FinCEN renamed "stored value" to "pre-paid access", let's hire a lawyer!

[Tulkas]

FinCEN renamed "stored value" to "pre-paid access", opportunity?

Accordingly to US Law (UNIFORM MONEY SERVICES ACT), Bitcoin has "monetary value" thus qualifying as "stored value". [see 1]

So any person or business transferring bitcoin from any kind of account based system to another person or business (as in a payment service) will need a "Money transmitting" license.

There is no US$ 1000.00 threshold for that, you transferred 1 btc from one person to another via funded accounts in your site, you need a "Money Transmitting" license.

From my understanding, if you do not transfer funds between users and limit the activity to US$ 1000.00 a day per user, you still are a MSB because bitcoins can be transferred to foreign countries, revoking the threshold.

But recently the definition of "stored value" changed, it also was renamed to "pre-paid access".

The definition go as follows:

Pre-paid access

The final rule renames 'stored value' as 'pre-paid access' without narrowing or broadening the meaning of the term, but recognises that value is not stored on the card. Specifically, the final rule defines 'pre-paid access' as:

"[a]ccess to funds or the value of funds that have been paid in advance and can be retrieved or transferred at some point in the future through an electronic device or vehicle, such as a card, code, electronic serial number, mobile identification number, or personal identification number."

The key parts of the definition are as follows:

Funds have been paid in advance; and
Those funds can be retrieved or transferred in the future.
FinCEN indicates that it believes that the definition has the necessary regulatory elasticity to survive future technological advancements.

The key term for me is "paid in advance".

Are bitcoins paid in advance ? Maybe I minted mine ?

The characterization of bitcoin as a "pre-paid access" is crucial to enforce regulation.

It is a show stopper for me. I think it will be at least a major pain for many other bitcoin business (like the wonderful casascius bitcoins, they look very similar to a redeemable pre paid "card").

Anyone here have some move information about this ?

Maybe we can collectively hire a lawyer to give us a final word about that

I'm more than willing to donate for that cause, maybe some more well know member can aggregate the donations ?

[1]
UNIFORM MONEY SERVICES ACT
http://www.securitization.net/knowledge/legal/uniform.asp
1. "Monetary value" is defined as "a medium of exchange, whether or not redeemable in money." Although not defined, medium of exchange connotes that the value is accepted by a larger group than the two parties to the change. Therefore, no "monetary value" would exist if the product (i.e., gift certificate) or payment mechanism (i.e., university payment card) is only accepted by one merchant.

2. "Stored value" is defined as "monetary value that is evidenced in an electronic record." Because "monetary value" is a required component of stored value, single issuer cards (i.e., gift certificates) and closed-end stored value systems (i.e., public transportation cards) are still excluded.

3. "Money transmission" means to engage in the business of (a) selling or issuing payment instruments, (b) selling or issuing stored value; or (c) receiving money or monetary value for transmission to a location within or outside the United States. This definition includes entities that receive and hold funds of consumers prior to transmission, whereas entities serving as a clearing agent for transmitted money (but never possess consumers’ funds) are outside the scope of the UMSA.

http://www.law.upenn.edu/bll/archives/ulc/moneyserv/umsa2004final.htm

 10. “Monetary value.” The definition of “money” has been expanded to reflect the fact that certain payment service providers employ a form of value that is not directly redeemable in money, but nevertheless (1) serves as a medium of exchange and (2) places the customer at risk of the provider’s insolvency while the medium is outstanding. The same safety and soundness issues pertinent to redeemable forms of value apply to these irredeemable forms of value. Consequently, a new definition of “monetary value” has been included in this Act.

[proudhon]

This doesn't look good.

[pointbiz]

Interesting. I have a few questions. Once you have a bitcoin what can you redeem it for? What's the redemption terms, rate of redemption and unit of redeemable value?

[Tulkas]

If only a single retailer accepts it, like a iTunes gift card, for example, then it is considered a "closed loop pre-paid access" and, as long as it can't be exchanged between users or sent internationally the 1k usd threshold is valid and you don't need to be regulated.

But if a community (they use a university fake money that is accepted by nearby stores as an example) start to accept it, its considered to have monetary value and the act of using it is "redeeming" it.

[finway]

Brazil law ?

[amincd]

It would be a very wrong decision to classify bitcoin as "pre-paid access". Pre-paid access means paying for credit that can later be redeemed for national currency. Buying a commodity, including a digital one like bitcoin, that has a value that fluctuates in the market, is not tantamount to credit that exists in a pre-paid card.

[Tulkas]

This doesn't look good.

Not, it doesn't, but maybe as a collective we can hire a fancy law firm and have some professionals looking over it.

I think it will be much more productive than each and every new startup here burning resources to solve an issue that affects so many of us.

[repentance]

There's a related thread here.

https://bitcointalk.org/index.php?topic=51980.0

Also here.

https://bitcointalk.org/index.php?topic=46971.0

The new rule was designed to be technology neutral and is meant to be adaptable to a range of products, such as a plastic card, an internet system, or a mobile phone network.

[Criteria that determines if a product is subject to the new rules include] whether the product is reloadable, can be transferred to other consumers, and, […] can be used to transfer funds outside the United States.

We will be publishing [a] proposal for public comment very soon [on the requirement that tangible prepaid access is declared] when it is transported across a border, similar to the existing declaration required for international transport of cash and monetary instruments.

An entity that engages in money transmission in any amount is subject to the BSA rules.

