2013-07-02 BitcoinFoundation.org - Response to CA DFI Warning Letter

[Stephen Gornick]

From Bitcoin Foundation's legal representative:

The Bitcoin Foundation does not engage in any of these regulated activities.  Furthermore, even if it did engage in these activities, it does not have any business operations in California that would subject it to the Department of Financial Institution's ("DFI") jurisdiction.
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The Bitcoin Foundation does not have business operations in California that would subject it to the DFI's jurisdiction. [...] The Bitcoin Foundation provides no direct money services to any California consumers.
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The Bitcoin Foundation is not in the business of selling bitcoin to consumers and does not otherwise operate a bitcoin exchange.
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Bitcoins are not written or signed notes or drafts, and therefore, are not payment instruments regulated by the California Money Transmitter Act.
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There is no issuer of bitcoin that would be subject to licensure as a money transmitter under California law.
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The fact that bitcoin does not fit within the definition of payment instruments or stored value does not mean it is automatically regulated by the money transmission prong.
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The same rationale that applied to the sale of a peso should prevail under the California statute with regard to the sale of a bitcoin.
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The Bitcoin Foundation requests that your office issue an opinion that [...] the sale of a bitcoin is not regulated under the California Money Transmitter Act.

Response of Bitcoin Foundation to May 30, 2013 Warning Letter
 - http://www.scribd.com/doc/151346841/Bitcoin-Foundation-Response-to-California-DFI

[Akka]

Excellent. I really appreciate that they use the opportunity to ask for clarifications on the matter of Bitcoin sales within the response letter.

Engaging in a dialogue and not get in a defensive position and just dismiss the issue is IMO the right course.

[tuheeden]

This is an excellent response!

All bitcoin enthusiasts should read this. It does the best job that I have seen to qualify what bitcoin is and is not, from a money transmitter perspective but also simply from a "money" perspective.

Great work.

[Gabi]

Epic 

[bitfair]

Great response - essentially taking some negative attention and turning it into a huge win!

[Fugger]

They definitely chose a good way to answer!

[vokain]

at least they're doing part of what we pay them  to do :p

[kjlimo]

Not to be too cynical, but I wonder if this was planned...

Granted California leads the way for the US, I'm curious if all the same arguments hold up in Ohio, or any other state for that matter.

Is this simply a defense for the California law, or also the FINCEN guidance?

Either way, awesome job Foundation!

[Mytche]

Bitcoin Foundation, I think you just scored some major points.

[BTCLuke]

I still wish they'd have used the word "Nincompoop" just once in the response!

[d'aniel]

Boy, I sure am glad we have Bitcoin Foundation to help fight the legal battles

[scrybe]

Bravo!

[NewLiberty]

Not to be too cynical, but I wonder if this was planned...

Granted California leads the way for the US, I'm curious if all the same arguments hold up in Ohio, or any other state for that matter.

Is this simply a defense for the California law, or also the FINCEN guidance?

Either way, awesome job Foundation!

The FinCEN is guidance on enforcement and not basic law, and not adjudicated or even well clarified either.
So this response is based on California law.

"The same rationale that applied to the sale of a peso should prevail under the California statute with regard to the sale of a bitcoin."
The California law makes different distinctions from Federal law.
Federal distinguishes also between current money of a foreign nation and other payment instruments.  

If CA does issue a concurring opinion letter, that would be the epic win.

[sbfree]

wondering why this story, or rather the response, is not making more news headlines??

[sbfree]

interested in MSANTORI's opinion on this response.....or anyone else who can poke holes in the response.

[BlackLilac Jordan]

Really happy to see the Foundation using this situation to spread understanding of Bitcoin to officials and regulators, rather than simply covering their own butts. That's what we signed up for, keep up the good work!!

[No_2]

Agreed, good strategy.

[NewLiberty]

wondering why this story, or rather the response, is not making more news headlines??

Nobody was killed or caught in infidelity?
How many July 4th hotdogs can a legal opinion letter sell?

[kjlimo]

Not to be too cynical, but I wonder if this was planned...

Granted California leads the way for the US, I'm curious if all the same arguments hold up in Ohio, or any other state for that matter.

Is this simply a defense for the California law, or also the FINCEN guidance?

Either way, awesome job Foundation!

The FinCEN is guidance on enforcement and not basic law, and not adjudicated or even well clarified either.
So this response is based on California law.

"The same rationale that applied to the sale of a peso should prevail under the California statute with regard to the sale of a bitcoin."
The California law makes different distinctions from Federal law.
Federal distinguishes also between current money of a foreign nation and other payment instruments.  

If CA does issue a concurring opinion letter, that would be the epic win.

"If CA does issue a concurring opinion letter, that would be the epic win."

So FINCEN guidance is for enforcement of federal laws?  

Would the epic win be the same as Washington legalizing pot?  It's legal at the state level, but illegal at the federal level?  

Even though I understand you're saying it's not an "illegal" at the federal level, but merely interpreted to be illegal without registration based on FINCEN guidance which isn't exactly "illegal" but rather not congruent with their interpretation of existing rules which they (FINCEN?) would be required to enforce.

So the thoughts would be Cali says it's cool with this interpretation of Cali law, and then someone at the federal level says yeah, we think the same is a good interpretation of federal law/regulation, and then FINCEN issues guidance saying, yeah, I guess that's cool, so no registration necessary?

So a three step process?

[NewLiberty]

Not to be too cynical, but I wonder if this was planned...

Granted California leads the way for the US, I'm curious if all the same arguments hold up in Ohio, or any other state for that matter.

Is this simply a defense for the California law, or also the FINCEN guidance?

Either way, awesome job Foundation!

The FinCEN is guidance on enforcement and not basic law, and not adjudicated or even well clarified either.
So this response is based on California law.

"The same rationale that applied to the sale of a peso should prevail under the California statute with regard to the sale of a bitcoin."
The California law makes different distinctions from Federal law.
Federal distinguishes also between current money of a foreign nation and other payment instruments.  

If CA does issue a concurring opinion letter, that would be the epic win.

"If CA does issue a concurring opinion letter, that would be the epic win."

So FINCEN guidance is for enforcement of federal laws?  

Would the epic win be the same as Washington legalizing pot?  It's legal at the state level, but illegal at the federal level?  

Even though I understand you're saying it's not an "illegal" at the federal level, but merely interpreted to be illegal without registration based on FINCEN guidance which isn't exactly "illegal" but rather not congruent with their interpretation of existing rules which they (FINCEN?) would be required to enforce.

So the thoughts would be Cali says it's cool with this interpretation of Cali law, and then someone at the federal level says yeah, we think the same is a good interpretation of federal law/regulation, and then FINCEN issues guidance saying, yeah, I guess that's cool, so no registration necessary?

So a three step process?

There's a lot more steps in the journey.
Banking is regulated by states, there are 50 + some state-like geographies.
When it gets into inter-state issues, the federal jurisdiction gets more power.
The federal is broken into districts, the districts do not always agree.
If it is a constitutional matter, it can go to SCOTUS (supreme court of the US).

California is not a horrible jurisdiction if we were doing forum shopping.
NY is more banking centric, and California does things right sometimes, like this today:
http://www.newsnet5.com/dpp/news/local_news/water_cooler/california-man-found-not-guilty-in-chalk-vandalsim-case-at-bank-of-america-branches