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

[Shevek]

They bark, thus we ride.

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[kjlimo]

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) I'm thinking farmers get a different definition

2) Bitcoin is something new, we're just trying to shove it into our existing definitions first b/c that will be easier... otherwise, we need new rules for this new thing...

[kjlimo]

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

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

Hah, receiving a letter marked May 30th last week... sounds about right Post office!

[jgarzik]

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

And yet, pointedly, the question was not answered.

[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)

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?

Generalizations like "acts/used/properties like a currency" can apply to any commodity.  What does not apply to any commodity are the things that make a currency a Currency.  Per the Australian legal system, that'd be something tangible backing it.  Per most legal definitions I've come across, (synonym: banknote) that'd be a government's central bank.

So yeah, it's most certainly lacking what many would consider key properties of Currency.

[Rampion]

We can't deny that as foolish as it is, that letter is a nicely crafted piece of FUD

America is a specialist on that. I guess we can just react with laugher, irony and contempt.

[n8rwJeTt8TrrLKPa55eU]

Personally, I put the entire state of California on "Ignore" a long time ago.  I suggest everyone strive to do likewise.  Migratory trends evidence that the whole place is a lost cause, and there will be no return to sanity before its inevitable death by suicide.  We live on a large planet: move somewhere else, don't travel there, don't do business there.  Let the bureaucats suffer the full consequences of their greed and stupidity.

[melvster]

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

And yet, pointedly, the question was not answered.

Did you try following the link?  thinkcomp @ reddit ...

[DeathAndTaxes]

Generalizations like "acts/used/properties like a currency" can apply to any commodity.  What does not apply to any commodity are the things that make a currency a Currency.  Per the Australian legal system, that'd be something tangible backing it.  Per most legal definitions I've come across, (synonym: banknote) that'd be a government's central bank.

It is up to each country.  In the US, FinCEN laid their rational on how the regs that give them oversight over monetary value cover Bitcoin.  Now you can disagree but simply not calling Bitcoin a currency doesn't really have any merit.

If the state believes your activity is regulated (regardless of if you call Bitcoin "virtual carrots") you can:
a) ignore them and hope you can avoid legal action
b) ignore them and intentionally try to cause legal action to force a precedent
c) bypass them (write off the united state and focus on non-US clients)
d) comply

My point it ultimately what matters is what the STATE (each state independently) defines Bitcoin as.  You can call them anything you want but FinCEN (and other states) is regulated based on what Bitcoin DOES not what you NAME it. 

TL/DR: If Bitcoin is used "as monetary value", FinCEN intends to regulate it, regardless of what you call it.  Their authority (or lack thereof) comes from what Bitcoin DOES not what it is CALLED.

[burnside]

Generalizations like "acts/used/properties like a currency" can apply to any commodity.  What does not apply to any commodity are the things that make a currency a Currency.  Per the Australian legal system, that'd be something tangible backing it.  Per most legal definitions I've come across, (synonym: banknote) that'd be a government's central bank.

It is up to each country.  In the US, FinCEN laid their rational on how the regs that give them oversight over monetary value cover Bitcoin.  Now you can disagree but simply not calling Bitcoin a currency doesn't really have any merit.

If the state believes your activity is regulated (regardless of if you call Bitcoin "virtual carrots") you can:
a) ignore them and hope you can avoid legal action
b) ignore them and intentionally try to cause legal action to force a precedent
c) bypass them (write off the united state and focus on non-US clients)
d) comply

My point it ultimately what matters is what the STATE (each state independently) defines Bitcoin as.  You can call them anything you want but FinCEN (and other states) is regulated based on what Bitcoin DOES not what you NAME it. 

TL/DR: If Bitcoin is used "as monetary value", FinCEN intends to regulate it, regardless of what you call it.  Their authority (or lack thereof) comes from what Bitcoin DOES not what it is CALLED.

Totally agree with most of what you said.  It basically boils down to C or D if you value your time/livelihood.  I think the point I was trying to make earlier was that it doesn't make any sense to poke the giant just because we want to have a certain name on things.

I disagree with how much it matters what it is called.  In the legal landscape what you call it is everything and in terms of regulatory requirements, the difference between a "commodity" and a "currency" can be a pretty large stack of paperwork and a pretty big list of "can's and cannot's".