The term ‘currency dealer or exchanger’ [has been replaced] with the new term ‘dealer in foreign exchange,’ a term used to include the exchange of instruments other than currency as a category of MSB.

It is recognized that AML/CFT regulations need to be applied not just to banks, but rather to a range of financial and other types of commercial institutions. Why? The reason is that any way that you can move money—any way that value can be intermediated—can be abused by criminals”.

Violations by much smaller entities might also merit monetary penalties.

Over the past year FinCEN has been engaged in an initiative to identify unregistered money services businesses, primarily independent money transmitters.

Now that FinCEN has established a solid regulatory framework for prepaid access in the United States, we must continue to promote analogous steps in foreign jurisdictions.

http://www.bitcoinmoney.com/post/11074108719/fincen-freis-prepaid-access-speech

They're planning on pressuring similar bodies overseas to adopt similar provisions.  

[Tulkas]

It would be a very wrong decision to classify bitcoin as "pre-paid access". Pre-paid access means paying for credit that can later be redeemed for national currency. Buying a commodity, including a digital one like bitcoin, that has a value that fluctuates in the market, is not tantamount to credit that exists in a pre-paid card.

No, accordingly to FinCEN "monetary value" doesn't need to be redeemed for national currency:

1. "Monetary value" is defined as "a medium of exchange, whether or not redeemable in money." Although not defined, medium of exchange connotes that the value is accepted by a larger group than the two parties to the change. Therefore, no "monetary value" would exist if the product (i.e., gift certificate) or payment mechanism (i.e., university payment card) is only accepted by one merchant.

[adamstgBit]

what is this going to mean for the bitcoin consumer and bitcoin merchant?

[Tulkas]

There's a related thread here.

https://bitcointalk.org/index.php?topic=51980.0

Also here.

https://bitcointalk.org/index.php?topic=46971.0
....

Yes, you don't need to be in US ground to be considered a criminal there.

If you perform "money transmit", issue or sell pre-paid access in Costa Rica, you are still a criminal in US.

I've made a different thread because i think the main point here is hiring a law firm to have those questions answered. I think many people here will benefit from that.

[amincd]

No, accordingly to FinCEN "monetary value" doesn't need to be redeemed for national currency:

You're correct that it's not just national currency, but that's not important to my point.

My point is that this:

"[a]ccess to funds or the value of funds that have been paid in advance

Can only describe credit for a set amount of monetary value whether that value is in the form of a national currency or some other widely accepted medium of exchange thing else (e.g. goods/services), not a fluctuating value dependent on the market price of the commodity.

Bitcoin is a commodity. It's not pre-paid any thing.

I've made a different thread because i think the main point here is hiring a law firm to have those questions answered. I think many people here will benefit from that.

Definitely.

[Tril]

let's hire a law firm to find out if it's legal to pool together bitcoins to hire a law firm.

[repentance]

As long as people realise that a law firm's not going to be able to give you a definitive answer.  At best they can give you an opinion on how they think a court might interpret the legislation. 

From what I've read, the changes are comprehensive enough to include things like pre-paid mobile phone and internet plans as well as gift-cards and pre-paid credit cards.  There doesn't seem to be a requirement that the thing bought can be redeemed for a fixed value.

What they seem to be trying to do is include things which may be used for money laundering in the future and not just those which have been used in the past (phone cards and prepaid credit cards have definitely been used in the past).  By specifying the characteristics, they have more latitude for including some new thing under the regulations without needing to re-legislate.  It's kind of like analogue drug legislation for financial services.

[matonis]

Why do so many people worry about how the law (and courts) will view bitcoin? Bitcoin was designed to route around centralized, authoritarian interference. There is no "silver bullet" in the law that will ultimately save and protect bitcoin because:

1. the laws can always be 'adjusted' to accomplish the aims of the State;
2. bitcoin doesn't need saving -- laws and regulations written specifically for bitcoin would perversely enhance its legitimacy.

[adamstgBit]

can't we push the issue... ask the court to make an official decision.
make them illegally define bitcoin.

would this be good or bad for bitcoin?

[phillipsjk]

I think there are ways to ask for a declatory judgement.

If bitcoin really does not fit into any neat definitions, the court rule on the legality of things around bitcoin instead, such are requiring Money Service Business registration for exchanging bitcoin like they did in france with MtGox.

[Tulkas]

what is this going to mean for the bitcoin consumer and bitcoin merchant?

Anyone (business or natural person) that exchange pre-paid for something must keep records of each transaction for five years, require personal identification and report "suspicius activities" to FinCEN.

[Tulkas]

Why do so many people worry about how the law (and courts) will view bitcoin? Bitcoin was designed to route around centralized, authoritarian interference. There is no "silver bullet" in the law that will ultimately save and protect bitcoin because:

1. the laws can always be 'adjusted' to accomplish the aims of the State;
2. bitcoin doesn't need saving -- laws and regulations written specifically for bitcoin would perversely enhance its legitimacy.

Its not about saving bitcoin, its about not being arrested by accepting it.

[repentance]

what is this going to mean for the bitcoin consumer and bitcoin merchant?

Anyone (business or natural person) that exchange pre-paid for something must keep records of each transaction for five years, require personal identification and report "suspicius activities" to FinCEN.

Bitcoin aside, I suspect we're going to see a lot less businesses selling things like gift cards, mobile phone credit, pre-paid Visas and the like if they have to verify the identity of the buyer for each sale.  The administrative burden will just be too huge for a lot of small businesses to continue offering those things or it would slow down their normal operations too much (in the case of businesses like supermarkets).