[ANN] Tangible Cryptography suspends Bitcoin related transaction.

[JoeChmoe]

Terrible news. TC is definitely an asset to the BTC community. Hopefully everything will work out for the best.

[fluxist]

The company has been given thirty days to provide written explanation on why our activity is exempt from licensing under current law. The commission has formally stated that unless exempt from licensing we must stop further activity until such time as we apply for and obtain a Money Transmitter license.

I see that Tangible Cryptography's MSB registration (#31000023734880), dated March 23, 2013, lists MSB Activities as "Mone transmitter".  
 - http://www.fincen.gov/financial_institutions/msb/msbstateselector.html

The types of activities to choose from include:

Money Services Business - The term "money services business" includes any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

(1) Currency dealer or exchanger.
(2) Check casher.
(3) Issuer of traveler's checks, money orders or stored value.
(4) Seller or redeemer of traveler's checks, money orders or stored value.
(5) Money transmitter.
(6) U.S. Postal Service.

- http://www.fincen.gov/whatsnew/html/LaunchNewMSBRegistrationSite.html

If Tangible Cryptography were to have wanted to choose something other than Money transmitter, there's nothing else that really applies.   And money transmitter isn't really correct either.

Bitcoins simply is a round peg that doesn't fit in any of the regulator's square holes.
 

Doesn't criterion 4, "Seller or redeemer of traveler's checks, money orders or stored value", pretty much fit the bill?

[crazylikeafox]

Well, the initial finding was wrong on its face.  The site doesn't sell or issue anything.  It buys Bitcoins for cash.  It's pretty clear that some other person or entity filed a complaint, either out of ignorance or malice, that contained a factually incorrect description of their business activities.  The state then took this complaint at face value, without investigation, despite asserting that it had conducted an "initial investigation".  Had someone during the "initial investigation" even visited the site, they would have discovered that they do not issue or sell anything.  This is akin to the state telling someone that they must stop buying things on eBay.

[ab8989]

Money Services Business
(4)  Seller or redeemer of traveler's checks, money orders or stored value.
(5) Money transmitter.

If Tangible Cryptography were to have wanted to choose something other than Money transmitter, there's nothing else that really applies.   And money transmitter isn't really correct either.
Bitcoins simply is a round peg that doesn't fit in any of the regulator's square holes.

Why a combination of (4) and (5) would not be pretty close?

[crazylikeafox]

Doesn't criterion 4, "Seller or redeemer of traveler's checks, money orders or stored value", pretty much fit the bill?

No.  Bitcoins have no "stored value".  There is no guarantee that a Bitcoin will be worth anything, ever, and there is no obligation on the part of any party to pay anything to a holder of a Bitcoin.  Like used collector stamps, they only have value because others will buy them (at least at the current time - it is clear that these actions are intended to chill the market by removing buyers from it).  

[TangibleCryptography]

Doesn't criterion 4, "Seller or redeemer of traveler's checks, money orders or stored value", pretty much fit the bill?

Our responses in this thread will be limited until the issue is resolved however FinCEN guidance in April 2013 clearly indicates no other category of MSB applies.  It is important to understand state law and federal law don't necessarily have the same definitions even for terms with the same "name".  Generally speaking the law will define a term and it has that meaning and only that meaning in the scope of that definition.  As we indicated in the response at the federal level however FinCEN has provided guidance that Bitcoins are not stored value and virtual currency does not fall under the definition of "currency dealer or exchanger".  FinCEN no longer uses the word "stored value" in regulations preferring instead the more inclusive "prepaid access" however some docs are still out of date so you may still see the older term. At the federal level the two terms can be considered synonymous.

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Providers and Sellers of Prepaid Access

            A person's acceptance and/or transmission of convertible virtual currency cannot be characterized as providing or selling prepaid access because prepaid access is limited to real currencies. 18

Dealers in Foreign Exchange

            A person must exchange the currency of two or more countries to be considered a dealer in foreign exchange.19 Virtual currency does not meet the criteria to be considered "currency" under the BSA, because it is not legal tender. Therefore, a person who accepts real currency in exchange for virtual currency, or vice versa, is not a dealer in foreign exchange under FinCEN's regulations.

[fluxist]

Doesn't criterion 4, "Seller or redeemer of traveler's checks, money orders or stored value", pretty much fit the bill?

Our responses in this thread will be limited until we get some resolution however it is important to understand state law and federal law don't necessarily have the same definitions even for terms with the same "name".  Generally speaking the law will define a term and it has that meaning and only that meaning in the scope of that definition. 

As we indicated in the response at the federal level however FinCEN has provided guidance that Bitcoins are not stored value and virtual currency does not fall under the definition of "currency dealer or exchanger".  FinCEN has changed the definition to "stored value" to be more inclusive of other prepaid products by using the term "prepaid access" however at the federal level "stored value" and "prepaid access" can be considered synonymous.

http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

Providers and Sellers of Prepaid Access

            A person's acceptance and/or transmission of convertible virtual currency cannot be characterized as providing or selling prepaid access because prepaid access is limited to real currencies. 18

Dealers in Foreign Exchange

            A person must exchange the currency of two or more countries to be considered a dealer in foreign exchange.19 Virtual currency does not meet the criteria to be considered "currency" under the BSA, because it is not legal tender. Therefore, a person who accepts real currency in exchange for virtual currency, or vice versa, is not a dealer in foreign exchange under FinCEN's regulations.

Ok. Fair argument.

[anexsia]

Speaking as a fellow Virginian and a customer, this is some bullshit. I hope they get their foot off your neck.

