FinCEN

[coin2013]

If a miner mines bitcoins, would a miner that is not registered as a money transmitter be able to sell them on an exchange that has registered with FinCEN (MtGox, Bitinstant, etc) or would they both have to be registered as a money transmitter?

Would a miner be able to sell bitcoins that he/she mined for gold/silver and not be considered a money transmitter?

Would a miner that mined litecoins be able to exchange them for bitcoins on BTC-E?

Putting mining aside for a moment; Is it legal to transfer funds to BTC-E and buy litecoins and eventually exchange them for Bitcoins on BTC-E when the price is right? Then find an exchange such as Bitinstant or MtGox that apparently has registered with FinCEN to sell the bitcoins for USD? Or would someone in the USA, not be able to use BTC-E because they are not registered?

Is it legal to buy/sell on what appears to be a registered exchange such as MtGox or Bitinstant?

[DeathAndTaxes]

By the letter of the guidance there is no exemption for using a registered service.  Yes it sounds stupid and it is improbable that FinCEN would go after each miner but if you exchange virtual currency for virtual or real currency you are required to register unless an exemption applies.  One exemption is for not for profit, infrequent activity. 

So to answer your question.

Miner exchanges virtual currency on exchange for USD?  Yes an MSB (I doubt this will be enforced but the guidance provides no exemption)
Miner exchanges coins for bullion?  No.  Sells of goods or services (other than money transmission) are exempt
Miner exchanges one virtual currency for another?  Yes an MSB

Once again I don't necessarily agree with this, nor do I think it makes much sense, and it is highly unlikely FinCEN will (or even will be able to) enforce the regs to the letter of the guidance but that is what they advised.

[coin2013]

Thank you for your input!

What about buying bitcoins from an exchange? If that is legal, would you be required to use an exchange that is registered with FinCEN?

What about selling bitcoins that you didn't mine? Again, if it is legal to sell bitcoins on an exchange, are you required to use an exchange that is registered with FinCEN or could you use something like BTC-E?

[pedrog]

I think you'll find the information you're looking for here:

http://www.youtube.com/watch?v=T_QwofDM5x4

Sorry I can't point the exact minute, but the talk is very interesting, you will not get bored.

What I remember is that in the US as a miner you don't have to worry with the money transmitter thing.

Edit: Look 14 minutes in.

[polrpaul]

Thanks for your post, pedrog. 

[pedrog]

Thanks for your post, pedrog.  

You're welcome.

[coin2013]

Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.

[DeathAndTaxes]

Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.

Per FinCEN guidance I already answered.  If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.

Now is FinCEN going to send storm troopers to break down the door of every unregistered Jalapneo owner?  No.  That is the problem with poorly written guidance.  If the guidance as written won't be enforced then what will be enforced (i.e what is the "defacto line")?  Who knows.

[coin2013]

Thank you!!

[MSantori]

Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.

Per FinCEN guidance I already answered.  If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.

Tragically, the guidance does not literally exclude non-business miners.  By its terms:

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.

Note the use of the word "person" not "business".  It's my reading of it, given the context, that there is some argument to be made that persons not engaged in mining "as a business" are exempt.  But my opinion is in the minority, and it is contrary to the plain text of the guidance.

[optimator]

Tragically, the guidance does not literally exclude non-business miners.  By its terms:

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.

Interestingly, I believe you could argue that participants in a mining pool do not "create units of convertible virtual currency".

A USB stick miner could go their entire existence and never even find a block, yet they would be paid by the mining pool.

I could even argue that the participant who finds the block does not "create units" because they (the participant) do  not submit the block to the network. The mining pool submits the block.

[crumbs]

Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.

Per FinCEN guidance I already answered.  If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.

Tragically, the guidance does not literally exclude non-business miners.  By its terms:

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.

Note the use of the word "person" not "business".  It's my reading of it, given the context, that there is some argument to be made that persons not engaged in mining "as a business" are exempt.  But my opinion is in the minority, and it is contrary to the plain text of the guidance.

Do you think FinCEN is intentionally leaving open the option of going after major miners (such as miners selling PMBs)?

[coin2013]

Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.

Per FinCEN guidance I already answered.  If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.

