LocalBitcoins.com & Legal Exposure

[secattorney]

appears there was another indictment based on activity buying and selling on LocalBitcoins.com

https://www.cryptocoinsnews.com/localbitcoins-trader-charged-for-running-unlicensed-bitcoin-exchange/

By my count, I believe this is the 4th significant indictment based solely on buying/selling on LB.

My thoughts on the legality of being active on LB are here: https://youtu.be/EcauBvTN7fs and here https://youtu.be/aO6oIqeWVpQ

I believe, and I welcome any comments, is that there exists a grey area with an unknown threshold concerning what is significant enough activity to constitute acting as an unlicensed "Money Service Business" - which makes any appreciable amount of activity fraught with risk

at@tracyfirm.com

[darkangel11]

I'm not a US citizen and reading about those cases makes me amazed and baffled at the same time. How is it that the US government doesn't give clear guidelines and at the same time abuses the fact that these guidelines don't exist and punishes people for doing something that should be completely legal and in fact is legal in most countries. I could sell cryptos in the street here in the EU and the only thing I'd have to apply for is a street peddling license.

[avikz]

The problem here was not with bitcoin. But the issue is with the amount he has exchanged. The article clearly states that the person had sold a huge amount of bitcoins without having a proper license of running a money exchange business. So I believe that person was trying to evade tax and any kind of legal formalities. While he used to have a cap of $2500 per trade, the total number of trades and amount went outside the legal limit of a resident which the person should have taken care long back.

Also there are flaws from US government as well. They should release a well-written guidelines for the crypto currency use in their country. I believe the majority of the crypto users don't want to break the law, but without a proper guideline, what can they do? The government must first think about it.

[illyiller]

I believe, and I welcome any comments, is that there exists a grey area with an unknown threshold concerning what is significant enough activity to constitute acting as an unlicensed "Money Service Business" - which makes any appreciable amount of activity fraught with risk

Indeed, the threshold seems unclear, and increasingly it appears lower and lower. The last indictment of the Michigan LocalBitcoins trader saw him charged for < $150,000 in trading volume (rather, $56,000 that they definitively can link to BTC sales). That's a far cry from earlier indictments where people were trading for millions of dollars in value.

It really feels shitty that the authorities are throwing people in prison for this when there exists no clear guidance for what constitutes a "Money Service Business" vis-a-vis cryptocurrency trading. I think it's intentional on the part of the feds, as a general deterrent against P2P trading, because it's so hard for them to monitor on a large scale.