Run 'Round FINCEN Rules. Bitcoin Exchanges without Registering

[bitrebel]

The Pet Rock was a throwaway idea, for the thought. What we really need is a Digital Good, capable of being sold or transferred. It can be paired with bitcoin, and then all transactions are for that product, not the bitcoins. Could be a e-card or something like that. As long as Bitcoin itself is not the item being sold for dollars, then it can be used as a part of the transaction.

An e-card would be difficult to justify for such a large transaction though. Maybe if someone developed a simple piece of software around bitcoin, made it open source, allowed people to alter and update it, or it could be a simple program, with updates. It could potentially justify the sales transactions. In essence the software would be free, but people could charge any amount they want for it, and that is the product being traded between people, not the currency of bitcoin.

I have a feeling there are a lot of very artistic individuals in the bitcoin community.  Perhaps these Picassos could  create some artwork in Microsoft Paint.  The more fiat that someone is willing to pay for one of these digital masterpieces, then the more free bitcoins they could receive as a bonus. 

This is EXACTLY what I'm talking about!

Great Idea!

This will work great! (Or at least it should)

Now, you are not selling any bitcoins, PERIOD!!!

No FINCEN regs can apply anymore!!!

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[cryptoanarchist]

Bingo!

This is a great idea. Reminds me of how they sell raw milk. Instead of selling you the milk, they sell you a share of the cow, and you get the milk from your own cow.

So to do this with bitcoin, the exchange sells them a portion of mining equipment for a specified time, and they get a share of the mining output during that specified time(bitcoin).

[halfawake]

Bingo!

This is a great idea. Reminds me of how they sell raw milk. Instead of selling you the milk, they sell you a share of the cow, and you get the milk from your own cow.

So to do this with bitcoin, the exchange sells them a portion of mining equipment for a specified time, and they get a share of the mining output during that specified time(bitcoin).

Whoa, great idea.  Lets call them Linden Cows

Actually, there's a mining union trying to get funded this way that has exactly this proposal: you fund them, and you get the share of the output for a whole year.  I'm tempted to throw a bitcoin their way, but they are asking for 10 BTC and no one has donated yet.  Anyone else interested in helping fund their project?  https://bitcoinstarter.com/projects/97

[shawshankinmate37927]

Actually, there's a mining union trying to get funded this way that has exactly this proposal: you fund them, and you get the share of the output for a whole year.  I'm tempted to throw a bitcoin their way, but they are asking for 10 BTC and no one has donated yet.  Anyone else interested in helping fund their project?  https://bitcoinstarter.com/projects/97

Or, you could just buy shares of ASICMiner and get paid dividends derived from the revenue that is generated with their mining operations and hardware sales.  Those shares don't expire after one year and are transferrable.

Back to the original topic...Selling digital artwork for fiat and giving away bitcoins as a free bonus may help you stay in compliance with FINCEN guidelines/regulations, but then the IRS bureaucrats will insist that Americans report those artwork sales as income.  I still think it's best to exchange your artwork for cash--the actual FRNs--and to transfer the free bitcoins to the buyer in a face-to-face transaction.  Transacting in electronic fiat just makes their job too easy with the surveillance apparatus that is in place.

[bitrebel]

Actually, there's a mining union trying to get funded this way that has exactly this proposal: you fund them, and you get the share of the output for a whole year.  I'm tempted to throw a bitcoin their way, but they are asking for 10 BTC and no one has donated yet.  Anyone else interested in helping fund their project?  https://bitcoinstarter.com/projects/97

Or, you could just buy shares of ASICMiner and get paid dividends derived from the revenue that is generated with their mining operations and hardware sales.  Those shares don't expire after one year and are transferrable.

Back to the original topic...Selling digital artwork for fiat and giving away bitcoins as a free bonus may help you stay in compliance with FINCEN guidelines/regulations, but then the IRS bureaucrats will insist that Americans report those artwork sales as income.  I still think it's best to exchange your artwork for cash--the actual FRNs--and to transfer the free bitcoins to the buyer in a face-to-face transaction.  Transacting in electronic fiat just makes their job too easy with the surveillance apparatus that is in place.

