Why Is a Beginner's Electronic Cash Experiment Considered Criminal?

[Loid Cypherpunk]

I’m trying to understand the specific basis for that classification.

Is it the software, the economic activity, distribution, or something else?

What exact conduct, rule, or law makes an experimental implementation cross that line?

I’m not looking for philosophical discussion. I’m asking for concrete criteria and specific examples.

[joniboini]

I'm kinda lost on what you're referring to here. What exactly is a beginner electronic cash experiment? Which country are we talking about? Since you mentioned it was labelled as criminal, wouldn't that imply the government share the reasoning for that, including the specific law and whatnot? Or are we talking about hypothetical scenario where the term itself is loosely defined?

[Ambatman]

Judging from your username I guess you speaking about decentralised and privacy money like Bitcoin
It's not considered a crime since the technology isn't inherently criminal but particular use can be
Just like virtually any technology.
I will place it as a messed up stereotype that many believe if you interested in privacy then you should be a criminal.

[Comeacross]

It depends on your country of residence but I believe it's same idea everywhere.

The software is not the problem. The crime is operating it without a licence. For instance, in Nigeria, the law is clear. Only CBN can issue currency. So it automatically becomes a crime when you attempt to issue any other currency or it's equivalent with the aim of circulating it as money. It doesn't matter if you call it experience or not, the moment people start using it for transactions, you are up against the law.

The general rule is if your software is only to allow people to send stuff between them and you have no control over it, it is fine but if you're running the server, process transaction or attach a fee, then you're operating a payment system and you need a licence for that. Otherwise, you're committing a crime.

[Loid Cypherpunk]

I'm kinda lost on what you're referring to here. What exactly is a beginner electronic cash experiment? Which country are we talking about? Since you mentioned it was labelled as criminal, wouldn't that imply the government share the reasoning for that, including the specific law and whatnot? Or are we talking about hypothetical scenario where the term itself is loosely defined?

Why does it sometimes feel like we are told to value freedom of expression, while people who think freely are punished for doing exactly that?

Whatever the case, privacy is a normal part of life, isn't it?

Maybe someday there will be something sane in this world.

It's not considered a crime since the technology isn't inherently criminal but particular use can be.

I agree that technology itself is not inherently criminal.

My question was more about where the line is drawn between an experiment and conduct that is actually considered criminal.

The software is not the problem. The crime is operating it without a licence...

That is exactly the kind of concrete distinction I was asking about.

Which specific country and which specific law are you referring to?

I would like to read the actual law and understand exactly which activity requires a licence, rather than relying on a general assumption.

[Zarya Volk]

I’m not looking for philosophical discussion. I’m asking for concrete criteria and specific examples.

In the US, Bitcoin's lack of an "operator" has been the distinguishing feature from other currencies which have been subject to prosecution. In 2007-2008, e-gold was prosecuted, which was used as a currency backed by gold. Their problem was that it was not P2P like Bitcoin, it was a company that stored user balances and allowed them to make payments. Because of this, they were supposed to be registered as money transmitter, and also follow AML/KYC laws. So, it's not just a matter of declaring it's just an "experiment."

In 2013, Liberty Reserve was criminally prosecuted. It had a lot of similarities to Bitcoin, but it was not P2P, it's branding was focused on anonymity in a way BTC isn't, and had little-to-no compliance. So, instead of the charges being for a "civil regulatory violation" it was a "criminal money laundering conspiracy."

Bottom line is that Bitcoin's implementation is such that there's no entity that could be prosecuted. You can be prosecuted under 18 U.S.C. § 1960 for operating an unlicensed money transmitting business. This has been interpreted to include companies that take possession of the money at any point, even temporarily, or that control or process the transaction. So, merely "distributing software" is legal, "operating a money service business," is not. Of course, you can't charge a fee or take a cut either. If you do that to facilitate a transaction, pretty much everywhere you're a money transmitter.

[hmbdofficial]

I would like to read the actual law and understand exactly which activity requires a licence, rather than relying on a general assumption.

I don’t know much about the laws, but I know that for you run a financial institution that create platform for people to keep money and also make transactions that you benefit from some charges from, then you needs a license from the authority that controls the banks because you’re practically operating as a sub bank, and if you don’t the license or get that permission from the authority then you’re definitely committing a crime.

Most of this license are issued by the Central bank of the country you’re operating at and that allows you to continue with your operation with being tagged as criminal. Thats why you see central banks warn against any fintech that hasn’t been licensed.

[adultcrypto]

I think the post is questioning why bitcoin (Electronic Cash) is perceived as something used by criminals, just like some bitcoin critics vocally condemn bitcoin as something used for the wrong reasons. My response is that bitcoin is mot exclusively reserved for criminals or for criminal activities,  bitcoin is money and accessible to everyone including criminals as well. Because few criminals also use fiat, PayPal,  bitcoin and other means of payment does not make them bad. Anyone attributing bitcoin to criminals is wrong and should not be taken seriously.

[JiiBs]

I do feel your response as quoted below do drift a little off course or at least the way I see it even when I didn’t clearly understand what you were talking about when you say, the experimentation of electronic cash was being criminalized.

Why does it sometimes feel like we are told to value freedom of expression, while people who think freely are punished for doing exactly that?

Whatever the case, privacy is a normal part of life, isn't it?

Maybe someday there will be something sane in this world.

What’s here to know however is, the world we live in is never free. There is never a time the world has being free and you don’t just go about doing as you like. We have laws and rules to ensure we are well aware of what limits we’ve got.

You wouldn’t be paying taxes if the world was indeed free and that didn’t infringe on the rights of nobody. Just the government telling you they own you and you work for them.

[Alphakilo]

I’m trying to understand the specific basis for that classification.

