FinCEN's definition of a Money Exchanger

[mr_random]

I am not spreading misinformation, I am quoting the definition from the finCEN guidance document. You're making yourself look very silly.

[dwolfman]

I think the one thing I'm taking out of this is the following:

An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency

Note the highlighted part.

Since I'm just an individual, not running a business, I figure that a lot of those really don't apply to me.  Yes I mine bitcoins, but there's no way I could be running a business off of only 0.01 BTC per day. 

So I figure FINCEN won't be bothered by what I'm doing. 

[crumbs]

I think the one thing I'm taking out of this is the following:

An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency

Note the highlighted part.

Since I'm just an individual, not running a business, I figure that a lot of those really don't apply to me.  Yes I mine bitcoins, but there's no way I could be running a business off of only 0.01 BTC per day. 

So I figure FINCEN won't be bothered by what I'm doing. 

By that logic, a car dealership is not a business if it's not making enough money.  Neither is a factory -- that's a company many individuals running a business with a hobby in common. 

[AliceWonder]

I am not spreading misinformation, I am quoting the definition from the finCEN guidance document. You're making yourself look very silly.

I think he's right. That's one of the things I hate about law is that you basically have to hire a lawyer to understand what it means, and even then you will get differing opinions, so it is absurd that common people are suppose to follow the law when the laws are written in such a way that common people have great difficulty understanding them.

It's a con to force us to need to buy expensive legal services so the 1% can continue taking money from those of us who work and it is one of the things I despise about this country (and lawyers, though not all are bad, don't want to stereotype them all).

But I think he's right.

[DeathAndTaxes]

I think the one thing I'm taking out of this is the following:

An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency

Note the highlighted part.

Since I'm just an individual, not running a business, I figure that a lot of those really don't apply to me.

Yes there is an exception for persons that are engaged in the activity infrequently and not for profit.  Of course those terms are rather open and vague but some people have the misconception that if you don't form a corporation you must not be a business.  If you are exchanging virtual currency for real currency for profit and frequently you are a business.  It doesn't matter if you don't have a business checking account, or office, or legal docs.  By default any individual engaged in business is a sole proprietorship.  No filling necessary.

Now how that related to miners who sell their coins.  Well who knows FinCEN guidelines are kinda nonsensical on that issue. I can't see the intent being that every miner who exchanges their mined coins for USD registers as a MSB but by the letter of guidance that is what they say.  My guess is even FinCEN doesn't know what they are trying to say.

[buyer]

not for profit

I do not believe "not for profit" is the same as (not "engaged in business").  There are plenty of non-profit and not-for-profit entities who are "engaged in business".  There are also many for-profit companies who are losing money and not "profitting" but again they are "engaged in business".

I wonder if there may be some exception for "sole proprietors" but you are probably right that the Department of Treasury has only begun to consider bitcoin at all.

[DeathAndTaxes]

not for profit

I do not believe "not for profit" is the same as (not "engaged in business").  There are plenty of non-profit and not-for-profit entities who are "engaged in business".  There are also many for-profit companies who are losing money and not "profitting" but again they are "engaged in business".

( Limitation. For the purposes of this section, the term “money services business” shall not include:

(i) A bank or foreign bank;

(ii) A person registered with, and functionally regulated or examined by, the SEC or the CFTC, or a foreign financial agency that engages in financial activities that, if conducted in the United States, would require the foreign financial agency to be registered with the SEC or CFTC; or

(iii) A natural person who engages in an activity identified in paragraphs (ff)(1) through (ff)(5) of this section on an infrequent basis and not for gain or profit.

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=57b923ddd7f27fbedc8afb57c6f8e605&rgn=div8&view=text&node=31:3.1.6.1.2.1.3.1&idno=31

If a business is losing money is still "for profit".  "For profit" is based on intent.  Some business ventures never even break even that doesn't make then

The exception requires three things:
a) a natural person (so no "non-profit corporation" for example)
b) not for profit or gain
c) infrequent basis

I wonder if there may be some exception for "sole proprietors" but you are probably right that the Department of Treasury has only begun to consider bitcoin at all.

There are no sole prop exceptions for any class of MSB.  The only difference between a sole prop, corporation, and partnership is the structure of ownership.  What purpose would it serve to except one business over another merely by how it is owned.  Take PayPal which is a MSB.  The same PayPal, same business model, same everything except it was owned by one person.  Suddenly it is exempt?  I have never seen any regulation at any level of government which treats a business differently based on the structure of ownership.  Once again what public good is served?

The reverse is often true.  MOST regulations use the word "person" and imply that the "person" can either be a natural person or a legal construct like a corporation.

(ff) Money services business. A person wherever located doing business , whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States.

Corporations, partnerships, limited liability companies, and foundations are "persons" (hence the term corporate personhood) under the law.  The law doesn't need to specifically name these ownership structures they are implied in "person".  When regulations only apply to "human persons" they often will use language to indicate that such as "natural person".

