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Author Topic: Using Liberty Reserve? READ THIS NOW!  (Read 21563 times)
davout
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February 07, 2011, 12:14:20 AM
 #21

As soon as mtgox is investigated he will probably be shut down, I am sure there are a lot of laws (stupid laws) that are being broken. There are probably some regulations for this as well. This kind of thing is just not allowed.
There are not a lot a "lot of stupid laws" being broken. There's one big fat law probably being broken, that's conducting the business of being a bank without the proper license.

The only option is to have an anonymous exchange, anything else will be targeted and shut down by the government.
That can't exist when one uses bank wires. Money has to get in, money has to get out, dead simple. You can't have something global and scalable using cash.

It will hit mtgox eventually, and it will hit hard. And it might probably hit me too eventually if I don't find creative solutions Smiley




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kiba
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February 07, 2011, 12:16:49 AM
 #22

The exchange problem appears to be intractable.

The Madhatter
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February 07, 2011, 12:30:34 AM
 #23

There are not a lot a "lot of stupid laws" being broken. There's one big fat law probably being broken, that's conducting the business of being a bank without the proper license.

Actually, it's called money transmitting without a license. MtGox doesn't do any banking. They don't write loans or pay interest.

That can't exist when one uses bank wires. Money has to get in, money has to get out, dead simple.

Yes, but you can insulate the customers from privacy breaches by using a network of global exchangers. If we had exchangers in every country in the world that traded GoxUSD/GoxEUR for cash/money orders/wires/etc it would be more robust.

Only the exchangers in each country would have to transmit a monthly wire to MtGox for more GoxUSD/GoxEUR markers. MtGox could limit his risk by having more than one bank account that accepts these wires. He could also cash the accounts out as soon as he receives the wires. He'd only be expected to hold enough day to day operating cash in his bank accounts.

You can't have something global and scalable using cash.

It could be done with a network of brick and mortar stores around the world that did over the counter trades in cash for Bitcoin. I don't see the cash in the mail for Bitcoin being very scalable because it relies so heavily on trust.

It will hit mtgox eventually, and it will hit hard. And it might probably hit me too eventually if I don't find creative solutions Smiley

I think exchangers should be laptop nomads. Tongue The "Ghost Walkers" described here: https://ffij33ewbnoeqnup.onion.meshmx.com/books/Toward_A_Private_Digital_Economy/index.html#Ghost%20Walker
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February 07, 2011, 12:31:49 AM
 #24

The exchange problem appears to be intractable.

It can be solved if we are creative.
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February 07, 2011, 12:46:28 AM
 #25

The solution would be to either register of buy a shelf company in the Seychelles.
Use that to open up any corporate bank account around the world, preferably bank in Azerbaijan (pretty much no rules) and they can accept indirect IBAN xfers through Austrian banks.

Or you could open a Perfect Money account and accept 3rd party wires. Use Superchange.ru or your exchanger of choice to convert it into Hdmoney or something else for customers to cash out with. I've never used it tho the large ponzi schemes have no problem dumping huge money into it. There must be some major exchanger in Russia/Canada/China you can partner with to accept money to fund into Mt Gox or withdraw.

The last thing you want to be doing is running an unlicenced brokerage/exchange house or market in the USA. Expect domains to be seized, and a visit from the Secret Service and IRS. At least a Seychelles IBC doesn't have to report anything according to Seychelles law (for now.. this will probably change just like Costa Rica, Switzerland and Jersey had to change)

Should definitely look into making it a Tor hidden service as well to prevent hordes of investigators seizing records, or ddos attacks. Leaseweb and some other fast ISPs have no problem with VPS subscribers running Tor. If not possible then grandhost.cc offers bulletproof 'immunity' hosting in Moldova, Ukraine and Russia with domains that can never be seized but it's pricey, $100/mth typically. A Tor hidden service would be only $50/mth on a major provider in EU



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February 07, 2011, 01:36:58 AM
 #26

Sorry, shell companies are of no use, that is playing by their rules, we will not be allowed to operate in their game.

