2013-06-23 Forbes - Bitcoin Foundation Receives Cease And Desist Order From Ca

[ktttn]

Ill be honest, they are really starting to clamp down hard in the U.S and is making me nervous.

With this exception of this California action, everything else in the US has been completely consistent with existing US law.

I am speaking of the recent developments with the IRS and FinCen along with this as well as the numerous services surrounding bitcoin that have gone down.

As am I.  Recent developments with the IRS and FinCEN are entirely consistent with US law as it has existed for years.  Ditto Mutum Sigillium seizure warrant. Tax and MSB implications were directly addressed years ago in my State of the Coin 2011 presentation, among others.  If you operate outside the law in your jurisdiction, the obvious result occurs... eventually.

Then I must be confused with the state of things then. I was under the impression that the recent IRS (or was it FinCen??) ruling/statement was that mining bitcoins will/may require an MSB/MT licensure.

I could be wrong and hope I am, I am not trolling I truly want to know.

My understanding is that if you mine bitcoins and then "use" them to purchase goods, no license necessary.

If you mine, and then "sell" them for fiat currency, then you need to be registered as a MSB.  However, if you go to an exchange, then I think that puts the responsibility on the exchange.  At least, let's hope so

I've done a bit of research and everywhere I see it defined, legal dictionary or otherwise, Currency (synonym: banknote) seems to directly state, or infer the backing or endorsement of a government.  As such, Bitcoin is a commodity, and until I can walk into Bank of America and trade it for USD, like I can with my Mexican Pesos, Canadian Twoonies, or my British Pounds, I'm not going to consider it any more a currency than Joe Redneck would, my Peer on the Jury.  

Try telling a farmer he has to register as an MSB/MT to sell the carrots (commodity) he grew. (mined)  Or try telling a rancher he has to register as an MSB/MT to sell the calf (commodity) his cow just birthed. (mined)  You have to be pretty confused to think that creating/growing/birthing/mining a commodity then selling it somehow equates to being in the business of Money transmission.  (Money with a capital M, per Joe Redneck, my peer on the Jury.)

Now exchanging it as your sole business, I think that's a different ballgame, but mining it seems pretty cut and dry to me.

What am I missing?  And why does everyone seem to want Bitcoin to be a currency when it's far better off legally with an official definition in the realm of general commodity?  (oil, cattle, tulip bulbs)  No country in the world is going to be particularly receptive legally or otherwise to direct competition with their local Currency.  (with a capital C)

Cheers.

+1, however I believe FinCen claims jurisdiction over "replacements for money, money-like things" or something to that effect.

[dave111223]

What am I missing?  And why does everyone seem to want Bitcoin to be a currency when it's far better off legally with an official definition in the realm of general commodity?  (oil, cattle, tulip bulbs)  No country in the world is going to be particularly receptive legally or otherwise to direct competition with their local Currency.  (with a capital C)

Cheers.

Because that's where it is headed eventually (a currency) so I'd prefer that we (society) just concretely define it as a currency and then everyone knows where they stand and can build based on that.

Right now no one knows where Bitcoin stands, it could be a commodity, a currency, a meaningless play thing...?  Once it is clearly defined then you can clearly work within that framework, without building a business and then finding out that the definition has changed on a whim and your business model is no longer viable.

[caveden]

Ill be honest, they are really starting to clamp down hard in the U.S and is making me nervous.

With this exception of this California action, everything else in the US has been completely consistent with existing US law.

Garzik, every totalitarian government acts totally in the scope of its laws too. Remarkably, the more totalitarian, the vaguer the laws tend to be.

[burnside]

Ill be honest, they are really starting to clamp down hard in the U.S and is making me nervous.

With this exception of this California action, everything else in the US has been completely consistent with existing US law.

I am speaking of the recent developments with the IRS and FinCen along with this as well as the numerous services surrounding bitcoin that have gone down.

As am I.  Recent developments with the IRS and FinCEN are entirely consistent with US law as it has existed for years.  Ditto Mutum Sigillium seizure warrant. Tax and MSB implications were directly addressed years ago in my State of the Coin 2011 presentation, among others.  If you operate outside the law in your jurisdiction, the obvious result occurs... eventually.

Then I must be confused with the state of things then. I was under the impression that the recent IRS (or was it FinCen??) ruling/statement was that mining bitcoins will/may require an MSB/MT licensure.

I could be wrong and hope I am, I am not trolling I truly want to know.

My understanding is that if you mine bitcoins and then "use" them to purchase goods, no license necessary.

If you mine, and then "sell" them for fiat currency, then you need to be registered as a MSB.  However, if you go to an exchange, then I think that puts the responsibility on the exchange.  At least, let's hope so

I've done a bit of research and everywhere I see it defined, legal dictionary or otherwise, Currency (synonym: banknote) seems to directly state, or infer the backing or endorsement of a government.  As such, Bitcoin is a commodity, and until I can walk into Bank of America and trade it for USD, like I can with my Mexican Pesos, Canadian Twoonies, or my British Pounds, I'm not going to consider it any more a currency than Joe Redneck would, my Peer on the Jury.  

