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sfh
April 09, 2011, 05:28:42 PM
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April 09, 2011, 05:51:57 PM
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Thank you for everyone who registered on the site and wanted to participate. I guess in the end our TOS and identification requirements stopped people from completing the registration completely. I sent out about 40 post cards with about a dozen verifying their address and the next hundred or so people didn't even get post cards mailed out to them with their PIN's. I had a total of three people upload their documents out of all the registered people. Just not going to be the correct ratio we need to make things sustainable.

I was wondering what happened, when I logged into the site just the other day, and was not able to enter my postcard code.

Yeah, it is really tough to bootstrap.  For me personally, I can still sell bitcoins pretty much cost-free, which makes life difficult for any for-profit exchanger...


Quote
Some information we have received from the Department of the Treasury that may help others or existing exchangers expand their presence in the United States.

We asked for a ruling on Bitcoin, and bitcoin is determined to be "Stored Value" and FinCen regulations do not apply if $1000 per day per person is exchanged.

Here is a specific ruling on Stored Value that applied to our situation: http://www.fincen.gov/statutes_regs/guidance/html/fin-2009-r001.html

Quote
Redeemers of traveler’s checks, money orders or stored value who redeem more than $1,000 in traveler’s checks, money orders or stored value for any one customer on any day.

This is fantastic.  I was pretty sure that FinCEN ruling applied to bitcoin, but it is very good to have official confirmation of that.

Quote
There are some proposed legislation bills in cue to change regulations and Know Your Customer guidelines on stored value instruments. Our goal was to comply with these additional regulations in an attempt to make our bank more comfortable with our business model. The postcard with a PIN was to verify the address of the account holder to prevent someone from say Nigeria using stolen ACH credentials to make unauthorized transactions on someones account.

Do you have a pointer to more detail on this?

Thanks, and sorry to hear this is closing.  I never saw much about BitcoinUSA on the forums after the initial announcement, but was nonetheless following it with great interest.


Jeff Garzik, bitcoin core dev team and BitPay engineer; opinions are my own, not my employer.
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April 10, 2011, 05:48:05 AM
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Thank you for trying your exchange and being so open about the lessons you learned in the process.  The information you shared from the Treasury is excellent.  Best of luck on future Bitcoin projects.
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April 10, 2011, 06:34:48 AM
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Most people in the USA probably don't know this, but in Canada we can do cross-border ACH payment to/from the USA. It costs pennies per transaction, processes the same business day, and it only costs a couple hundred dollars to get it setup.

In terms of the money-related statutes of the USA: we just agree to them by signing a contract with our local bank. If you are found to be in breach of it, you are not arrested or fined. Your bank accounts are simply closed.

This might be a better option for those who want to provide ACH services to US customers. In the likely event of a US government backlash you'd just find your accounts closed. You wouldn't be in a legal battle or end up sitting in the 'clink. Smiley

A word of caution: I still wouldn't use ACH to debit from bank accounts. You will have fraud/sore casino losers/etc, and your only remedy is to sue. The banks don't get involved with ACH disputes at all because there is no money in it. (Pennies vs a credit card where the bank charges the merchant $20-$45 to mediate complaints.)

Paying people with ACH doesn't seem to be a problem at all. Actually, it is far cheaper and faster than wires.

I have software that I had written many years ago for a client of mine that actually produces the specially-formatted CPA (Canadian Payments Association; our equivalent of the ABA) files that are uploaded and parsed by our banks in Canada. If someone in Canada (or a US citizen using a trustee in Canada) needs programming examples I can provide them.
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April 10, 2011, 11:36:04 AM
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A word of caution: I still wouldn't use ACH to debit from bank accounts. You will have fraud/sore casino losers/etc, and your only remedy is to sue. The banks don't get involved with ACH disputes at all because there is no money in it. (Pennies vs a credit card where the bank charges the merchant $20-$45 to mediate complaints.)

Are you saying that all a customer has to do is call their bank and say they didn't authorize it, and the bank takes the money back from the merchant without question?

Does that apply only to merchant-initiated ACH? What about if the customer initiates the ACH from their bank's website? Most banks offer some sort of bill-pay service, which is sometimes processed electronically; some banks offer outgoing ACH directly; many others offer it through a service such as CashEdge's Popmoney.

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April 10, 2011, 12:59:07 PM
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Are you saying that all a customer has to do is call their bank and say they didn't authorize it, and the bank takes the money back from the merchant without question?

Without disclosing too much about my client; the last time we dealt with ACH disputes the following was standard procedure:

The customer calls their bank to dispute the withdrawal from their account. The customer is told to go to their branch to sign an affidavit, they sign it, and the funds are returned immediately. It matters not if the merchant has an authorization form with the customer's signature on it. If the customer claims it was fraudulent and signs an affidavit, the merchant loses the funds. The bank will not get involved in the dispute itself. It's up to the merchant to seek remedy in court by way of litigation.