A method to operate an anonymous exchange, the exchange must remain anonymous, customers can become known to the exchange( but the exchange is not known,by more than reputation to the customer)

A customer creates a regular bank account and gets two atm cards. One card is sent to the exchange(how the exchange can get it and remain anonymous I don't know, small detail).

When the customer wants to transfer money to the exchange they deposit cash into the account and inform the exchange. the exchange then needs to use the atm card to withdraw the cash.

When the exchange wants to return money to the customer they deposit cash to the account using an automated deposit machine, and the atm card they were given. The exchange then informs the customer that their funds are availablefor withdrawal.

The account then become a kind of drop box with multiple gateways to drop off and pick up from, forming a cutout between the exchange and the customer.

As was said before the exchanges can then become known to each other and do international transferes etc. directly to each others accounts.

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February 07, 2011, 01:53:08 AM
 #27

I can't say much more in public, but this I can;

Bank wires are not the solution. Those online poker cashiers were busted through bank wires of USD.

Being outside the US does not solve the problem because for the past 4 years or so, all wires in US funds are diverted through a US (NYC) "corespondent bank" who spies out your deals and charges the victim $15. Panama is the worst. They actually use USD as national currency and are therefore totally under the thumb of the "owners", the Federal Reserve.

Not only would you have to be outside the US, none of your wires could carry USD.

Perfect Money is not perfect. They are currently melting down and selectively scamming their stakeholders.

HD-Money has taken the only logical approach and is unregistered, and unattached to any legal fiction or person - a pirate corp. If the privateers board her, the killing will be swift and the booty will be carted off to feed the beast but the jackboots are stymied as to where the treasure is buried and they can't finger anyone for the rubber hose treatment. Guess all you like. Nobody is going to admit he is pushing the buttons and hiding the booty. It might work.

As for LR, the founders decided to not admit ownership after being jailed in NYC. Since then it's been a mystery. There is some sort of corp reggy to enable the banking, but that's surely a trustee.

And no davout, for the nth time, Mt Gox is not a bank. Check a dictionary. If Jed had a charter to create money, especially in this bailout climate, he wouldn't bother with petty little bitcoin. (Let me know Jed because I'd like a bailout loan too).

And that is the rumour about LR, that they contracted a charter under under the Costa Rican gov.

BTW, most CR corps bank in Panama. You know, the country that got INVADED by the US over bank deposits.

some more jargon for googlers; financial services business (FSB) financial action task force (FATF) Financial Intel Center (FINCEN) financial tracking agency (FINTRAC) mutual legal assistance treaty (MLAT)


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Nefario
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February 07, 2011, 02:20:39 AM
 #28

Perhaps, by the time all the exchanges get slammed by the governments, there will be enough B users to maintain trade.

The majority of those who wish to enter after that, will have to do so via selling goods and services for Bitcoin. Adoption would just take longer. Bitcoin is still in beta anyway, and only 1/4 of the monetary base is generated.

To me, the problem really boils down to the fact that the average newcomer has now been pushed out of worthwhile, independent generation by GPU-rack farmers, and communes. If the independent CPU miners could still generate blocks, more people would have Bitcoins to spend, and wouldn't need exchangers...




Specialisation of labor, this is one of the results of a market(even one thtat is not free) and especially for one that is completely free. It is a goodthing and will benefit everyone in both the short term and long term. It is a sign that the free market is working that gpu farms have grown, and quickly too.

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kiba
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February 07, 2011, 03:40:53 AM
 #29


...the multinational banks have also grown and quickly too. So, if it will be "a  good thing" to have the central reserve bank of bitcoin once the current banks buy up the gpu farms and get together as member banks, then concentration of wealth and network control in farms and communes will also benefit everyone, as you say...

As i understand the intent, however, this was supposed to be a p2p network, in which there weren't the usual centralized wealth and control that would weaken it. P2p is not about "specialization of labor," and rather about spreading it out rather equally, to gain certain benefits. Specialization of labor is the client/server model, where the server farms and clusters do the labor and charge us fees for it... Silly, me! I thought we were trying to get away from that with Bitcoin...