Try telling a farmer he has to register as an MSB/MT to sell the carrots (commodity) he grew. (mined)  Or try telling a rancher he has to register as an MSB/MT to sell the calf (commodity) his cow just birthed. (mined)  You have to be pretty confused to think that creating/growing/birthing/mining a commodity then selling it somehow equates to being in the business of Money transmission.  (Money with a capital M, per Joe Redneck, my peer on the Jury.)

Now exchanging it as your sole business, I think that's a different ballgame, but mining it seems pretty cut and dry to me.

What am I missing?  And why does everyone seem to want Bitcoin to be a currency when it's far better off legally with an official definition in the realm of general commodity?  (oil, cattle, tulip bulbs)  No country in the world is going to be particularly receptive legally or otherwise to direct competition with their local Currency.  (with a capital C)

Cheers.

+1, however I believe FinCen claims jurisdiction over "replacements for money, money-like things" or something to that effect.

To a kid, that'd be pokemon cards and M&M's.  To a gamer, WoW gold and GameStop points.  To a woman 25-55, it's facebook credits, starbucks points, and airline miles.  Sounds to me like it's another one of those "three felonies a day" situations.  "We have jurisdiction over anything you care about."  

[burnside]

What am I missing?  And why does everyone seem to want Bitcoin to be a currency when it's far better off legally with an official definition in the realm of general commodity?  (oil, cattle, tulip bulbs)  No country in the world is going to be particularly receptive legally or otherwise to direct competition with their local Currency.  (with a capital C)

Cheers.

Because that's where it is headed eventually (a currency) so I'd prefer that we (society) just concretely define it as a currency and then everyone knows where they stand and can build based on that.

Right now no one knows where Bitcoin stands, it could be a commodity, a currency, a meaningless play thing...?  Once it is clearly defined then you can clearly work within that framework, without building a business and then finding out that the definition has changed on a whim and your business model is no longer viable.

It's not like it's not definable as a generic commodity.  And you want it defined explicitly by the US Gov't as a Currency *why*?  What are the benefits of that over the current definition?

So it's not a Currency... and per most accepted definitions it isn't one until it gets some official gov't backing somewhere...  That's not a bad thing.  Blindly marching toward a confrontation with the US Gov't because you want it to be a Currency (banknote, legal tender, physical coin) is only going to get you "Liberty Dollar'd".  Unlike Pinocchio who so badly wanted to be a real boy, there's no fairy godmother guaranteeing Bitcoin it's happy ending.

[oakpacific]

The government is confused, nothing to see here.

After reading the C and D letter, I am actually convinced that it's more of the boilerplate type that orgs like RIAA/MPAA throws at everybody "just in case", no substantial evidence of breaking any law/regulation is provided in the letter, neither any particular activity involving the Foundation that is considered illegal.

[edd]

The government is confused, nothing to see here.

After reading the C and D letter, I am actually convinced that it's more of the boilerplate type that orgs like RIAA/MPAA throws at everybody "just in case", no substantial evidence of breaking any law/regulation is provided in the letter, neither any particular activity involving the Foundation that is considered illegal.

I agree. I have a feeling someone saw footage of the Bitcoin ATM at the conference and proceeded to mail these letters to anyone they could find with "Bitcoin" in their name.

[melvster]

The government is confused, nothing to see here.

After reading the C and D letter, I am actually convinced that it's more of the boilerplate type that orgs like RIAA/MPAA throws at everybody "just in case", no substantial evidence of breaking any law/regulation is provided in the letter, neither any particular activity involving the Foundation that is considered illegal.

Could be any number of reasons, let's not jump to conclusions.

One thing that came up in a previous thread is the the foundation lists Satoshi as one of the founders, whereas it seems to be misleading.

The foundation could easily have been engaged in activity that it should not. 

I'm not saying California is correct either tho...

Let's find out the details of the case.

[edd]

This is big. Why is this news only leaking out now 

According to Patrick Murck, the Bitcoin Foundation only received the letter last week.

[melvster]

This is big. Why is this news only leaking out now 

According to Patrick Murck, the Bitcoin Foundation only received the letter last week.

Did anyone consider that 'transmitting' money to their employees without the correct paperwork could trigger a cease and desist?

[oakpacific]

The government is confused, nothing to see here.

After reading the C and D letter, I am actually convinced that it's more of the boilerplate type that orgs like RIAA/MPAA throws at everybody "just in case", no substantial evidence of breaking any law/regulation is provided in the letter, neither any particular activity involving the Foundation that is considered illegal.

Could be any number of reasons, let's not jump to conclusions.

One thing that came up in a previous thread is the the foundation lists Satoshi as one of the founders, whereas it seems to be misleading.

The foundation could easily have been engaged in activity that it should not.  

I'm not saying California is correct either tho...

Let's find out the details of the case.