[DeathAndTaxes]

I disagree with how much it matters what it is called.  In the legal landscape what you call it is everything and in terms of regulatory requirements, the difference between a "commodity" and a "currency" can be a pretty large stack of paperwork and a pretty big list of "can's and cannot's".

Your missing the point.  Regulators don't ask YOU what your product is.  They will TELL YOU and then those list of choices above apply.  So if the Bitcoin Foundation called Bitcoins commodities, or virtual property, or holy carrots it would have absolutely no value under the law.  Regulators would say "Bitcoin is monetary value and subject to xzy".  They don't take what you chose to name it into consideration.

I mean do you also think that if you sold gambling products under a different name, say "true random number commodity contracts" it would magically be exempt from regulations/prohibitions on gambling.

Start calling Bitcoins "magical carrots" if you helps you sleep better at night, it won't exempt Bitcoin from anything the state says it is regulated by, and it wouldn't even if you did it from day one.  If Bitcoin was NOT designed to be a currency, say it was designed to "fight spam" however defacto people realized it made a good currency and started using it as such the same regs would apply.  The state is the one with the guns and monopoly on violence.  They TELL (not ASK) you what laws apply.  If you are lucky they don't do it in a carpicious or retroactive fashion.

[oakpacific]

I disagree with how much it matters what it is called.  In the legal landscape what you call it is everything and in terms of regulatory requirements, the difference between a "commodity" and a "currency" can be a pretty large stack of paperwork and a pretty big list of "can's and cannot's".

Your missing the point.  Regulators don't ask YOU what your product is.  They will TELL YOU and then those list of choices above apply.  So if the Bitcoin Foundation called Bitcoins commodities, or virtual property, or holy carrots it would have absolutely no value under the law.  Regulators would say "Bitcoin is monetary value and subject to xzy".  They don't take what you chose to name it into consideration.

I mean do you also think that if you sold gambling products under a different name, say "true random number commodity contracts" it would magically be exempt from regulations/prohibitions on gambling.

Start calling Bitcoins "magical carrots" it won't exempt Bitcoin from anything the state says it is regulated by.  The state is the one with the guns and monopoly on violence.  They TELL (not ASK) you what laws apply.  If you are lucky they don't do it in a carpicious or retroactive fashion.   Once they TELL you then you can decide if you want to play or work around that.

That's interesting cause if the regulators want to bring things to court, there should be at least a slight hint of ambiguity in the legal definition of currency, but there isn't, it looks almost as if the original legislators were so concerned that they can not be clear enough about what's currency, that they go to great length to elaborate, repetitively, exhaustively, that it must be something issued by a government.

[meowmeowbrowncow]

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holy carrots

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Question answered.  Inform the government.

[burnside]

I disagree with how much it matters what it is called.  In the legal landscape what you call it is everything and in terms of regulatory requirements, the difference between a "commodity" and a "currency" can be a pretty large stack of paperwork and a pretty big list of "can's and cannot's".

Your missing the point.  Regulators don't ask YOU what your product is.  They will TELL YOU and then those list of choices above apply.  So if the Bitcoin Foundation called Bitcoins commodities, or virtual property, or holy carrots it would have absolutely no value under the law.  Regulators would say "Bitcoin is monetary value and subject to xzy".  They don't take what you chose to name it into consideration.

I mean do you also think that if you sold gambling products under a different name, say "true random number commodity contracts" it would magically be exempt from regulations/prohibitions on gambling.

Start calling Bitcoins "magical carrots" it won't exempt Bitcoin from anything the state says it is regulated by.  The state is the one with the guns and monopoly on violence.  They TELL (not ASK) you what laws apply.  If you are lucky they don't do it in a carpicious or retroactive fashion.   Once they TELL you then you can decide if you want to play or work around that.

I think we're going to have to agree to disagree.

How you market your "product" can have a HUGE impact on how it gets regulated.  (*cough*  *cough*  syrup.)  Go ahead slap a label on it "meth4U" and tell those guys to market it to the meth addicts and see how far they get.  And what do you think is going to happen when Ruger starts a new ad campaign "A kill a day keeps the good guys at bay"?  Seriously.  How you pitch your product says everything about how you intend for it to be used, and when it has unintended uses, how you pitched it is going to make a huge difference in how you're dealt with.