It's not like the GPU farms are cornered markets.

Garrett Burgwardt
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February 07, 2011, 03:46:27 AM
 #30

Mining isn't even the point of Bitcoin, you guys. It doesn't matter if the mining market is cornered for now, in 2013 there will be less profit gained from the same work.

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February 07, 2011, 05:02:40 AM
 #31


...the multinational banks have also grown and quickly too. So, if it will be "a  good thing" to have the central reserve bank of bitcoin once the current banks buy up the gpu farms and get together as member banks, then concentration of wealth and network control in farms and communes will also benefit everyone, as you say...

As i understand the intent, however, this was supposed to be a p2p network, in which there weren't the usual centralized wealth and control that would weaken it. P2p is not about "specialization of labor," and rather about spreading it out rather equally, to gain certain benefits. Specialization of labor is the client/server model, where the server farms and clusters do the labor and charge us fees for it... Silly, me! I thought we were trying to get away from that with Bitcoin...

My point is that LR and other exchangers are those points of weakness, manifested in the problems this thread is addressing...


Yes exchanges are points of weakness, no international banks or any kind of legitimate bank will not corner the bitcoin market, they won't even recognise bitcoin until it's stealing all their business, and then they willside with governments trying to destroy it.


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The Madhatter
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February 07, 2011, 06:57:22 AM
 #32

Imagine hoards of nomadic exchangers with cellphones/pdas/laptops that roam the world doing face-to-face cash exchanges for Bitcoin.

Hey.. a man can dream... Tongue
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February 07, 2011, 08:35:05 AM
 #33

MtGox should drop it immediately and just accept bank wires.

Wouldn't that make them even more vulnerable to US government stupid laws?
While they keep with LR they are vulnerable "only" to Costa Rica government and whichever government controls the data center where they are hosted.

I mean, if LR is doing chargebacks just like paypal, then I get the point. I haven't read everything you just posted, but it's not quite that yet, right? They are "just" locking accounts under investigation by US authorities, right?

Summarizing, why would bank wires be any safer than LR?

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February 07, 2011, 09:45:28 AM
 #34

And no davout, for the nth time, Mt Gox is not a bank. Check a dictionary. If Jed had a charter to create money, especially in this bailout climate, he wouldn't bother with petty little bitcoin. (Let me know Jed because I'd like a bailout loan too).
Of course it's not, he still does things that require a banking license where I live, safeguarding people's money, allowing people to send money to each other etc.

I have no idea about the best possible solution, I think the network of exchangers is a good first step, nefarios idea with the credit cards is really creative but I don't really see it scale well.

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February 07, 2011, 01:36:18 PM
 #35


IMHO, it's actually beneficial for Bitcoin that fiat exchange mechanism problems continue. It gives a strong incentive for "the average citizen" to enter the B economy via trading good and services, AND stay in it to avoid the exchange hassles...

It will delay widespread adoption, but seems a much more elegant and clean solution, which is more consistent with the p2p design and intent of the project...

I've closed my LR account, and plan to use exchangers only when it's unavoidable. Thank you, Madhatter! You are a very valuable member of the Bitcoin community! Smiley


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February 07, 2011, 05:40:21 PM
 #36

And no davout, for the nth time, Mt Gox is not a bank. Check a dictionary. If Jed had a charter to create money, especially in this bailout climate, he wouldn't bother with petty little bitcoin. (Let me know Jed because I'd like a bailout loan too).
Of course it's not, he still does things that require a banking license where I live, safeguarding people's money, allowing people to send money to each other etc.

I have no idea about the best possible solution, I think the network of exchangers is a good first step, nefarios idea with the credit cards is really creative but I don't really see it scale well.

A bank solicits deposits and makes loans at interest. Mt Gox is a financial services business (FSB).  Since these definitions come from France, I will assume they are also used there. FATF is Groupe d'action financière (GAFI)

Generally, this "authority" claims that FSBs who transmit money must be licensed. I can argue that exchangers don't transmit money, and be correct, but the opposition has proven themselves to be motivated to something other than justice.