[Bitco]

What you say is "completely wrong" is absolutely right.  There are only 6 types of MSBs.  No more, no less.  They all have exact definitions in the eCFR.  When registering as a MSB you must select one or more of the following six types.  You can't select none, you can't write in a new type.  All MSBs must be one these six.   

(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.

The law doesn't allow any other type of MSB.

Oh really?  Show me where in the BSA it defines "stored value" or "prepaid access".  It's not there.  These are just new categories of money transmitting businesses that FinCEN added to the regulations.  In 2011, they removed "stored value" and added "prepaid access".

FinCEN can't write new law.

No, but they can write new regulations.  However, they didn't, so they're not really following proper procedure by coming up with a new definition of "virtual currency" in a guidance document.

[DeathAndTaxes]

What you say is "completely wrong" is absolutely right.  There are only 6 types of MSBs.  No more, no less.  They all have exact definitions in the eCFR.  When registering as a MSB you must select one or more of the following six types.  You can't select none, you can't write in a new type.  All MSBs must be one these six.  

(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.

The law doesn't allow any other type of MSB.

Oh really?  Show me where in the BSA it defines "stored value" or "prepaid access".  It's not there.  These are just new categories of money transmitting businesses that FinCEN added to the regulations.  In 2011, they removed "stored value" and added "prepaid access".

The above aren't money transmitting businesses.  Money transmitter is a money transmitting business.  The BSA gives FinCEN the authority to consider the following financial institutions.  

(2) “financial institution” means—
(A) an insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813 (h)));
(B) a commercial bank or trust company;
(C) a private banker;
(D) an agency or branch of a foreign bank in the United States;
(E) any credit union;
(F) a thrift institution;
(G) a broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
(H) a broker or dealer in securities or commodities;
(I) an investment banker or investment company;
(J) a currency exchange;
(K) an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, or similar instruments;
(L) an operator of a credit card system;
(M) an insurance company;
(N) a dealer in precious metals, stones, or jewels;
(O) a pawnbroker;
(P) a loan or finance company;
(Q) a travel agency;
(R) a licensed sender of money or any other person who engages as a business in the transmission of funds, including any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or internationally outside of the conventional financial institutions system;
(S) a telegraph company;
(T) a business engaged in vehicle sales, including automobile, airplane, and boat sales;
(U) persons involved in real estate closings and settlements;
(V) the United States Postal Service;
(W) an agency of the United States Government or of a State or local government carrying out a duty or power of a business described in this paragraph;
(X) a casino, gambling casino, or gaming establishment with an annual gaming revenue of more than $1,000,000
(Y) any business or agency which engages in any activity which the Secretary of the Treasury determines, by regulation, to be an activity which is similar to, related to, or a substitute for any activity in which any business described in this paragraph is authorized to engage; or
(Z) any other business designated by the Secretary whose cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters.

http://www.law.cornell.edu/uscode/text/31/5312

FinCEN added stored value and later expanded it to prepaid access under the authority that the Secretary of the Treasury determined that "gift cards" were similar to one of the other categories.  IIRC it was "(K) an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, or similar instruments".  However even that is subject to public input and review.  FinCEN didn't do that with Bitcoin they simply deemed "virtual currency broker/exchanger" = "money transmitter" which is just nonsense.


http://www.govtrack.us/congress/bills/111/hr2893


Still that wasn't really the point I should have said regs not laws. The eCFR and related forms, registrations, reporting, etc has no reference to "virtual currency exchanger".  There are only the 6 types of MSBs listed above.  Contrary to the view of another poster, you couldn't register as a "virtual currency exchanger" even if you wanted to.

[Bitco]

The above aren't money transmitting businesses.  Money transmitter is a money transmitting business.  The BSA gives FinCEN the authority to consider the following financial institutions.

but the BSA does not give FinCEN the authority to require MSBs to register.  It only requires money transmitting businesses to register.  So in requiring MSBs to register, FinCEN is actually claiming that all 6 types of MSB are money transmitting businesses that are required to register under section 5330.  Really.

[DeathAndTaxes]

The above aren't money transmitting businesses.  Money transmitter is a money transmitting business.  The BSA gives FinCEN the authority to consider the following financial institutions.

but the BSA does not give FinCEN the authority to require MSBs to register.  It only requires money transmitting businesses to register.  So in requiring MSBs to register, FinCEN is actually claiming that all 6 types of MSB are money transmitting businesses that are required to register under section 5330.  Really.

If you are saying in a round about way that FinCEN has overstepped their regulatory authority well you will get no argument from me.  However unless you have seven figures and a willingness to fight them out in court it really is academic.

[adpinbr]

Gift cards are not an exchange of currency.