Is it the software, the economic activity, distribution, or something else?

What exact conduct, rule, or law makes an experimental implementation cross that line?

I’m not looking for philosophical discussion. I’m asking for concrete criteria and specific examples.

The reason why you create an electronic cash experiment doesn't matter to the law unless you integrate real world financial use into it without proper regulations. Once money is involved, legal rules must apply and that's why it can be an illegal activity if it enables live payment process on the network or other payment uses without kyc or AML policies guiding it.

[Loid Cypherpunk]

Thanks for the replies.

I understand the points about money transmission, licensing, real-world financial activity, and the distinction between software and operating a financial service.

Zarya Volk:
I understand your point about the distinction between distributing software and operating a money-transmission business.

hmbdofficial:
Understood. I also understand that licensing requirements can depend on the actual activity and jurisdiction.

adultcrypto:
I agree that the use of a payment system by criminals does not make the system itself criminal.

JliBs:
I understand that laws and rules exist and that an experiment does not operate outside them.

Alphakilo:
That distinction is actually what I was trying to understand: whether the relevant issue is the software itself or a specific real-world financial activity.

Loid:
Rather than continuing to debate the legal question, can we continue with the experiment itself?

If anyone is interested, run Queen, test the network, and tell me what happens.

I would rather see actual test results than continue arguing about the theory.

[BlackHatCoiner]

Under FinCEN's 2019 guidance, if you accept value from users and send it somewhere on their behalf, you're a money transmitter. That means registering with FinCEN, getting state licenses, and running AML/KYC. Skip all that and you're looking at 18 USC 1960 (unlicensed money transmitting business).

Publishing non-custodial software that users run themselves isn't transmission under that same guidance. The distinction is about who controls the keys.

Does that answer your question?

[Hatchy]

If anyone is interested, run Queen, test the network, and tell me what happens.
I would rather see actual test results than continue arguing about the theory.

I don't really know what you're looking for beyond what has already been said in this thread. The main point is that the classification can depend on how the asset is used, and every country has its own line drawn around the regulatory framework governing it.

[PrivacyG]

I don't really know what you're looking for beyond what has already been said in this thread. The main point is that the classification can depend on how the asset is used, and every country has its own line drawn around the regulatory framework governing it.

OP is obviously looking to promote their Altcoin, as in Queen.

[Loid Cypherpunk]

BlackHatCoiner:
Understood. The distinction between operating a money transmitter and publishing non-custodial software is clear. Thank you.

Hatchy:
Understood. The classification depends on how the asset is used and on the jurisdiction. Thank you.

PrivacyG:
Understood. You believe the purpose of this thread is to promote Queen. Noted.

Loid:
Okay, I accept your opinions.
Now, can we continue by starting a node and exchanging peers,
or not at all?

[attiq310]

You need to release the source for a node, instructions to build it, and how it differs from Bitcoin.

As far as gaining adoption goes: People are going to be wary of downloading and running a binary from some random noob account.

Regulators don’t really care about you sitting at home coding and testing stuff on your own, that’s not really a crime. But the minute you start distributing it or selling it they will.

If there’s any sort of token sale or premine or you advertise it as an opportunity to make a buck off price increases it’s going to be treated as an investment vehicle no matter what you call it. That would have a whole other set of regulations besides money transmitter.

[Danish Ali]

If there’s any sort of token sale or premine or you advertise it as an opportunity to make a buck off price increases it’s going to be treated as an investment vehicle no matter what you call it. That would have a whole other set of regulations besides money transmitter.

Great point. What happens, however, if someone were to release the code for free with no ICO, no premine and no "buy now before price go up"-style pitches? Would that mean that the Howey test no longer applies? What if one of the devs were to mine some before anyone else is aware of the project's imminent release? I'm not sure if regulators would still deem this an "investment scheme", despite the lack of an obvious sale.

People are going to be wary of downloading and running a binary from some random noob account.

In this case, the problem is more of a matter of adoption/trust rather than legality. Making it fully legal is not going to sway anyone to run executables from a newbie account with 23 activity.

However, by opening up the source with clear instructions on how to reproduce the same binary you're releasing, you're allowing people to inspect the source for themselves instead of blindly trusting someone else. That's the solution.

[attiq310]

What happens, however, if someone were to release the code for free with no ICO, no premine and no "buy now before price go up"-style pitches? Would that mean that the Howey test no longer applies? What if one of the devs were to mine some before anyone else is aware of the project's imminent release? I'm not sure if regulators would still deem this an "investment scheme", despite the lack of an obvious sale.

Interesting question. The Howey test requires an investment of money in a common enterprise with an expectation of profits to be made from the efforts of others. Absent a sale it would be much harder to make such an argument, and a free release would probably fare poorly on several of the Howey tests, because if it's free, there's unlikely to be a pitch.

That said, though I'm not a lawyer, early-mined coins could be part of a holistic view of what happened with respect to a sale/promotion of the currency, particularly if the developer was holding a large proportion of coins and later sold them to the market/promoted the currency, although this would likely be jurisdiction-dependent.

That said, if you mined coins early and didn't disclose this I think community members would be quick to declare it a stealth premine, which would sink community trust even quicker than regulators. Disclose up front how many coins were mined early on, and/or avoid the issue by launching with a genesis block so everybody can start mining on block 1.

Agree about reproducible builds, as it is one less thing you have to trust the dev with.

[Loid Cypherpunk]

attiq310:
The source is public, with setup instructions in the README.
I’m not trying to sell anything.

Queen Home:
https://bitcointalk.org/index.php?topic=5594369.0

Danish Ali “how is it different from Bitcoin?”:
Honestly, I don't know what the difference is beyond that.
I’m better at watching it run than explaining it with jargon.