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Author Topic: License for entering the business of money transmission  (Read 5850 times)
franky1
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June 25, 2013, 11:48:10 AM
 #41

short story: fincen only want to regulate the people touching FIAT or its digital counterpart...

long story:

http://beforeitsnews.com/alternative/2013/03/realtime-bitcoin-fincen-issues-guidance-on-virtual-currencies-and-regulatory-responsibilities-2599120.html

The Financial Crimes Enforcement Network (“FinCEN”) is issuing this interpretive guidance to clarify the applicability of the regulations implementing the Bank Secrecy Act (“BSA”) to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies.1 Such persons are referred to in this guidance as “users,” “administrators,” and “exchangers,” all as defined below.2 A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations. However, an administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. An administrator or exchanger is not a provider or seller of prepaid access, or a dealer in foreign exchange, under FinCEN’s regulations.

Currency vs. Virtual Currency

            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 in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction. This guidance addresses “convertible” virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.

basically convertible virtual currency is: digital dollars held on a database. EG bitstamp dollars, dwolla dollars, bitinstant dollars, liberty exchange dollars. which are the equivalent of bank account (legal tender) dollars but not classed as legal tender. EG you cannot pay a court fine or a tax bill with liberty exchange/bitinstant dollars. it has to be converted to a bank account dollar or paper/coin dollars to be legal tender

Background

            On July 21, 2011, FinCEN published a Final Rule amending definitions and other regulations relating to money services businesses (“MSBs”).4 Among other things, the MSB Rule amends the definitions of dealers in foreign exchange (formerly referred to as “currency dealers and exchangers”) and money transmitters. On July 29, 2011, FinCEN published a Final Rule on Definitions and Other Regulations Relating to Prepaid Access (the “Prepaid Access Rule”).5 This guidance explains the regulatory treatment under these definitions of persons engaged in virtual currency transactions.

Definitions of User, Exchanger, and Administrator

This guidance refers to the participants in generic virtual currency arrangements, using the terms “user,” “exchanger,” and “administrator.”6 A user is a person that obtains virtual currency to purchase goods or services.7 An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency. An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.
 Users of Virtual Currency

A user who obtains convertible virtual currency and uses it to purchase real or virtual goods or services is not an MSB under FinCEN's regulations.8 Such activity, in and of itself, does not fit within the definition of "money transmission services" and therefore is not subject to FinCEN's registration, reporting, and recordkeeping regulations for MSBs.9

Administrators and Exchangers of Virtual Currency

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."11

The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies.
the definition of a money transmitter does not differentiate between real currency (legal tender in bank accounts) and convertible virtual currency (digital dollars on database that is not a bank account EG liberty exchange mtgox)
Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA.12 FinCEN has reviewed different activities involving virtual currency and has made determinations regarding the appropriate regulatory treatment of administrators and exchangers under three scenarios: brokers and dealers of e-currencies and e-precious metals; centralized convertible virtual currencies; and de-centralized convertible virtual currencies.

a. E-Currencies and E-Precious Metals

blah blah, talks about commodities (Raw materials EG gold silver wheat ) trading

b. Centralized Virtual Currencies

The second type of activity involves a convertible virtual currency that has a centralized repository. The administrator of that repository will be a money transmitter to the extent that it allows transfers of value between persons or from one location to another. This conclusion applies, whether the value is denominated in a real currency(bank notes /coins/digital dollar in a bank account) or a convertible virtual currency(digital dollar on database thats not a bank account). In addition, any exchanger that uses its access to the convertible virtual currency services provided by the administrator to accept and transmit the convertible virtual currency on behalf of others, including transfers intended to pay a third party for virtual goods and services, is also a money transmitter.

FinCEN understands that the exchanger's activities may take one of two forms. The first form involves an exchanger (acting as a "seller" of the convertible virtual currency) that accepts real currency or its equivalent from a user (the "purchaser") and transmits the value of that real currency to fund the user's convertible virtual currency account with the administrator. Under FinCEN's regulations, sending "value that substitutes for currency" to another person or to another location constitutes money transmission, unless a limitation to or exemption from the definition applies.16 This circumstance constitutes transmission to another location, namely from the user's account at one location (e.g., a user's real currency account at a bank) to the user's convertible virtual currency account with the administrator. It might be argued that the exchanger is entitled to the exemption from the definition of "money transmitter" for persons involved in the sale of goods or the provision of services. Under such an argument, one might assert that the exchanger is merely providing the service of connecting the user to the administrator and that the transmission of value is integral to this service. However, this exemption does not apply when the only services being provided are money transmission services.17

