcoin.it/wiki/Category:Exchanges

pjce
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June 22, 2011, 10:00:56 PM
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I don't WANT to have btc exchanges registered, but it's currently the only way I see how the market can mature.

Think about it: Those exchanges carry accept millions of USD from users. You need a bank account for that. The tax man will see that as revenue without costs (i.e. pure profit) unless you register as an entity that holds other people's money i.e. a currency exchange.

Edit: And there is no way escaping the tax man since in most countries all transactions above 10K or so are communicated to the authorities.

Edit2: Maybe using just Dwolla you can keep it off the books totally, but again I think the future is in expanding the market to the masses.
davout
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June 22, 2011, 10:31:18 PM
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I don't WANT to have btc exchanges registered

contradicts

but again I think the future is in expanding the market to the masses.

Exchanges need to be registered, I'm running one and the reason I'm not currently accepting EUR wires is that I want to feel safe, and not vulnerable to legal hazard.

My opinion is that since bitcoin is not legally recognized as a currency (in France at least) it should either be considered as :
 - a security (fungible asset)
 - a generic service (me selling bitcoins to you = me providing the service of signing a transaction we mutually see as acceptable)

AFAIK, the only way to legally run a bitcoin exchange is to buy coins from people and then sell them to other people (in a single transaction).
So the exchange would have to act as a counter-party to users.

It's not feasible in France though. The reason is that if I buy a 1 BTC for 1 EUR from a user, I'll have to immediately resell it adding VAT, which in France is 19.6%.

So you'd be buying one BTC from me at 1.20 EUR even though I bought it at 1 EUR (and I wouldn't be making any profit at all).

pjce
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June 23, 2011, 12:30:19 AM
 #7

It doesn't contradict. In my ideal libertarian world, there wouldn't be the current statist quo to worry about. In the world we live in, there is, hence I think registration/licensing will be needed to expand beyond tech savvy people.

Thanks a lot for the info about your exchange. It makes a lot of sense. However, I remember MtGox having a bank account in France (and AFAIK a license in Japan). So MtGox is doing illegal stuff?

I'm going to talk with an international fiscalist in the coming weeks (next week a local Belgian one, later an international one). Maybe the exchange can be run from a VAT and tax free paradise somewhere (Belize, Antigua, ...)
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June 23, 2011, 08:54:25 AM
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Thanks a lot for the info about your exchange. It makes a lot of sense. However, I remember MtGox having a bank account in France (and AFAIK a license in Japan). So MtGox is doing illegal stuff?
According to MT the french bank account belongs to a company that simply forwards payments and bills the japanese legal entity 2% of the amount for this service, so I don't really think it's illegal at all.

Info about the french company is here.

Looked it up a month ago didn't see anything weird, but as I'm looking today I notice the "Société radiée le 29/10/2008" mention, which basically means "closed since 29/10/2008". Really weird, I downloaded the associated legal documents, I'll find them and double check.

I'm going to talk with an international fiscalist in the coming weeks (next week a local Belgian one, later an international one). Maybe the exchange can be run from a VAT and tax free paradise somewhere (Belize, Antigua, ...)
That's not really a problem, the real problem is to get a bank in a respectable country to open you a bank account. If you incorporate in Belize, good luck finding a bank that'll open you a bank account in France, and if you open a bank account in Belize, good luck finding people that will accept to wire small amounts for huge banking fees, and good luck finding people that'll transfer large amounts to a tax haven using a bank wire (and don't care if they bring attention to them doing that.)

The problem is definitely non-trivial Smiley


DiamBTC
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June 23, 2011, 09:24:38 AM
 #9

Does someone have info about rules that you must follow to have the same licence as MTGox ?

Must they comply to some security rules or certified agains standards ?

For me, there API has been writen by a student and his very very poorly designed. He does not respect the basic concept of security ...
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June 23, 2011, 09:27:11 AM
 #10

Licensed in Japan, bank accounts around the world but not licensed outside Japan
BTW they *are* registered as companies where they have accounts, their US entity is called "Mutum Sigillum" and is based in Delaware.

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