Gift Cards = Stored Value Cards and therefore are regulated by FinCEN

"(3) Issuer of traveler's checks, money orders, or stored value. An issuer of traveler's checks, money orders, or, stored value (other than a person who does not issue such checks or money orders or stored value in an amount greater than $1,000 in currency or monetary or other instruments to any person on any day in one or more transactions). "

So if I sell bitcoins on gift cards but less than 1000 per person per day I don't have to deal with bureaucracy ?

[DeathAndTaxes]

So if I sell bitcoins on gift cards but less than 1000 per person per day I don't have to deal with bureaucracy ?

Possibly however the phrase "bitcoins on gift cards" is unclear.  Can you better describe exactly what will be happening?

i.e. "I will do X, the other buyer will do Y".

[TheButterZone]

Funded private key under tamper-evident cover, corresponding BTC address & denomination on front?

[adpinbr]

Yes I would be selling a funded private key. Take for example cassasius. If he were to sell his 1 BTC coin in USD, he could sell his coins for the 1.3 BTC exchange rate (ATM 140$), and claim that the he charges 140 per piece of physical metal, meanwhile the BTC is a gift. If legally necessary the coin could be funded with BTC at a later date (lets say after you bought the coin at a store, go home and send me an email with your public key), that way you paid 140 for the coin and the extra BTC is not considered "consideration" because it was not on the card at the time of purchase. Is this feasible and legal?

[DeathAndTaxes]

Yes I would be selling a funded private key. Take for example cassasius. If he were to sell his 1 BTC coin in USD, he could sell his coins for the 1.3 BTC exchange rate (ATM 140$), and claim that the he charges 140 per piece of physical metal, meanwhile the BTC is a gift. If legally necessary the coin could be funded with BTC at a later date (lets say after you bought the coin at a store, go home and send me an email with your public key), that way you paid 140 for the coin and the extra BTC is not considered "consideration" because it was not on the card at the time of purchase. Is this feasible and legal?

No need for such weak legal foolery (which any court would see through anyways).  FinCEN has already stated Bitcoins are not stored value (prepaid value).  Period.  If you are exchanging Bitcoins for another form of Bitcoins there is no "exchanging" going on.

Now if you want to sell BTC for USD then regardless of if you send them as on chain transactions, "physical Bitcoins", or private keys written by hand on the back of a napkin FinCEN says you are a "money transmitter". 

The law isn't a videogame, you can enter a cheat code and bypass the law.  If your intent is to sell BTC for USD or vice versa then any weak attemtps to obfuscate it ("I am selling this paperclip for $140 and it includes 1 BTC as a free gift") has no legal merit.  I mean stop for a second if that worked as a legal strategy then why wouldn't drug dealers be "paper clip dealers" and each sale includes some free drugs.   Granted possession is still a crime but it is significantly lower penalty than distribution.

[adpinbr]

Yes I would be selling a funded private key. Take for example cassasius. If he were to sell his 1 BTC coin in USD, he could sell his coins for the 1.3 BTC exchange rate (ATM 140$), and claim that the he charges 140 per piece of physical metal, meanwhile the BTC is a gift. If legally necessary the coin could be funded with BTC at a later date (lets say after you bought the coin at a store, go home and send me an email with your public key), that way you paid 140 for the coin and the extra BTC is not considered "consideration" because it was not on the card at the time of purchase. Is this feasible and legal?

No need for such weak legal foolery (which any court would see through anyways).  FinCEN has already stated Bitcoins are not stored value (prepaid value).  Period.  If you are exchanging Bitcoins for another form of Bitcoins there is no "exchanging" going on.

Now if you want to sell BTC for USD then regardless of if you send them as on chain transactions, "physical Bitcoins", or private keys written by hand on the back of a napkin FinCEN says you are a "money transmitter". 

The law isn't a videogame, you can enter a cheat code and bypass the law.  If your intent is to sell BTC for USD or vice versa then any weak attemtps to obfuscate it ("I am selling this paperclip for $140 and it includes 1 BTC as a free gift") has no legal merit.  I mean stop for a second if that worked as a legal strategy then why wouldn't drug dealers be "paper clip dealers" and each sale includes some free drugs.   Granted possession is still a crime but it is significantly lower penalty than distribution.

No money, No honey:(
So how does someone do business in the states without shelling out so much cash? this is crushing my entrepreneurial vibe. I heard of BTC global offering a legal umbrella.I basically explained the elements of what I want to do above Any help about how to go about my business legally would be appreciated!!

[crumbs]

No money, No honey:(
So how does someone do business in the states without shelling out so much cash? this is crushing my entrepreneurial vibe. I heard of BTC global offering a legal umbrella.I basically explained the elements of what I want to do above Any help about how to go about my business legally would be appreciated!!

There are a few threads here on BTC Global.  They sound really solid -- an address in Uruguay & pre-IPO share auction is their unicorn blood.