I also reside in Virginia and this thread comes as no surprise to me, the Commonwealth will fuck someone over hard for all kinds of dumb shit.

[Pale Phoenix]

I will be dumbfounded if this decision is not reversed. If these bad decisions are allowed to stand it will set a precedent for future bad decisions regarding bitcoin.

I agree. If it comes down to it, and we need to set up a defense fund I will be happy to donate.

Happy to donate as well, but I don't think it will go that far.

Most state money transmission laws are concerned primarily with protecting the public from people of low character running off with funds, as opposed to the Feds, who are interested in making sure no one moves a penny without "proper oversight." Once OP's attorney makes it clear that he is simply purchasing virtual goods, I bet he'll be right back to business.

The vile worm who made the complaint obviously struggles for a reason to exist. He should do the noble thing and reduce his oxygen consumption by 100%.

[Severian]

Most state money transmission laws are concerned primarily with protecting the public from people of low character running off with funds, as opposed to the Feds, who are interested in making sure no one moves a penny without "proper oversight." Once OP's attorney makes it clear that he is simply purchasing virtual goods, I bet he'll be right back to business.

This is the Commonwealth of Virginia, otherwise known as DC South. They're in lockstep with Federal regulators. If TC manages to outlawyer them, they'll find another reason to put the freeze on. TC has my undying respect for being open as long as he has been without coming into their sights.

You're more optimistic than I am but in my experience, once the Commonwealth has you in range they don't let go.

[JimCGSavings]

OK, total newb here, but the U.S. IS the land of suit/countersuit. Couldn't Tangible Cryptography take steps to protect itself and any investors by seeking legal redress from the Commonwealth of Virginia for any loss or possible loss of income due to interference with its business on the basis of such a vague charge? Go on the offensive! Fight back! (grin)

[Bitco]

Most state money transmission laws are concerned primarily with protecting the public from people of low character running off with funds, as opposed to the Feds, who are interested in making sure no one moves a penny without "proper oversight." Once OP's attorney makes it clear that he is simply purchasing virtual goods, I bet he'll be right back to business.

It could be a somewhat difficult case because of how broadly worded the Virginia law is.

"Money transmitter" means a person engaged in the business of money transmission.

"Money transmission" means receiving money or monetary value for transmission by wire, facsimile, electronic means or other means or selling or issuing stored value.

"Stored value" means monetary value that is evidenced by an electronic record.

"Monetary value" means a medium of exchange, whether or not redeemable in money.

[TangibleCryptography]

OK, total newb here, but the U.S. IS the land of suit/countersuit. Couldn't Tangible Cryptography take steps to protect itself and any investors by seeking legal redress from the Commonwealth of Virginia for any loss or possible loss of income due to interference with its business on the basis of such a vague charge? Go on the offensive! Fight back! (grin)

Simple answer is no.  The notice from the commonwealth only indicates we "may" be engaged unlicensed money transmission.  There is only a demand to cease "if" we are engaged in activity which requires licensure.  However it is prudent for us to stop at this time until we have clarity on the position of the government.  At this point it is our intent to avoid an adversarial situation which likely will be costly and time consuming and instead open a dialog with the commission as Bitcoin is an emergent technology and based on the letter we believe they have some significant misunderstandings on how this technology works.

[Severian]

based on the letter we believe they have some significant misunderstandings on how this technology works.

You are too polite.

He's a good businessman.

[rdponticelli]

based on the letter we believe they have some significant misunderstandings on how this technology works.

You are too polite.

He's a good businessman.

They don't even care how this technology works. Not in the slightest. They just want to take their cut and/or mainly to impose their restrictions onto it to continue their sovereignty over money... 

[counter]

Dang I was just about to use this site just been on the fence and now I can't.

I'm sorry to hear about this nonsense it's truly laughable how destructive the feds are.  It is good your taking this step by step and playing it safe as the feds are really good at picking on the little guy.  I will be following this thread as I'm very curious what will come of all this.  Hopefully the law prevails and leads to a smooth transition and getting back to business as usual.

[MPOE-PR]

you weren't operating anonymously...?? rofl what a joke

As they say on the Internets, sir, the joke is upon thyself.

[Aseras]

OK, total newb here, but the U.S. IS the land of suit/countersuit. Couldn't Tangible Cryptography take steps to protect itself and any investors by seeking legal redress from the Commonwealth of Virginia for any loss or possible loss of income due to interference with its business on the basis of such a vague charge? Go on the offensive! Fight back! (grin)

Simple answer is no.  The notice from the commonwealth only indicates we "may" be engaged unlicensed money transmission.  There is only a demand to cease "if" we are engaged in activity which requires licensure.  However it is prudent for us to stop at this time until we have clarity on the position of the government.  At this point it is our intent to avoid an adversarial situation which likely will be costly and time consuming and instead open a dialog with the commission as Bitcoin is an emergent technology and based on the letter we believe they have some significant misunderstandings on how this technology works.

wouldn't it just be easier to move to another state or jurisdiction?

[BCB]

While direction came from a state agency this is not a state issue.  Direction is clearly coming down from the federal level.  Almost all state will march in line.

[DeathAndTaxes]

wouldn't it just be easier to move to another state or jurisdiction?

It is something we are considering.  Understand though that would essentially be us conceding the issue to the state of VA and we would then need to enforce mechanisms to block VA residents from using our service.  It is utterly baffling that MSB/MT regulations at state levels haven't be challenged on interstate commerce grounds but we haven't found any case law to suggest they have.  Of course it likely is only time before some other states move to "protect" their residents as well.