What do you need to know legally to sell on localbitcoins.com in the USA?

[GodOfTheEasternWinds]

I tried googling it, but its a cluster eff of information. So what I got from it all, is that you need a money transmitter license? You need to verify who you deal with, and also file reports for customers that buy more than $2,000 worth of bitcoin in a day?

Basically, what happened was, is that I logged in to my coinbase for the first time in months(and its lv3 verified) and found that my daily bank limit is now at $25,000, my credit card is at $7,500 weekly limit, and Paypal withdrawals at $25,000 a day. Then I remembered that localbitcoins site sells bitcoin at a rate higher than the actual price, something like 5% to 20%, which I guess is the profit they make minus fees. So a lightbulb turned on in my head, what if I registered to lbc, then used whatever capital I had in USD(right now, I can only spare $500) to buy btc on coinbase pro/gdax when I enter a trade in LBC, and then transfer the BTC there and sell it for 5% to 15% higher price and then receive profit in bank account or paypal? So lets say I make 10% profit off my starting capital, then I would have, say, $550 now, then repeat the process again, $605, and so on.

So, do I need to jump a lot of hurdles to get started? A license? Registration with the gubbermint? Going to my bank and telling them I'm gonna be selling BTC for profit? What do I need to do so I don't get THIS happening to me for selling btc for usd: https://youtu.be/L4bkbRhkXYE?t=2

It kind of seems like a waste that my CB account has a $25,000 a day limit and it's not being used. : I

Is it too late to even profit through LBC? Will I be waiting days before somebody purchases anything?

And I forgot to mention, how often will I encounter scammers? I read a few horror stories on reddit like chargebacks and so on, whats the scammer to legit buyer ratio like? Did KYC solve this?

[gentlemand]

Much is dependent on your state. The big operations have to have different licensing for each state. Some states are very slack, others awful strict.

As soon as Coinbase figure out you're buying from them and selling on LBC you'll lose your Coinbase account. They differentiate between users and exchangers. Exchangers aren't welcome.

https://support.coinbase.com/customer/en/portal/articles/1905681-localbitcoins-and-coinbase

[baradfo]

There will be multiple hurdles for you to accomplish the arbitrage that you're thinking of. Aside from Coinbase not allowing that (ultimately) you will have to register with FINCEN; FINRA; and the SEC as a money transmitter (for federal) then you'll more than likely have to register with your state (dependant on the state you live in). There will be KYC that you will have to comply with as well (which is a pain). On top of that if you want to have some measurement of protection so that you're personal assets will be minimally harmed you would have to form a company to deal with all of that and taxes that will come from it (yes taxes will hit you hard here with all the transfers that will happen). Capital gains tax will more than likely eat at your profits if the fees don't from LBC and Coinbase. And if you do have a bank that will do business with Coinbase (not all of them will) then you would eventually have to explain where the money from Coinbase is coming from, if not to the bank then the IRS when you get audited.

[GodOfTheEasternWinds]

@gentlemand Dear gosh, and I thought CB was encouraging arbitrage with such high limits. Is there other sites similar to CB that are okay with LCB? I remember registering to a bunch like CB, and doing KYC with all of them, then not touching them again after(and it was months before last years bullrun, so I had the chance to buy BTC at 2,000-3,000 at the time, but had no capital to work with.) I'm in FL by the way.

Big operations? What if I keep it small, like arbitrage $1,800, with 10% of it being profit, so I would be netting $180 a day. I read somewhere that it was fine as long as I wasn't going over $2,000 over a single client.

@baradfo Too bad about CB, any others similar to it that are okay with it? I registered with a bunch back then, did KYC, but never logged in again after that, and that was over a year ago. As for FINCEN/FINRA and SEC, isn't that only if I do more than $2,000 for a single person? I was reading that if its under $2,000 per customer, then there wouldn't be a need for the money transmitter license, but I guess I would still have to register with FINCEN/FINRA, how much would that cost? As for taxes, isn't it something like 30% capital gains tax, and then 15% of some other tax? I see about the bank, is it better to go to them and tell them what I'm gonna do beforehand? I'm in FL by the way.

[figmentofmyass]

@gentlemand Dear gosh, and I thought CB was encouraging arbitrage with such high limits. Is there other sites similar to CB that are okay with LCB? I remember registering to a bunch like CB, and doing KYC with all of them, then not touching them again after(and it was months before last years bullrun, so I had the chance to buy BTC at 2,000-3,000 at the time, but had no capital to work with.) I'm in FL by the way.

you can try gemini, bitflyer or kraken but they might have similar policies.