The second form involves a de facto sale of convertible virtual currency that is not completely transparent. The exchanger accepts currency or its equivalent from a user and privately credits the user with an appropriate portion of the exchanger's own convertible virtual currency held with the administrator of the repository. The exchanger then transmits that internally credited value to third parties at the user's direction. This constitutes transmission to another person, namely each third party to which transmissions are made at the user's direction. To the extent that the convertible virtual currency is generally understood as a substitute for real currencies, transmitting the convertible virtual currency at the direction and for the benefit of the user constitutes money transmission on the part of the exchanger.

c. De-Centralized Virtual Currencies

A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator
peer to peer trading of database dollars (presumably using ripple)
, and (2) that persons may obtain by their own computing or manufacturing effort.
given digital dollars (eclipse mining pool giving out dwolla digital dollars)

A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

Providers and Sellers of 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

Dealers in Foreign Exchange

A person must exchange the currency of two or more countries to be considered a dealer in foreign exchange.19 Virtual currency does not meet the criteria to be considered "currency" under the BSA, because it is not legal tender. Therefore, a person who accepts real currency in exchange for virtual currency, or vice versa, is not a dealer in foreign exchange under FinCEN's regulations.
EG mtgox that only seems to have a trading floor involving dollars. is not a FOREX.. however BTC-e which has a separate trading floor (currency tab for euro and dollar) is a forex

http://beforeitsnews.com/alternative/2013/03/realtime-bitcoin-fincen-issues-guidance-on-virtual-currencies-and-regulatory-responsibilities-2599120.html

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Please do your own research & respect what is written here as both opinion & information gleaned from experience. many people replying with insults but no on-topic content substance, automatically are 'facepalmed' and yawned at
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June 26, 2013, 05:29:47 AM
 #42

My hope is that an exchange needs a license only in the state where it's headquartered, and nowhere else.
If you're on the East coast, you should be able to run a web-based business with customers from California without any license from CA. This used to be a principle, and it should not be different with BTC.

Most states require a License even if you don't have a physical location in there State. http://moneytransmitterlicense.blogspot.com/2010/01/money-transmitter-license-information.html
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June 26, 2013, 05:47:59 AM
 #43

None of that has anything to do with money transmitter or a license.  

Your are simply 100% wrong in your statement that large transfers require a money transmitter license.  You also are wrong in stating you know the reason for the C&D and you are wrong in claiming a MY license in needed in all 50 states. There is no way to fudge that.   This are false statements. 


Banks are required to file SARs and CTRs and may close accounts if they deem them high risk.  None of that has ANYTHING to do with Money Transmitter laws or licensing.  Banks routinely close non Money Transmitters for being high risk. 

Quote
especially if its over $1000 in one go.
99%+ of B2B commerce is >$1000.  Not sure what kind of childhood lemonade stands you have been running but hopefully $1000 is insufficient for weekly payroll much less inventory purchases.  Of course none of that has anything to do with Money Transmitter laws.  If you are a Money Transmitter you must be licensed to transmit even a single penny.  If you are not a Money Transmitter there is no special "I buy lots of stuff license" even when making seven figure deals.   One does not get a MT license simply because they make large purchases/payments.  One ONLY gets a Money Transmitter license if they are a Money Transmitter.  You are simply throwing stuff against the law and trying to see what sticks.



If BitCoin foundation converted BitCoin into Fiat, that is the reason for the C&D according to FinCen guidance which makes them an MSB. If this did not happen than who knows why, but from my understanding of reading the posts here, is they converted BitCoin into Fiat.
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June 26, 2013, 05:50:46 AM
 #44

I love how the head counsel for the BitCoin foundation is incompetent. He said all miners are MSB's when FinCen made it clear they are only MSB's when they convert into Fiat. I would be scared if I was the foundation right now lol.
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June 26, 2013, 09:05:46 AM
 #45

I love how the head counsel for the BitCoin foundation is incompetent. He said all miners are MSB's when FinCen made it clear they are only MSB's when they convert into Fiat. I would be scared if I was the foundation right now lol.

Does having a different interpretation mean he's incompetent?

QuarkCoin - what I believe bitcoin was intended to be. On reddit: http://www.reddit.com/r/QuarkCoin/
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June 26, 2013, 04:17:17 PM
 #46

I love how the head counsel for the BitCoin foundation is incompetent. He said all miners are MSB's when FinCen made it clear they are only MSB's when they convert into Fiat. I would be scared if I was the foundation right now lol.

Does having a different interpretation mean he's incompetent?

Yes it does when it's clearly written in plain english. Secondly, having the wrong interpertation even if it wasnt clearly written stillshows his incompetence. Thirdly, the biggest show of incompetence is him allowing the foundation to convert BitCoin directly into Fiat to pay for the convention center, which would put them into MSB status.
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June 26, 2013, 04:32:01 PM
 #47

I love how the head counsel for the BitCoin foundation is incompetent. He said all miners are MSB's when FinCen made it clear they are only MSB's when they convert into Fiat. I would be scared if I was the foundation right now lol.

