Bitcoin Foundation receives cease and desist order from California

[darkmule]

FinCEN's March 18 guidance specifically said virtual currencies are not prepaid access.

I believe FinCEN is right on this and any regulators saying otherwise are blowing smoke, or simply don't know what they're talking about.  BTC has no guaranteed cash value.  It is a thing that has value because people will pay for it or accept it as payment, but unlike a prepaid card, sort of the definitive example, no corporation or government backs up the value.

Not to say that it's beyond regulation, but stored value is a particularly poor fit.

[1714911969]

1714911969

[1714911969]

1714911969

[DeathAndTaxes]

The real meat in this letter is under Section C for "stored value." The Bitcoin Foundation says that Bitcoin is not stored value. This directly contradicts U.S. Department of Treasury FinCEN statements which say that the reason why Bitcoin operators need money transmitter licenses (or MSB licenses) is because BTC is stored value.

Not sure where you got that idea.  Stored value issuers are MSBs but stored value issuers are NOT money transmitter under federal law (SV issuer aka "prepaid access" is one type of MSB entity and MT is another).

FinCEN specifically said Bitcoin exchangers are MT because they accept Bitcoins which are "other value that substitutes for currency"
FinCEN also specifically said Bitcoin exchangers are NOT issuers of prepaid access (stored value) because those require "real currencies".

An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations, unless a limitation to or exemption from the definition applies to the person.10 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.

...

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

18 This is true even if the person holds the value accepted for a period of time before transmitting some or all of that value at the direction of the person from whom the value was originally accepted. FinCEN's regulations define "prepaid access" as "access to funds or the value of funds that have been paid in advance and can be retrieved or transferred at some point in the future through an electronic device or vehicle, such as a card, code, electronic serial number, mobile identification number, or personal identification number." 31 CFR § 1010.100(ww). Thus, "prepaid access" under FinCEN's regulations is limited to "access to funds or the value of funds." If FinCEN had intended prepaid access to cover funds denominated in a virtual currency or something else that substitutes for real currency, it would have used language in the definition of prepaid access like that in the definition of money transmission, which expressly includes the acceptance and transmission of "other value that substitutes for currency." 31 CFR § 1010.100(ff)(5)(i) .

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

[xxjs]

Store of value and facilitation of trade are two important functions of money, but they are inseparable. The marketabitlity of money is directly the reason the money has value, and there is no other reason. (Talking of money with no intrinsic value here). It is nonsensical to say that one kind of money is good as a store of value, while another kind is good for trade.

This is why there is no hope for freicoin.

[DeathAndTaxes]

Store of value and facilitation of trade are two important functions of money, but they are inseparable. The marketabitlity of money is directly the reason the money has value, and there is no other reason. (Talking of money with no intrinsic value here). It is nonsensical to say that one kind of money is good as a store of value, while another kind is good for trade.

This is why there is no hope for freicoin.

For regulation "Stored value" (technically now called "prepaid access") is a legal term with a specific definition. Nobody (not even FinCEN) is saying Bitcoin isn't a store of value, it simply doesn't meet the statutory requirements for a form of "prepaid access".  Namely there is no ability for redemption and no issuer.

Take a starbucks gift card.  This is regulated as prepaid access because it is only good if it can be redeemed at a future date.  Stabucks issues a card.  You buy a card and starbucks holds that money in escrow until you redeem it.  At some point in the future that "prepaid access" is used to make a purchase.  It is only good if starbucks doesn't steal/lose/embezzle the money in the meantime otherwise it is just an empty promise.

Anytime (well usually) a term exists in regulations it is defined.  Don't assume you know what they mean, or use "common sense" to determine the meaning.  Just look up the term in the regulations.

[darkmule]

I believe the important functional difference that is relevant to a legal analysis is that if you have a prepaid card denominated in dollars, you do not have actual dollars.  You have the value of dollars that you can reclaim at some later date.  If you have BTC in a wallet on your system, you have the ACTUAL BITCOINS.  Nobody is guaranteeing to let you pay in the future for some unidentified product.  No third party is required to have a quantity of currency on hand to guarantee that. 

The purpose of regulating "stored value" in the legal sense is to prevent some dishonest or incompetent outlet from selling a bunch of prepaid cards for their services, then going belly-up and leaving people holding a bunch of worthless prepaid cards.  This is why companies usually do not manage the prepaid cards themselves, but some large entity that specializes in meeting all the regulatory requirements does it on contract.