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February 07, 2011, 05:55:28 PM
 #37

A bank solicits deposits and makes loans at interest. Mt Gox is a financial services business (FSB).  Since these definitions come from France, I will assume they are also used there. FATF is Groupe d'action financière (GAFI)

In the US, this is called a Money Services Business (MSB).  Mt Gox is probably an MSB, but there is FinCEN administrative ruling that states "our regulations define a money services business to include a seller or redeemer of stored value who sells or redeems stored value in an amount greater than $1,000 per person per day in one or more transactions."

So it can be argued that limiting daily withdrawals to $1000, exchanging for stored value (==bitcoins), fits this definition.  At least for the US jurisdiction.

Nevertheless, I would certainly recommend to Mt Gox and others in the US to register as an MSB.  It's not as complicated or expensive as it sounds, and it basically involves the following:
  • AML: requires at least two people.  One is an auditor/reviewer of anti-money-laundering (AML) practices, who should not be involved in implementing AML.  For small websites, this means the website owner (mtgox) must find another person willing to review his code for security/privacy/KYC/AML.
  • AML: You must file electronic reports on all transactions leaving the country, or are over $10,000
  • AML: You are expected to notice transactions smaller than $10,000, that appear to attempt to evade the $10,000 reporting limit
  • KYC: You are expected know to details on your website's users, primarily name, address and tax ID, in case law enforcement comes calling.

There are more details, but these were the big details that stick out in my mind, from my own research.

Jeff Garzik, bitcoin core dev team and BitPay engineer; opinions are my own, not my employer.
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February 07, 2011, 06:06:35 PM
 #38

This whole Liberty Reserve thing just stinks. MtGox should drop it immediately and just accept bank wires. He can sell GoxUSD / GoxEUR or whatever. The exchangers can buy/sell the GoxUSD/GoxEUR directly from MtGox and resell it to the masses.

I don't get the concern... when you do a bank wire, doesn't that pretty much already make your identity available to the US government, in addition to putting the transaction right under their nose?  The owner of MtGox doesn't appear outrageously concerned about being anonymous, as he seems willing to readily identify himself to his own prospective customers.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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February 07, 2011, 06:42:57 PM
 #39

So it can be argued that limiting daily withdrawals to $1000, exchanging for stored value (==bitcoins), fits this definition.

I wonder what would happen if the value of Bitcoins rises so quickly that someone's MtGox balance increases in value by more than $1000 per day. They will never be able to get the value out!
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February 07, 2011, 07:18:44 PM
 #40

And no davout, for the nth time, Mt Gox is not a bank. Check a dictionary. If Jed had a charter to create money, especially in this bailout climate, he wouldn't bother with petty little bitcoin. (Let me know Jed because I'd like a bailout loan too).
Of course it's not, he still does things that require a banking license where I live, safeguarding people's money, allowing people to send money to each other etc.

I have no idea about the best possible solution, I think the network of exchangers is a good first step, nefarios idea with the credit cards is really creative but I don't really see it scale well.

I do have to wonder where the lines are drawn (legally speaking) for these activities. If I overpay my cell phone bill, then my verizon account ends up with a negative balance (is it a negative balance in a credit account? I can never keep those accounting terms straight). Does that make verizon a bank? Technically, I can leave the money there to spend on future service automatically, or call them up and demand that they refund me (cash out).

When we first got together, my wife had double paid a cell phone bill, but it was a late already, so it was a bill for 2 months, and a second notice came in the mail, which she also paid, after the first one went out.... so she paid for about 4 months of service up front. Did that make them a bank? (are they already?)

At what point does allowing people to hold a credit with you, for use at your site, make you a bank? Clearly there are many situations where a non-bank would end up holding your money for a short time (or intending to be a short time, that for various reasons, can turn into a long time).

Of course... I know this is a slippery one, since, each government makes its own laws. Here in the US, often at multiple levels of city, country, state, and federal.... so likely the answer is different in many different places but... it seems like even a store that sells gift certificates is, in some way, acting as a bank, depending on your definition.

When I loan a friend $10 because he left his wallet at home, am I a bank?

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