Tragically, the guidance does not literally exclude non-business miners.  By its terms:

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.

Note the use of the word "person" not "business".  It's my reading of it, given the context, that there is some argument to be made that persons not engaged in mining "as a business" are exempt.  But my opinion is in the minority, and it is contrary to the plain text of the guidance.

Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?

[MSantori]

Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?

On that fact pattern, nobody is actually located in the US or doing business with US citizens?  I don't believe US regulators would have any jurisdiction over the miner.

If the miner is a US citizen residing in the US, then it's a closer call.

[coin2013]

Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?

On that fact pattern, nobody is actually located in the US or doing business with US citizens?  I don't believe US regulators would have any jurisdiction over the miner.

If the miner is a US citizen residing in the US, then it's a closer call.

Using the same scenario: What if the miner was a US Citizen and the mining rig was located in the US, but just like in the scenario, the pool sent the bitcoins rewarded to the VPS that was located outside of the country and those mined units were exchanged on a foreign exchange?

[DeathAndTaxes]

Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?

On that fact pattern, nobody is actually located in the US or doing business with US citizens?  I don't believe US regulators would have any jurisdiction over the miner.

If the miner is a US citizen residing in the US, then it's a closer call.

Using the same scenario: What if the miner was a US Citizen and the mining rig was located in the US, but just like in the scenario, the pool sent the bitcoins rewarded to the VPS that was located outside of the country and those mined units were exchanged on a foreign exchange?

Generally speaking if it involves a US entity then our over reaching federal govt is going to claim jurisdiction.  Take online poker as an example.  US players, playing on foreign servers run by foreign companies and with banks in foreign countries.  The Justice department seized the servers, bank accounts, and filed charges against the foreign companies.

[NewLiberty]

Would a miner be able to sell bitcoins that he/she mined for gold/silver and not be considered a money transmitter?

Shameless plug: we have the lowest premium silver pieces available for bitcoin.
(closest to bullion spot price)
And unlike American Eagles, not governed by CFTC so not considered required reporting to IRS.
http://www.coinworld.com/Articles/ViewArticle/what-coins-are-reportable
(Not to be construed as tax advice)

[coin2013]

FinCEN is classifying bitcoin as currency and in their guidance it states:

"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 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."

"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.""

So as discussed previously in the post, it appears that: "If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers."

What still doesn't make sense to me, is you can create an account with Etrade (https://us.etrade.com/investing-trading/forex?ploc=it-nav) and start FOREX trading; which is trading currency. To my knowledge it appears you can do that all day long for the sole purpose of making a profit. However it appears from the recent guidance, if you were to trade bitcoin for the sole purpose of making a profit, then you would need to register with FinCEN. I don't understand why someone would be able to be a "day trader" on Etrade and trade real currency for a profit, however if they were to become a "day trader" with bitcoin, then they would need to register with FinCEN.

What is the difference between trading fiat and trading bitcoin, that would require you to register with FinCEN if you decided to trade bitcoin for a profit? It appears they are both considered currency with FinCEN. I might be totally missing something, but this is what I really don't understand.

[DeathAndTaxes]

Because FINCEN felt the need to force Bitcoin (square peg) into a round hole (existing MSB regulations) and the only place it would fit (kinda) was Money Transmitter classification.  They DID NOT determine that exchanging USD for BTC (or BTC for USD) was similiar to someone exchanging USD for EUR or EUR for USD = currency exchange.  They decided exchanging BTC to USD was similar to Bob paying Alice by using a third party (think Western Union) = Money Transmitter.

There is a classification called "foreign currency exchange" which is a MSB (money service business) but isn't a MT (money transmitter).  Using "common sense" OF COURSE exchanging Bitcoin for "real" currencies has more in common with a currency exchange then money transmission but FINCEN couldn't make that fit (regulations define the words foreign in foreign currency exchange).  The only thing they could force Bitcoin (square peg) into in the MSB regs (round hole) with a massive amount of force (asinine leaps of logic) was Money Transmitter.

TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges.  The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years.  FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.

[NewLiberty]

TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges.  The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years.  FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.

The Foundation challenged this in its response letter.  It may yet get litigated if not legislated.