License for entering the business of money transmission

[countryfree]

This is a follow-up to the discussion about the Bitcoin Foundation which receives a cease and desist order from California.

So I understand that you need a license for the business of money transmission, but I think the subject needs to be clarified. Sadly, I have more questions than answers.

My belief is that only exchanges need a license. Is this correct?

Do all states require such a license, or only California?

Is it possible to get a nation-wide license, say maybe from Delaware? If not, it means that an exchange would need to get a license from all 50 states to do business in the whole country. What a bureaucratic nightmare!

[1715180781]

1715180781

[1715180781]

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[jeannie]

You will need separate licenses, I guess your legal fees and professional services fees will be extremely high

[vokain]

You will need separate licenses, I guess your legal fees and professional services fees will be extremely high

that's absurd

[countryfree]

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.

[AliceWonder]

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.

My understanding is that it needs a license for each state it does business in.
Yes it is absurd and we need a change to federal law.

CampBX for example I believe only has the licenses in Georgia which means that they could get in trouble with the State of California for people like me who do business with them.

Part of me wants to see it happen so it can go to trial and hopefully get clarified but I don't want to wish that on anyone.

[QuestionAuthority]

According to Patrick Murck, General Counsel for the Bitcoin Foundation, anyone that mines Bitcoin needs an MSB license.

ALL miners are considered MSBs, since they are enabling transactions for a profit.

http://www.thegenesisblock.com/town-hall-discussion-with-gavin-andresen-and-patrick-murck/

[TheFootMan]

You will need separate licenses, I guess your legal fees and professional services fees will be extremely high

that's absurd

Not in the eyes of those who created this system: The established power structures. They don't like competition you see, so they're essentially making it impossible for a small honest business to succeed in this market.

According to Patrick Murck, General Counsel for the Bitcoin Foundation, anyone that mines Bitcoin needs an MSB license.

ALL miners are considered MSBs, since they are enabling transactions for a profit.

http://www.thegenesisblock.com/town-hall-discussion-with-gavin-andresen-and-patrick-murck/

Yes, now all miners should register as MSBs, even those who mine 0.1BTC pr. month - this makes a lot of sense, and there's no overhead associated with it at all..

[TheBanker]

I am currently in the process of establishing my LLC and registering as a proper MSB. I should probably keep a blog of that somewhere for people's use and help.

I'm already somewhat along in the process and one of the challenges that I have come across is the following: FinCen's letter back in May was the first type of guidance (any guidance) and that's for the federal level. The general legal consensus is that at the STATE level there would have to be similar position statements about virtual currency. Some states may say, "you must register with us" others may say, "we dont care about virtual currency, you just need to be OK with FinCen". So that's a little unclear right now at the state level and it could take YEARS for all 50 states to have something in place. State registration is the safe play, but it may ultimately be unnecessary depending on the position your individual state takes.

[MSantori]

We address these issues in the legal subforum, mostly. 

In sum, there are two regulatory regimes that govern most bitcoin businesses: Money Transmission and Securities:

Money transmission is regulated on the state and federal levels.  The federal level is straightforward.  Miners (who convert to fiat) and Exchangers (who buy or sell BTC as a business) are considered "money transmitters" by FinCEN, the government agency that administers the Bank Secrecy Act.  These businesses must register with FinCEN as money services businesses, and design and implement Anti-money laundering (AML) and Know your Customer (KYC) policies.  The state level is more complex.  Any state in which your business solicits customers or transacts business - whether or not your business is physically located there - will require a license in that state.  These licenses are expensive and time-consuming.  Also, they are not granted automatically; money transmission is a privilege under most states' laws, not a right.

Securities are regulated on the state and federal levels as well.  Most of the perpetual mining bonds and "shares" of "companies" being sold in the securities forum here on the boards are unregistered, restricted securities.  They also don't provide the kinds of disclosures that issuing companies are required to provide.  That's lawyer talk for "illegal".  These issuances would likely be legal, if their issuers would file the appropriate paperwork to comply with the rules.  Unfortunately, there is not enough money involved yet to make a lawyer worth it.  Until then, it's casual securities fraud.

The foregoing was a very general explanation of the regulatory regimes that apply to BTC businesses.  If you have more specific questions, I would suggest looking into the legal subforum.  There is a lot of very granular detail in the posts there.  Hope this helps!

[QuestionAuthority]

You will need separate licenses, I guess your legal fees and professional services fees will be extremely high

that's absurd

Not in the eyes of those who created this system: The established power structures. They don't like competition you see, so they're essentially making it impossible for a small honest business to succeed in this market.

According to Patrick Murck, General Counsel for the Bitcoin Foundation, anyone that mines Bitcoin needs an MSB license.

ALL miners are considered MSBs, since they are enabling transactions for a profit.

http://www.thegenesisblock.com/town-hall-discussion-with-gavin-andresen-and-patrick-murck/

Yes, now all miners should register as MSBs, even those who mine 0.1BTC pr. month - this makes a lot of sense, and there's no overhead associated with it at all..

Your overhead is not the states concern. If the state cared they would make it a lot easier for small start ups to stay in business.

This law isn't here because govt expects everyone to run out and register. I doubt most people would be approved anyway. In fact, I doubt they care if you register. This gives them the ability to prosecute whenever they want and let's them set up Bitcoin politically as a rouge group of criminals operating outside the law. Then they need to spend no money attempting to fight Bitcoin, there will be no government super computers attacking the network but instead a slow propaganda campaign that erodes the user-base or at least keeps "the problem" from growing.

[countryfree]

Thank you for all these answers. I'll check the Legal forum for more.

