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Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. Not to mention selling crypto with credit cards is a g

Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad. I don't get this.

htormey 9y ago
I agree. Have these guys done any legal due diligence on any of this? Any lawyers care to chime in? I thought you couldn’t do this in many states without a money transmitter license. Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate. Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following: “What platform/tools do you use for your business? Stripe for payments” This is what Stripes TOS says: “By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.” “Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller ” https://stripe.com/ca/prohibited-businesses https://stripe.com/ca/prohibited-businesses I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP. Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.
- throw9991999 9y ago
  Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Which banks have no issue dealing with crypto related businesses? Anyone know what banking partners Coinbase, Gemini, Bitpay etc use?
  - ceejayoz 9y ago
    > Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Surely you're not surprised? Credit card chargebacks make it virtually guaranteed that widespread fraud would occur.
- s73v3r_ 9y ago
  "Have these guys done any legal due diligence on any of this?" Something, something, move fast and ask for permission later.
  - jklein11 9y ago
    In all seriousness, what is the worst that could happen to these guys?
    - brownbat 9y ago
      "In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000." https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report-virtual-currency-transactions https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report... I'm not their or your lawyer and this isn't advice it is just one among what I assume are many possible examples of penalties that have been asserted for those who are messing around with coins without really thinking them through. I don't know who is doing their taxes or legal prep, maybe they've got this all covered, who knows. UPDATE: They reply in another comment that they've been advised to avoid US sales for the time being. Makes sense.
mieseratte 9y ago
> Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. I look forward to the "How I lost $32,000 selling crypto-USBs" after the fraud claims and chargebacks are filed.
- BartBoch 9y ago
  Thousands of smaller transactions. You are buying USB keys with a set amount of Crypto. They can just assume 10% scam ratio and rise price by that.
  - devit 9y ago
    If scamming something like this is possible, the scammers have an incentive to scam as much as possible, so the "scam ratio" will tend to grow to 100% quite fast unless there's a huge amount of legitimate business.
    - fiveoak 9y ago
      I don't really think this is true in practice. There is a risk to scamming, plus even with zero risk not every customer would choose to scam them (given morals/etc).
      - cardine 9y ago
        It only takes one sophisticated scammer to make the "scam ratio" close to 100%.
    - BartBoch 9y ago
      If that would be true, then Ebay, Amazon, Etsy etc. would have no right to exist in the world.
      - thunfischbrot 9y ago
        The difference may lay in the years that those you named had to adjust and readjust their countermeasures and learn from their mistakes ( up to a point ).
wheelerwj 9y ago
almost certainly going to run into regulatory problems. As the former head of an former MSB, I did not enjoy the experience.
dragonwriter 9y ago
> You need a license to sell this in the US. I think Dr. McCoy said it best: “There aren't going to be any damn permits. How can you get a permit to do a damn illegal thing!”
- IncRnd 9y ago
  You sound like a doctor not a miracle worker!
deleted 9y ago
[deleted]
paulie_a 9y ago
> regulatory problems They should be more concerned about federal prosecution for fraud > I don't get this Because it is a scam
parliament32 9y ago
>You need a license to sell this in the US. I'm not sure if you do. How is this any different than "buy X product for $50 and get a $5 mail-in-rebate via AMEX gift card"?
yorby 9y ago
crypto is just like pizza and has nothing to do with currencies in the US, no?
auston 9y ago
> Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. We've had some conversations with our legal team at Cooley & some conversations with outside counsel at Goodwin Procter. They have not been able to reach consensus on whether we fall within regulatory oversight. Until then, we're not going to be selling anymore in the United States. It comes down to whether this is art or a collectible or not. We're working on it & have stopped sales for the time being. :) > Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. This is a fair point, there is actually trust on both sides of the relationship here - we're trusting that our customers will not chargeback & they're trusting us not to steal their keys. > Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad. We originally thought so as well. When we sold a bunch we were surprised & started talking to our customers. It turns out, they don't want to go through the hassle of finding a wallet creator, disconnecting their computer from the internet, generating a wallet, writing down private keys or mnemonics & securing them. You can think of this kind of how car dealerships don't run their own mail servers anymore or pizza places don't run their own instance of a bind DNS server. They want the convenience of not having to worry about it. We're currently working hard on a v2 that makes it a bit more secure while maintaining usability. > I don't get this. We really didn't either, but the people that have trusted us with their money helped us understand this: Everyone who is working on cryptocurrency projects is suffering from the curse of knowledge [1] - most of them don't care about the end user. 1. https://en.wikipedia.org/wiki/Curse_of_knowledge https://en.wikipedia.org/wiki/Curse_of_knowledge
- CPLX 9y ago
  > we're trusting that our customers will not chargeback I remember when I was young once, too.
- htormey 9y ago
  Glad you guys got a lawyer to look into this. Thread very carefully with crypto, taxes and the US government. Good luck.