The whole point of my post was not to avoid IRS taxes. That can be done lots of other ways.
The main point of this idea, is to keep average Joe from having to register as a Money Transmitter when he is just buying and selling bitcoins.
FINCEN regs would like to make it so everyone who transfers bitcoins, and accepts dollars, could be identified as a Money Transmitter.
But, if they are selling digital artwork and giving away FREE bitcoins with it, they are not selling Bitcoins for dollars, then there is NO Money Transmitting service provided.

As well, Paypal TOS claim they do not allow the sales of virtual currencies, for dollars.
A Physical Item MUST accompany the transaction, in order to avoid this. A Digital Artwork item fits that definition, and should work to keep paypal at bay.

[bluemeanie1]

If a person buys or sells bitcoins for dollars, they are supposed to register as a Money Transmitter. This is being applied to the average person even Foundations that do not angage in this, based on the associations of their members.

So, I propose nobody ever buys or sells bitcoins for dollars anymore. I propose we give them away for FREE whenever someone buys or sells a piece of blank paper, valued at approx the same price as bitcoins.

If someone is willing to buy my "pet rock" for $105.00, I'll include a FREE Bitcoin!

what if we buy and sell Magic Cards?  is that currency?

[bitrebel]

If a person buys or sells bitcoins for dollars, they are supposed to register as a Money Transmitter. This is being applied to the average person even Foundations that do not angage in this, based on the associations of their members.

So, I propose nobody ever buys or sells bitcoins for dollars anymore. I propose we give them away for FREE whenever someone buys or sells a piece of blank paper, valued at approx the same price as bitcoins.

If someone is willing to buy my "pet rock" for $105.00, I'll include a FREE Bitcoin!

what if we buy and sell Magic Cards?  is that currency?

Not making sense?

The problem with something "physical" is that it has to be mailed, to complete the transaction.
Magic Cards have actual value, so it will not work.

Replacing Bitcoins with Magic Cards, is going 2 steps backward.

[bitrebel]

Actually, there's a mining union trying to get funded this way that has exactly this proposal: you fund them, and you get the share of the output for a whole year.  I'm tempted to throw a bitcoin their way, but they are asking for 10 BTC and no one has donated yet.  Anyone else interested in helping fund their project?  https://bitcoinstarter.com/projects/97

Or, you could just buy shares of ASICMiner and get paid dividends derived from the revenue that is generated with their mining operations and hardware sales.  Those shares don't expire after one year and are transferrable.

Back to the original topic...Selling digital artwork for fiat and giving away bitcoins as a free bonus may help you stay in compliance with FINCEN guidelines/regulations, but then the IRS bureaucrats will insist that Americans report those artwork sales as income.  I still think it's best to exchange your artwork for cash--the actual FRNs--and to transfer the free bitcoins to the buyer in a face-to-face transaction.  Transacting in electronic fiat just makes their job too easy with the surveillance apparatus that is in place.

The whole point of my post was not to avoid IRS taxes. That can be done lots of other ways.
The main point of this idea, is to keep average Joe from having to register as a Money Transmitter when he is just buying and selling bitcoins.
FINCEN regs would like to make it so everyone who transfers bitcoins, and accepts dollars, could be identified as a Money Transmitter.
But, if they are selling digital artwork and giving away FREE bitcoins with it, they are not selling Bitcoins for dollars, then there is NO Money Transmitting service provided.

As well, Paypal TOS claim they do not allow the sales of virtual currencies, for dollars.
A Physical Item MUST accompany the transaction, in order to avoid this. A Digital Artwork item fits that definition, and should work to keep paypal at bay.

If you are doing something where you should be registered as a Money Transmitter do not listen to this ridiculous discussion.  Anything of stored values requires you to flow the rules. 

"Stored value" refers to CARDS that store value, in US dollars. Bitcoins do not store value, and they are not "Stored Value Cards".