I think if someone actually does start selling prepaid cards that just happen to be denominated in BTC, those cards will be subject to "stored value" regulations.  (I doubt the Casascius "physical Bitcoins" would qualify for this because, again, you are getting the actual Bitcoins themselves, albeit on a different physical medium.)

[NewLiberty]

I believe the important functional difference that is relevant to a legal analysis is that if you have a prepaid card denominated in dollars, you do not have actual dollars.  You have the value of dollars that you can reclaim at some later date.  If you have BTC in a wallet on your system, you have the ACTUAL BITCOINS.  Nobody is guaranteeing to let you pay in the future for some unidentified product.  No third party is required to have a quantity of currency on hand to guarantee that. 

The purpose of regulating "stored value" in the legal sense is to prevent some dishonest or incompetent outlet from selling a bunch of prepaid cards for their services, then going belly-up and leaving people holding a bunch of worthless prepaid cards.  This is why companies usually do not manage the prepaid cards themselves, but some large entity that specializes in meeting all the regulatory requirements does it on contract.

I think if someone actually does start selling prepaid cards that just happen to be denominated in BTC, those cards will be subject to "stored value" regulations.  (I doubt the Casascius "physical Bitcoins" would qualify for this because, again, you are getting the actual Bitcoins themselves, albeit on a different physical medium.)

The tricky part with the coins is that the virtual currency value could be removed from the coin by spending it even without the coin.  The coin holds a copy, another copy could be held by the maker.  Whichever is spent first takes the value.  So, where are the "actual Bitcoins"?

[marcus_of_augustus]

So, where are the "actual Bitcoins"?

There are no "Bitcoins" ... there are private keys and there is a public database. That's the reality that the law has to catch up with ... no one is holding their breath i don't think.

[xxjs]

Store of value and facilitation of trade are two important functions of money, but they are inseparable. The marketabitlity of money is directly the reason the money has value, and there is no other reason. (Talking of money with no intrinsic value here). It is nonsensical to say that one kind of money is good as a store of value, while another kind is good for trade.

This is why there is no hope for freicoin.

For regulation "Stored value" (technically now called "prepaid access") is a legal term with a specific definition. Nobody (not even FinCEN) is saying Bitcoin isn't a store of value, it simply doesn't meet the statutory requirements for a form of "prepaid access".  Namely there is no ability for redemption and no issuer.

Take a starbucks gift card.  This is regulated as prepaid access because it is only good if it can be redeemed at a future date.  Stabucks issues a card.  You buy a card and starbucks holds that money in escrow until you redeem it.  At some point in the future that "prepaid access" is used to make a purchase.  It is only good if starbucks doesn't steal/lose/embezzle the money in the meantime otherwise it is just an empty promise.

Anytime (well usually) a term exists in regulations it is defined.  Don't assume you know what they mean, or use "common sense" to determine the meaning.  Just look up the term in the regulations.

So stored value is newspeak, means prepaid access. Get it.

[BitGo]

The real meat in this letter is under Section C for "stored value." The Bitcoin Foundation says that Bitcoin is not stored value. This directly contradicts U.S. Department of Treasury FinCEN statements which say that the reason why Bitcoin operators need money transmitter licenses (or MSB licenses) is because BTC is stored value.

When did FinCEN state that bitcoin is stored value?  Since 2011, FinCEN regulations have referred to "prepaid access" rather than "stored value", and they have never claimed that bitcoin is prepaid access either.

In a letter to Tangible Cryptography LLC, the State of Virginia did claim that bitcoin was stored value.  However, the definition of stored value in the Virginia law is somewhat different than the California law and the former federal regulations.

FinCEN, via Bradley Stevens in 2011, told Bitcoin USA (now dissolved) that BTC is stored value [https://bitcointalk.org/index.php?topic=41155.0;all]. But even if the director of FinCEN had made an official statement about it, such statements are not legally binding, so they're only good for guidance. In addition, the Bitcoin community at large generally speculates that the government thinks Bitcoin is more likely to be covered as stored value rather than the other two money transmission subcategories (payment instruments and money received for transmission). It's a bold statement for the Foundation to say that Bitcoin is not stored value when the community has been guessing that our various governmental bodies thinks it is stored value (despite any nuanced differences in their definitions of stored value).