Does having a different interpretation mean he's incompetent?

Yes it does when it's clearly written in plain english. Secondly, having the wrong interpertation even if it wasnt clearly written stillshows his incompetence. Thirdly, the biggest show of incompetence is him allowing the foundation to convert BitCoin directly into Fiat to pay for the convention center, which would put them into MSB status.


Maybe the Bitcoin Foundation is planning to sue its head counsel for gross incompetence Smiley
/where's that popcorn
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June 26, 2013, 04:41:56 PM
 #48

I love how the head counsel for the BitCoin foundation is incompetent. He said all miners are MSB's when FinCen made it clear they are only MSB's when they convert into Fiat. I would be scared if I was the foundation right now lol.

Does having a different interpretation mean he's incompetent?

Yes it does when it's clearly written in plain english. Secondly, having the wrong interpertation even if it wasnt clearly written stillshows his incompetence. Thirdly, the biggest show of incompetence is him allowing the foundation to convert BitCoin directly into Fiat to pay for the convention center, which would put them into MSB status.


Maybe the Bitcoin Foundation is planning to sue its head counsel for gross incompetence Smiley
/where's that popcorn

That is assuming that the above is true. Can someone confirm that they did indeed use BitInstant? If thats the case then yes their counsel is completely incompetent, and I would def. sue his slacker ass for potentially throwing my ass in jail. He probably read Fincens guidence once and said "I got this" pulling up his big boy pants, while the rest of us mere mortal peons had to read it a few times to double check the meanings.
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June 26, 2013, 04:49:57 PM
 #49

[...]
That is assuming that the above is true. Can someone confirm that they did indeed use BitInstant? If thats the case then yes their counsel is completely incompetent, and I would def. sue his slacker ass for potentially throwing my ass in jail. He probably read Fincens guidence once and said "I got this" pulling up his big boy pants, while the rest of us mere mortal peons had to read it a few times to double check the meanings.

I've never dealt with the Bitcoin Foundation, but if they're goofy enough to have such inept head counsel, what if their choice of representation is just as bad when they shop for a lawyer to sue their lawer Huh
Edit:  Turtles all the way down...
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June 30, 2013, 02:43:53 AM
 #50

Edit: i found quotes from fincen to correct 'death and taxes' because due to him also running a MSB business its in his interest to know the brutal truth.

but now ill let him leearn the hard way.

quotes deleted

ill just leave him this to re-learn the truth
http://www.fincen.gov/news_room/rp/files/MSB_Exam_Manual.pdf

(to show i atleast half helped him)

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Please do your own research & respect what is written here as both opinion & information gleaned from experience. many people replying with insults but no on-topic content substance, automatically are 'facepalmed' and yawned at
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July 08, 2013, 12:57:09 PM
 #51

This guidance refers to the participants in generic virtual currency arrangements, using the terms “user,” “exchanger,” and “administrator.”6 A user is a person that obtains virtual currency to purchase goods or services.

Doesn't this mean that using bitcoins to buy something (i.e. conference center) would mean they are a user not an exchanger or administrator?


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July 08, 2013, 05:35:43 PM
 #52

Edit: i found quotes from fincen to correct 'death and taxes' because due to him also running a MSB business its in his interest to know the brutal truth.

but now ill let him leearn the hard way.

quotes deleted

ill just leave him this to re-learn the truth
http://www.fincen.gov/news_room/rp/files/MSB_Exam_Manual.pdf

(to show i atleast half helped him)

Ok Franky, so let's say I wanted to run a business that compete with D&T and I do not want to learn the hard way.  What is it that someone needs to know from your post of the MSB Exam Manual?


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joesmoe2012
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July 08, 2013, 07:41:30 PM
 #53

Yes it does when it's clearly written in plain english. Secondly, having the wrong interpertation even if it wasnt clearly written stillshows his incompetence. Thirdly, the biggest show of incompetence is him allowing the foundation to convert BitCoin directly into Fiat to pay for the convention center, which would put them into MSB status.

Does converting $ into £ to buy something sold for £ makes one a MSB?


I'm not sure, but I do know that exchanging $ ro Euro is not the same as exchanging bitcoins as they have specifically set a set of guidelines for Virtual Convertible Currencies - such as bitcoin.

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October 16, 2014, 04:07:58 PM
 #54

It looks like Texas has cancelled MSB license rental in that state.
https://www.linkedin.com/today/post/article/20141014163134-184694-msb-licenses-for-rent-not-in-texas


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