Cheers.

[DeathAndTaxes]

I disagree with how much it matters what it is called.  In the legal landscape what you call it is everything and in terms of regulatory requirements, the difference between a "commodity" and a "currency" can be a pretty large stack of paperwork and a pretty big list of "can's and cannot's".

Your missing the point.  Regulators don't ask YOU what your product is.  They will TELL YOU and then those list of choices above apply.  So if the Bitcoin Foundation called Bitcoins commodities, or virtual property, or holy carrots it would have absolutely no value under the law.  Regulators would say "Bitcoin is monetary value and subject to xzy".  They don't take what you chose to name it into consideration.

I mean do you also think that if you sold gambling products under a different name, say "true random number commodity contracts" it would magically be exempt from regulations/prohibitions on gambling.

Start calling Bitcoins "magical carrots" it won't exempt Bitcoin from anything the state says it is regulated by.  The state is the one with the guns and monopoly on violence.  They TELL (not ASK) you what laws apply.  If you are lucky they don't do it in a carpicious or retroactive fashion.   Once they TELL you then you can decide if you want to play or work around that.

That's interesting cause if the regulators want to bring things to court, there should be at least a slight hint of ambiguity in the legal definition of currency, but there isn't, it looks almost as if the original legislators were so concerned that they can not be clear enough about what's currency, that they go to great length to elaborate, repetitively, exhaustively, that it must be something issued by a government.

Paraphrasing. FinCEN has said virtual currencies are not "real currencies" under the law.  Lucky for them (and not so lucky for everyone else) the law is very broad based and gives them the authority to regulate a lot of "non-currencies" too.

FinCEN's regulations define currency (also referred to as "real" currency) as "the coin and paper money of the United States or of any other country that is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance."3 In contrast to real currency, "virtual" currency is a medium of exchange that operates like a currency

...

FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means."

...

The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA.

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

Simple version like I said names don't matter.  FinCEN is saying virtual currencies, or virtual commodities, or virtual holy carrots are "other value that substitutes for currency".  If you disagree well FinCEN is laying out their legal case here so you can expect to eventually see them in court.

Personally I believe their analysis is a little weak but I am not going to risk my livelihood and freedom on their ability to convince a judge they are right.  The point is no matter what you call it FinCEN believes Bitcoin is a "substitute for currency".  Unless you convince a judge they are incorrect it meets they have the ability to regulate Bitcoin exchangers.

[burnside]

Simple version like I said names don't matter.  FinCEN is saying virtual currencies, or virtual commodities, or virtual holy carrots are "other value that substitutes for currency".  If you disagree well FinCEN is laying out their legal case here so you can expect to eventually see them in court.

Personally I believe their analysis is a little weak but I am not going to risk my livelihood and freedom on their ability to convince a judge they are right.  The point is no matter what you call it FinCEN believes Bitcoin is a "substitute for currency".  Unless you convince a judge they are incorrect it meets they have the ability to regulate Bitcoin exchangers.

I completely agree.  I just don't think it makes much sense to provoke 'em or give them ammo.  If you force a confrontation it won't be long before bitcoin is branded a tool only criminals use and they'll be out to make examples of a few randomly selected public bitcoin users.

[ShadowOfHarbringer]

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holy carrots

...

Question answered.  Inform the government.

[sergio]

The state of California has no excuse of being ignorant of the law
 According to the constitution only gold and silver are money, and that's the law anything else is an scam.
Most Bitcoin businesses should ban together as sue the government for violating the constitution, harrasment, and corruption on behalf the banking industry.
The Bitcoin foundation in crearly not a money transmitter business and claiming otherwiseit is a clear case of harassment.
Having a competing currency is perfecly legal but since the dollar has a debt of 17 trillian vs 0 for Btc, and based on the market the BTC is killing the dollar, the gov is acting as a bully by intimidation and force on behalf of the Banks.
I would recommend for now to support the foundation, and the creation of p2p exchanges,  and to evaluate if zerocoin is a good idea or not. Finally support businesses that accept Bitcoins. For some of us Bitcoin represents more that just a currency it represents freedom.

[worldinacoin]

Problem is laws are man made and man defined.   I guess Bitcoins stepped on the wrong toes.

[prophetx]

Does this mean that guys like opencoin/ripple will be getting the same notice?