[biggie]

It's still a bit strange, if a consumer in the u.s buys foreign currency does that make him need some kind of license ? Why would that same consumer not be allowed to buy bitcoin ? Assuming that the people / biz he buys it from are outside the U.S located.

[bitrebel]

"Stored value" refers to CARDS that store value, in US dollars. Bitcoins do not store value, and they are not "Stored Value Cards".

 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.  31 C.F.R. § 1010.100(ff)(5)(i)(A) and (B).

I can't believe you sit there and argue about this as if it has the slightest bit of merit.  If you ever make it to court your arguments will be listed here:

http://archive.adl.org/mwd/suss1.asp

Those guys are the subject of this film, huh?
http://www.youtube.com/watch?v=b8bG5NxQ66g
Bunch of racist, hate mongering zionist fascist piglets.
Fuck the ADL, and Fuck you if you support them and their bullshit.

[CompNsci]

Personally, I think the best interim solution is distributed exchanges and in-person exchanges. The best long-term solution is when one buys and sells other items with BTC directly, avoiding the need for exchanges.

[shawshankinmate37927]

The whole point of my post was not to avoid IRS taxes. That can be done lots of other ways.
The main point of this idea, is to keep average Joe from having to register as a Money Transmitter when he is just buying and selling bitcoins.
FINCEN regs would like to make it so everyone who transfers bitcoins, and accepts dollars, could be identified as a Money Transmitter.
But, if they are selling digital artwork and giving away FREE bitcoins with it, they are not selling Bitcoins for dollars, then there is NO Money Transmitting service provided.

As well, Paypal TOS claim they do not allow the sales of virtual currencies, for dollars.
A Physical Item MUST accompany the transaction, in order to avoid this. A Digital Artwork item fits that definition, and should work to keep paypal at bay.

I just came across one attorney's opinion on selling digital goods for fiat and giving away bitcoins in order to comply with FINCEN regulations:

https://bitcointalk.org/index.php?topic=205385.msg2276374#msg2276374

I still believe something along these lines can be done without running afoul of FINCEN regulations.  Maybe two separate transactions would help keep things in accordance with FINCEN's regulations or at least make it more difficult for them to enforce.  Suppose Alice has 5 BTC that she wants to convert to $500 in fiat and Bob has $500 in fiat that he wants to convert to 5 BTC.  Alice could agree to buy some of Bob's artwork for 5 BTC and Bob could agree to buy some of Alice's artwork for $500.  They could use alternate identities for each transaction and they could also use an escrow agent that's located in Russia or China.  Countries like these might be less likely to waste their time assisting American bureaucrats trying to enforce asinine regulations.

[esenminer]

If a person buys or sells bitcoins for dollars, they are supposed to register as a Money Transmitter. This is being applied to the average person even Foundations that do not angage in this, based on the associations of their members.

So, I propose nobody ever buys or sells bitcoins for dollars anymore. I propose we give them away for FREE whenever someone buys or sells a piece of blank paper, valued at approx the same price as bitcoins.

If someone is willing to buy my "pet rock" for $105.00, I'll include a FREE Bitcoin!

Where did you get this information from? Please provide a source, it is false.

The aim of FinCEN is to control money laundering from US->Other countries.

FinCEN does not apply to personal transactions only to companies in the money transmission business e.g. Western Union.

A FinCEN Advisory from a little while ago made it clear that personal transactions are exempt.

Using this logic then selling gold, silver or anything of any value would fall under FinCEN? Even your pet rock.

[esenminer]

I found the advisory

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

And I quote

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.

and the definitions of user, administrator or exhanger

A user is a person that obtains virtual currency to purchase goods or services. 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.

Draw your own conclusions but it seems clear to me that unless you are in the business of buying / selling or exchanging bitcoins then FinCEN clearly does not apply.

[bitrebel]

I found the advisory

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

And I quote

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.

and the definitions of user, administrator or exhanger

A user is a person that obtains virtual currency to purchase goods or services. 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.