[crumbs]

Yes, now all miners should register as MSBs, even those who mine 0.1BTC pr. month - this makes a lot of sense, and there's no overhead associated with it at all..

Your overhead is not the states concern. If the state cared they would make it a lot easier for small start ups to stay in business.

This law isn't here because govt expects everyone to run out and register. I doubt most people would be approved anyway. In fact, I doubt they care if you register. This gives them the ability to prosecute whenever they want and let's them set up Bitcoin politically as a rouge group of criminals operating outside the law. Then they need to spend no money attempting to fight Bitcoin, there will be no government super computers attacking the network but instead a slow propaganda campaign that erodes the user-base or at least keeps "the problem" from growing.

+1 and
There's a pretty schizoid outlook on this forum.  Words like "government" & "statism" are used as pejoratives, and at the same time laws are expected to be appropriate, just & rational. When a cruiser with the words "to serve and protect" pops up in your rearview mirror, are you expecting it to "serve and protect"

[franky1]

This is a follow-up to the discussion about the Bitcoin Foundation which receives a cease and desist order from California.

So I understand that you need a license for the business of money transmission, but I think the subject needs to be clarified. Sadly, I have more questions than answers.
each state has different rules but heres an attempt to merge all the rules into simple guidelines:
1) any bank money movement over $1,000 per other party in a day is classed as potential business transaction
1) any bank money movement over $15,000 per other party in a year is classed as potential business transaction
1) any bank money movement over $100,000 from your account in a year is classed as potential business transaction
any one of these can flag up your bank account being investigated. so if it is personal use only ensure your bank knows before hand. if you are running a business. ensure you have a licence.


My belief is that only exchanges need a license. Is this correct?
not really. again each state/country is different. but if you are moving money above the thresholds in the last question as a business purchase/task/service. then you will need a licence
and most importantly it has to be FIAT payments to be classed as money transmitters. so the whole "miners are MSB" only concerns mining pools that give out fiat direct. EG Eclipse mining pool (the only one i know that paid out fiat)


Do all states require such a license, or only California?
all states. california only sent the letter due to the spending / transmission of money for the hiring of the convention hall

Is it possible to get a nation-wide license, say maybe from Delaware? If not, it means that an exchange would need to get a license from all 50 states to do business in the whole country. What a bureaucratic nightmare!
from looking at bitinstant as a case study, there is no nation wide licence for USA.
if your website is linked to selling products only to residents (delivery address) of delaware. and your own business bank account is delaware based. then you only need a delaware licence. but if you are sending and receiving money in different states then stock up on pain killers and expect some headaches and cramped wrists. form filling x50

[GoldBit89]

they keep messing with us, its time we start messing with them.





http://thebitcoinnews.co.uk/2013/06/20/your-bitcoin-wallet-is-being-tracked-by-feds/




maybe start tracking each fed and posting what they do each minute of their life.


what is good for the goose is also good for the gander.


sorry this had to be posted--i know some will hate it and that is their right to do so. this is my right and therefore i did it.

[QuestionAuthority]

they keep messing with us, its time we start messing with them.





http://thebitcoinnews.co.uk/2013/06/20/your-bitcoin-wallet-is-being-tracked-by-feds/




maybe start tracking each fed and posting what they do each minute of their life.


what is good for the goose is also good for the gander.


sorry this had to be posted--i know some will hate it and that is their right to do so. this is my right and therefore i did it.

I agree with you. You first and if you're not arrested I'll go next.

[franky1]

My belief is that only exchanges need a license. Is this correct?

Following Californias line of thinking (interpretation of law) you need a money transmitting license if you are writing open source software, such as for example, bitcoin client, or rsync, or linux or apache web server or any other piece of software some money transmitter may use.

Technically if you fart in an elevator while a banker present you would need one too. And god forbid someone comes up with fartcoin alt...

the actual interpretation is that bitcoin foundation moved fiat across state lines into california as a business to pay for the convention centre. so the large (above $1000 in a single transaction) to a Californian bank from a business created a risk flag.

[crumbs]

My belief is that only exchanges need a license. Is this correct?

Following Californias line of thinking (interpretation of law) you need a money transmitting license if you are writing open source software, such as for example, bitcoin client, or rsync, or linux or apache web server or any other piece of software some money transmitter may use.

Technically if you fart in an elevator while a banker present you would need one too. And god forbid someone comes up with fartcoin alt...

Has anything other than the cease & desist been released to clarify "California's line of thinking"?

[crumbs]

the actual interpretation is that bitcoin foundation moved fiat across state lines into california as a business to pay for the convention centre. so the large (above $1000 in a single transaction) to a Californian bank from a business created a risk flag.

Where are you guys getting this

[DeathAndTaxes]

the actual interpretation is that bitcoin foundation moved fiat across state lines into california as a business to pay for the convention centre. so the large (above $1000 in a single transaction) to a Californian bank from a business created a risk flag.

None of that is right.  Spending money is spending money it isn't money transmission.   Otherwise anyone, anyplace, any purchase would always be money transmission.  Funds always move in the sale of goods and services.

CA contention is that the Bitcoin Foundation is running a business that for profit transmits money.  Obviously that is false but it had nothing to do with spending too much money.  I mean did you honestly think this is the first business in the history of the CA to pay for a convention there.

[DeathAndTaxes]

the actual interpretation is that bitcoin foundation moved fiat across state lines into california as a business to pay for the convention centre. so the large (above $1000 in a single transaction) to a Californian bank from a business created a risk flag.

Where are you guys getting this

Imaginary-land.