Does that apply only to merchant-initiated ACH?

I've only have had experiences with merchant-initiated ACH. I can't speak for any other methods.

What about if the customer initiates the ACH from their bank's website? Most banks offer some sort of bill-pay service, which is sometimes processed electronically; some banks offer outgoing ACH directly; many others offer it through a service such as CashEdge's Popmoney.

Well, in Canada bill payments are technically not ACH. I'm pretty sure we have a separate facility for that here. I can't speak for the US's bill payment system.
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April 10, 2011, 07:18:27 PM
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We asked for a ruling on Bitcoin, and bitcoin is determined to be "Stored Value" and FinCen regulations do not apply if $1000 per day per person is exchanged.

Would you mind releasing the direct quote? Makes a huge difference whether we can refer to a quote from you vs a quote from the Treasury Dept.

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April 11, 2011, 04:29:50 AM
 #8

davidonpda:

wow, sad to see it go. while i never got around to registering myself, i was looking forward to seeing it in operation.

i guess the problem was that there are plenty of other avenues of exchange by now, that going through the laborious KYC registration process when you could just... go elsewhere, didn't make sense for a most users.

i suppose we'll just have to wait until someone like scottrade, or one of the big forex players, decides to add BTC to their trading options. Smiley

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April 11, 2011, 01:59:08 PM
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@davidonpda: could you publish the no-action letter you got from Treasury or at least give us its citation? I am working on a legal paper on bitcoin and the letter would be very useful. Thanks!
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April 12, 2011, 04:21:56 AM
 #10

What reubgr asked. I'm interested in setting up an exchange service and I have no idea what the legal barriers are.

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April 12, 2011, 08:36:16 AM
 #11

For those messing around with a PHP site, you can pull info from MtGox's site easily with his json api. A PHP Sample:

Code:
<?php
    
//Pull MTGOX Prices
    
$mtgoxtrade file_get_contents("https://www.mtgox.com/code/data/ticker.php");

    
//decode json information and place into array
    
$gettradedata json_decode($mtgoxtrade);
    
$tickerarray $gettradedata->ticker;

    
//Get the Current Bid, Ask, or any other data available. 
    
$CurrentBid $tickerarray->buy;
    
$CurrentAsk $tickerarray->sell
    
$CurrentVolume $tickerarray->vol
    
$CurrentHigh $tickerarray->high
    
$CurrentLow $tickerarray->low
    
$LastPrice $tickerarray->last
?>

/quote]

Thanx a lot dude! You saved me some time =D
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April 24, 2011, 04:53:57 PM
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bumping this in hope we can get the letter or direct quote on the ruling.  there is a lot of interest in this.
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May 05, 2011, 09:39:16 PM
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also bumping this
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May 06, 2011, 12:34:33 AM
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also bumping this

bump bump...

Also, would it be possible to set up the exchange with simple registration requirements, and then lift the $1000/day limit if you do everything for KYC?

As we slide down the banister of life, this is just another splinter in our ass.
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May 06, 2011, 01:39:09 AM
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It is also unclear about the 1099 tax forms and if those would need to be sent out like paypal is doing.

Since that law was repealed I don't think very much will happen.

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August 04, 2011, 08:07:52 AM
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Let me see if my business partner has the links for the proposed legislation. If I remember correctly there were two of them. One was old, pre-dating Bitcoin itself but if it were to get passed it would effect all stored value goods.

FinCEN does apply to bitcoins, but if you stay under $1000 per day per person you are not required to register as a Money Service Business.  Becoming a MSB opens you to all kinds of additional regulation.

Why do you think think FinCEN applies to bitcoins with regard to MSB issues?

This is directly from FinCEN on page 2:

Quote
Our regulations define the term “money services business”1 to include, among others, persons doing business as a seller or redeemer of stored value or as a money transmitter.2 A seller or redeemer of stored value is defined as a person who sells stored value in an amount greater than $1,000 per person per day.3 Stored value is defined as “funds or monetary value represented in digital electronics format (whether or not specially encrypted) and stored or capable of storage on electronic media in such a way as to be retrievable and transferable electronically. A money transmitter is defined as “any person...who engages as a business in accepting currency, or funds denominated in currency, and transmits the currency or funds or the value of the currency or funds, by any means through a financial agency or institution.””

The issue is whether bitcoins are 'currency', 'funds or monetary value' for purposes of MSB regulations? Currency is legal tender as defined under 31 USC 5103-5118. Bitcoins are not defined as legal tender currency under the USC. Funds or monetary value are in regard to currency.

Because bitcoins are not currency and MSB regulations apply to persons doing business as a seller or redeemer of stored value which is in regard to currency or funds of currency therefore the MSB regulations do not apply to bitcoins. For the same reasons MSB regulations do not apply to soybeans, tractors, ebooks or pieces of dog crap.

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