Draw your own conclusions but it seems clear to me that unless you are in the business of buying / selling or exchanging bitcoins then FinCEN clearly does not apply.

I would wholeheartedly agree with you on this. You are correct.
However, businesses like Paypal and Moneybookers Skrill, do not see things this way. They probably just choose to see it this way because it competes with their precious dollar.
Until they agree that people who buy and sell bitcoins, not engaged in the business of it, are users, still....it may be difficult to bypass unless there is another alternative.
But, as far as your interpretation of this law, I believe you are correct.

[leopard2]

 Personally I believe they are trying to create legal barriers from exiting the failing USD.

 They won't be successful in the long run.

US dictator Roosevelt was successful with outlawing gold for 40 years

Since BTC is a bit easier to own anonymously than gold, of course, they are trying to stop the USD flow into BTC. The US leaders know very well they are like Cyprus, just that Cyprus could not force others to accept the EUR they printed forever.

[Stephen Gornick]

If 10000 US Bitcoin users opened accounts on LocalBitcoins and started actively trading, there would be little anyone could do about it.

Here's another approach that will be hard for banks and regulators to respond to.  An escrow service that matches buyers and sellers in which cash is deposited by the buyer into the seller's bank account.   Seller's coins get escrowed to Bitcoin-Brokers.org.     

 - http://www.Bitcoin-Brokers.org
 - http://bitcointalk.org/index.php?topic=237164.0

The high volume sellers will have the risk of the bank concluding that the deposits are for bitcoin (or a sting) and the seller ending up without access to the funds in the bank account.

Instead of there being a handful of exchanges each with a high volume of cash deposits there will be a high number of exchanges (individuals selling coins) each with a low volume of cash deposits.   

Decentralization FTW!

[TippingPoint]

If 10000 US Bitcoin users opened accounts on LocalBitcoins and started actively trading, there would be little anyone could do about it.

Here's another approach that will be hard for banks and regulators to respond to.  An escrow service that matches buyers and sellers in which cash is deposited by the buyer into the seller's bank account.   Seller's coins get escrowed to Bitcoin-Brokers.org.    

 - http://www.Bitcoin-Brokers.org
 - http://bitcointalk.org/index.php?topic=237164.0

The high volume sellers will have the risk of the bank concluding that the deposits are for bitcoin (or a sting) and the seller ending up without access to the funds in the bank account.

Instead of there being a handful of exchanges each with a high volume of cash deposits there will be a high number of exchanges (individuals selling coins) each with a low volume of cash deposits.    

Decentralization FTW!

I believe that this may be a practical approach.  And it might be possible to donate or loan addresses to the escrow services, to increase the decentralization.  But could the escrow services remain out of the grasp of FINCEN?  Can high-volume buyers or sellers remain out of the grasp of FINCEN?

[TheButterZone]

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

I can only see how that can be applied to escrows and exchanges, but not to (I)ndividuals who simply buy BTC from one person (A) one day, sell it to another person (Z) another day, with no express or implied contract between the two people who sold and bought the BTC, (A) and (Z), and the (I)ndividual. This is the "as part of the acceptance and transfer of..." clause. There is a contract with (e)scrows and (e)xchanges, that they will execute trades between two (sometimes anonymous to each other) people with mutually-agreed-upon terms.

[firefop]

I found the advisory

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

And I quote

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.

and the definitions of user, administrator or exhanger

A user is a person that obtains virtual currency to purchase goods or services. 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.

Draw your own conclusions but it seems clear to me that unless you are in the business of buying / selling or exchanging bitcoins then FinCEN clearly does not apply.

I should point out that there are no administrators since the requirement states they be able to both issue and redeem (withdraw from circulation) --- nobody can withdraw a bitcoin from circulation - so we have no administrators.

so the only thing at applies is "as a business" re: exchange of bitcoin to fiat or vice versa.

So miners and users don't need to concern themselves - only exchanges and people who are registered as a business...