Big operations? What if I keep it small, like arbitrage $1,800, with 10% of it being profit, so I would be netting $180 a day. I read somewhere that it was fine as long as I wasn't going over $2,000 over a single client.

@baradfo Too bad about CB, any others similar to it that are okay with it? I registered with a bunch back then, did KYC, but never logged in again after that, and that was over a year ago. As for FINCEN/FINRA and SEC, isn't that only if I do more than $2,000 for a single person? I was reading that if its under $2,000 per customer, then there wouldn't be a need for the money transmitter license, but I guess I would still have to register with FINCEN/FINRA, how much would that cost? As for taxes, isn't it something like 30% capital gains tax, and then 15% of some other tax? I see about the bank, is it better to go to them and tell them what I'm gonna do beforehand? I'm in FL by the way.

as far as federal MSB registration requirements goes, there is no activity threshold for the definition of money transmitter. any person who engages as a business in the transfer of funds is an MSB.

at the state level, florida requires licenses for money transmitters:

A person may not engage in the business of a money services business or deferred presentment provider in this state unless the person is licensed or exempted from licensure under this chapter.

i don't see an activity threshold in the state law, but unlicensed activity exceeding $300 in any 12 month period is a third degree felony. i'd have a quick chat with a lawyer before jumping into anything. there have been a bunch of florida cases at both the federal and state level where bitcoin traders have been charged with unlicensed activity and money laundering.

[gentlemand]

@gentlemand Dear gosh, and I thought CB was encouraging arbitrage with such high limits. Is there other sites similar to CB that are okay with LCB? I remember registering to a bunch like CB, and doing KYC with all of them, then not touching them again after(and it was months before last years bullrun, so I had the chance to buy BTC at 2,000-3,000 at the time, but had no capital to work with.) I'm in FL by the way.

I've heard of all the major exchanges giving customers the boot if they find out they're selling on for profit. I doubt they themselves care all that much. They do care about being involuntarily implicated in money laundering they have nothing to do with once the coin has left their hands.

I'm not sure keeping numbers down will help. They follow the coins that leave their wallets. If small amounts are sent to gambling sites you're toast so I assume it's the same for LBC. You could try mixing coins or sending them through several wallets. Depends on how much you care about your Coinbase account.

Big operations? What if I keep it small, like arbitrage $1,800, with 10% of it being profit, so I would be netting $180 a day. I read somewhere that it was fine as long as I wasn't going over $2,000 over a single client.

Considering how eager the American government is to relieve your of your freedom for a very long time for any excuse whatsoever, you should consult a legal and financial professional to get the full picture. This is one area you can't afford to get wrong.

Even then I would not do it in the USA under any circumstances.

[GodOfTheEasternWinds]

@figmentofmyass Thanks for the info, FUUUUUUUUU, so basically trading more than 300 in a year is bad.  Do I have to move out of the country and do business elsewhere then come back, or do I have to totally get citizenship in another country to even begin try it? Or if I do STAY here, what is the license fee cost? I read 178,000 per year, is this possibly true?! You could move and establish yourself in some BTC friendly country for a lot less. Is there anywhere in the world where this sort of arbitrage is even legal??

@gentlemand Yikes, then the 25,000 a day limit is literally only for rich people then to move their BTC comfortably around and not for arbitrage. So If not in the USA, what country do you reccomend? Do I have to get rid of my US citizenship and move there? Could I just do it from there as a visitor? Do I have to become a citizen of said country before doing this arbitrage? Will they have a $178,000 fee to get a license as well? Man, opportunities. : I

[gentlemand]

@gentlemand Yikes, then the 25,000 a day limit is literally only for rich people then to move their BTC comfortably around and not for arbitrage. So If not in the USA, what country do you reccomend? Do I have to get rid of my US citizenship and move there? Could I just do it from there as a visitor? Do I have to become a citizen of said country before doing this arbitrage? Will they have a $178,000 fee to get a license as well? Man, opportunities. : I

Ask a pro.

There are plenty of LBC traders in the US doing fine. I would hope they've been very meticulous about how they set themselves up. The idea still gives me the willies.

Coinbase sells and buys BTC to private individuals. Once you signed up I presume the terms made sure you agreed not to use their business for your own business. Just like gambling, it creates head aches they have no interest in enduring.

There may be business specific avenues via them but there'll be no shortage of hoops to jump through and you'll probably need to be as compliant as they are to satisfy them which would be very compliant indeed.

Assuming you get legitimised the majority of professionals on LBC will buy and sell through there. In that case there's no need to deal with any exchange. You pay less from one individual and sell to another for more.