Had it really been the case that the foundation was engaged in unauthorized activities, I would expect the wording of the letter to be more along the line of"Hey there, don't move, gotcha!" Instead it has nothing specific/of substance in it, how can you ask someone to "cease and desist", without telling him what to stop doing?

[rikur]

What some people here do not realize (and yes I mean you) is that by standing up for scammers you end up just as fucked as they are. Find a better hobby.

Strong words coming from a scammer who just hasn't pulled the plug yet.

[carlos]

Did anyone consider that 'transmitting' money to their employees without the correct paperwork could trigger a cease and desist?

First of all "paying wage" to own employees (in fiat/bitcoin/bananas/oranges) is not "money transmitting service".

Proper paperwork is a must of course even with bananas payment to prove that its wage.

[melvster]

Did anyone consider that 'transmitting' money to their employees without the correct paperwork could trigger a cease and desist?

First of all "paying wage" to own employees (in fiat/bitcoin/bananas/oranges) is not "money transmitting service".

Proper paperwork is a must of course even with bananas payment.

OK thanks ... some comment in reddit:

"(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business..."

The question then becomes whether the Bitcoin Foundation has any "control" or "direction" over its members and/or affiliates, who are most clearly in violation of the law under section (b). These words are vague. It could be argued that it does.

There is an extremely high chance that people will go to jail over this whether people here think it's stupid or not.

[jgarzik]

OK thanks ... some comment in reddit:

"(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business..."

The question then becomes whether the Bitcoin Foundation has any "control" or "direction" over its members and/or affiliates, who are most clearly in violation of the law under section (b). These words are vague. It could be argued that it does.

There is an extremely high chance that people will go to jail over this whether people here think it's stupid or not.

Who, precisely, wrote that comment?  And is that author presently suing a bunch of bitcoin companies?

[DeathAndTaxes]

What am I missing?  And why does everyone seem to want Bitcoin to be a currency when it's far better off legally with an official definition in the realm of general commodity?  (oil, cattle, tulip bulbs)  No country in the world is going to be particularly receptive legally or otherwise to direct competition with their local Currency.  (with a capital C)

What you want, or I want, or even the Bitcoin Foundation wants is utterly irrelivent.  You can call Bitcoin anything you want but governments around the world aren't that stupid.  If it "acts like a currency" and is "used like a currency" and has "currency like properties" what do you think THEY are going to classify it as.

I mean it would be like saying this Marijuana.  Take "bath salts" as an example.  It wasn't marketed as a drug, wasn't sold as a drug, it didn't provide instructions on how to use it as a drug however people started using it like a drug and what did various governments classify it as?  A controlled substance or a household product?

The only way xCoin doesn't get classified as a currency by various governments is if it lacks the properties of currency.  So something which isn't fungible, liquid, accepted as a medium or exchange, and doesn't store value probably won't be classified as a currency, then again why would you want to use that?

[DeathAndTaxes]

Had it really been the case that the foundation was engaged in unauthorized activities, I would expect the wording of the letter to be more along the line of"Hey there, don't move, gotcha!" Instead it has nothing specific/of substance in it, how can you ask someone to "cease and desist", without telling him what to stop doing?

The joys of governmental interference and regulatory overhead.  It is highly improbable that the foundation meets any regulatory requirements for oversight as a MSB anymore than a trade organization for prepaid credit cards does.  In case it isn't clear they don't. 

Still the state has unalateral power to take everything you own, everything you will own, your good name, and even your freedom and/or life so stupid, pointless, massively overreaching it doesn't matter you need to drop everything and respond.

Of course there is no consequence for the state getting it wrong.  If the state had to pay costs + 20% + $5,000 punitive penalty for any improper notice there would be a lot less improper notices.  Then again it costs the state absolutely nothing.  Hell they could send a cease and desist to every human being in the country and all it would cost is the taxpayers of CA slightly more taxes.

[NewLiberty]

Compliance regulation is also a way of creating barriers to entry to a market.  If releasing an alt-coin invites a bunch of letters such as this from all over, there might be a few less alt-coins.  One of the ways to slow innovation.

[melvster]

OK thanks ... some comment in reddit:

"(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business..."

The question then becomes whether the Bitcoin Foundation has any "control" or "direction" over its members and/or affiliates, who are most clearly in violation of the law under section (b). These words are vague. It could be argued that it does.

There is an extremely high chance that people will go to jail over this whether people here think it's stupid or not.

Who, precisely, wrote that comment?  And is that author presently suing a bunch of bitcoin companies?

I posted the full text in a new thread...

https://bitcointalk.org/index.php?topic=242113.0

[melvster]

Of course there is no consequence for the state getting it wrong.  If the state had to pay costs + 20% + $5,000 punitive penalty for any improper notice there would be a lot less improper notices.  Then again it costs the state absolutely nothing.  Hell they could send a cease and desist to every human being in the country and all it would cost is the taxpayers of CA slightly more taxes.

The people pay the costs.  Now we need to decide whether that's a good use of our funds ... and have that view represented.  That's how democracy works.