The Bitcoin Foundation does a good job here at addressing all three subcategories under which a Bitcoin operator can be pinned for money transmission. Even though it is striking that they claim Bitcoin is not stored value, it's also important that the Foundation says that Bitcoin is not covered under payment instruments or money received for transmission. Since, they claim, Bitcoin doesn't fall under any of these subcategories, then Bitcoin operators are not subject to money transmission regulation.

It seems the Bitcoin world would explode with huge success if the US & its states eventually decided that Bitcoin operators are not subject to money transmission regulation. Although, if this happens, it is practical to assume that the government would find some other way to regulate Bitcoin since the government holds a significant interest in preventing criminal financial transactions.

[please note this is not legal advice]

[TheButterZone]

... and liberty.

[DeathAndTaxes]

FinCEN, via Bradley Stevens in 2011, told Bitcoin USA (now dissolved) that BTC is stored value [https://bitcointalk.org/index.php?topic=41155.0;all]. But even if the director of FinCEN had made an official statement about it, such statements are not legally binding, so they're only good for guidance. In addition, the Bitcoin community at large generally speculates that the government thinks Bitcoin is more likely to be covered as stored value rather than the other two money transmission subcategories (payment instruments and money received for transmission). It's a bold statement for the Foundation to say that Bitcoin is not stored value when the community has been guessing that our various governmental bodies thinks it is stored value (despite any nuanced differences in their definitions of stored value).

Did you read any of the posts above.  It isn't a bold statement. FinCEN says in black and white that virtual currencies (to include Bitcoin) are NOT stored value. Period. End stop.  There is absolutely no ambiguity about it.


Cited once again since it seems to be difficult for you to find it.  Not FinCEN not longer uses the term "stored value" they use the more inclusive term "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

18 This is true even if the person holds the value accepted for a period of time before transmitting some or all of that value at the direction of the person from whom the value was originally accepted. FinCEN's regulations define "prepaid access" as "access to funds or the value of funds that have been paid in advance and can be retrieved or transferred at some point in the future through an electronic device or vehicle, such as a card, code, electronic serial number, mobile identification number, or personal identification number." 31 CFR § 1010.100(ww). Thus, "prepaid access" under FinCEN's regulations is limited to "access to funds or the value of funds." If FinCEN had intended prepaid access to cover funds denominated in a virtual currency or something else that substitutes for real currency, it would have used language in the definition of prepaid access like that in the definition of money transmission, which expressly includes the acceptance and transmission of "other value that substitutes for currency." 31 CFR § 1010.100(ff)(5)(i) .

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

[xxjs]

Bitcoin is a store of value and a means for exchange, two of the functions of money which are not separable.

[NewLiberty]

Bitcoin is a store of value and a means for exchange, two of the functions of money which are not separable.

[Not to be confused with legal definitions within a body of law that have similar sounding names.]

[xxjs]

Bitcoin is a store of value and a means for exchange, two of the functions of money which are not separable.

[Not to be confused with legal definitions within a body of law that have similar sounding names.]

Yeah, right, I hate it when people change the meaning of words either by ignorance or with a purpose to deceive.

[darkmule]

Bitcoin is a store of value and a means for exchange, two of the functions of money which are not separable.

[Not to be confused with legal definitions within a body of law that have similar sounding names.]

Yeah, right, I hate it when people change the meaning of words either by ignorance or with a purpose to deceive.

So you'd rather FinCEN use your definition and regulate Bitcoin exactly like they would a prepaid card?

No, thanks.

[bernard75]

I just love how they stuck it back to the state.
Hopefully that doesnt invite new trouble though.

[molecular]

I just love how they stuck it back to the state.
Hopefully that doesnt invite new trouble though.

Isn't that part of the foundations goal? Make some trouble and/or get into trouble so the rest of the community doesn't have to?

[BurtW]

I just love how they stuck it back to the state.
Hopefully that doesnt invite new trouble though.

Isn't that part of the foundations goal? Make some trouble and/or get into trouble so the rest of the community doesn't have to?

AFAICT you are correct, that is their purpose.

[molecular]

I just love how they stuck it back to the state.
Hopefully that doesnt invite new trouble though.

Isn't that part of the foundations goal? Make some trouble and/or get into trouble so the rest of the community doesn't have to?

AFAICT you are correct, that is their purpose.

Not solely. As their website says, the "vision" is to

• standardize Bitcoin
• protect Bitcoin
• promote Bitcoin