htormey 9y ago

I agree. Have these guys done any legal due diligence on any of this? Any lawyers care to chime in? I thought you couldn’t do this in many states without a money transmitter license. Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate. Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following: “What platform/tools do you use for your business? Stripe for payments” This is what Stripes TOS says: “By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.” “Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller ” https://stripe.com/ca/prohibited-businesses https://stripe.com/ca/prohibited-businesses I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP. Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.

throw9991999 9y ago
Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Which banks have no issue dealing with crypto related businesses? Anyone know what banking partners Coinbase, Gemini, Bitpay etc use?
- ceejayoz 9y ago
  > Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Surely you're not surprised? Credit card chargebacks make it virtually guaranteed that widespread fraud would occur.
s73v3r_ 9y ago
"Have these guys done any legal due diligence on any of this?" Something, something, move fast and ask for permission later.
- jklein11 9y ago
  In all seriousness, what is the worst that could happen to these guys?
  - brownbat 9y ago
    "In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000." https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report-virtual-currency-transactions https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report... I'm not their or your lawyer and this isn't advice it is just one among what I assume are many possible examples of penalties that have been asserted for those who are messing around with coins without really thinking them through. I don't know who is doing their taxes or legal prep, maybe they've got this all covered, who knows. UPDATE: They reply in another comment that they've been advised to avoid US sales for the time being. Makes sense.

mieseratte 9y ago

> Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. I look forward to the "How I lost $32,000 selling crypto-USBs" after the fraud claims and chargebacks are filed.

BartBoch 9y ago
Thousands of smaller transactions. You are buying USB keys with a set amount of Crypto. They can just assume 10% scam ratio and rise price by that.
- devit 9y ago
  If scamming something like this is possible, the scammers have an incentive to scam as much as possible, so the "scam ratio" will tend to grow to 100% quite fast unless there's a huge amount of legitimate business.
  - fiveoak 9y ago
    I don't really think this is true in practice. There is a risk to scamming, plus even with zero risk not every customer would choose to scam them (given morals/etc).
    - cardine 9y ago
      It only takes one sophisticated scammer to make the "scam ratio" close to 100%.
  - BartBoch 9y ago
    If that would be true, then Ebay, Amazon, Etsy etc. would have no right to exist in the world.
    - thunfischbrot 9y ago
      The difference may lay in the years that those you named had to adjust and readjust their countermeasures and learn from their mistakes ( up to a point ).

wheelerwj 9y ago

almost certainly going to run into regulatory problems. As the former head of an former MSB, I did not enjoy the experience.

dragonwriter 9y ago

> You need a license to sell this in the US. I think Dr. McCoy said it best: “There aren't going to be any damn permits. How can you get a permit to do a damn illegal thing!”

IncRnd 9y ago
You sound like a doctor not a miracle worker!

deleted 9y ago

[deleted]

paulie_a 9y ago

> regulatory problems They should be more concerned about federal prosecution for fraud > I don't get this Because it is a scam

parliament32 9y ago

>You need a license to sell this in the US. I'm not sure if you do. How is this any different than "buy X product for $50 and get a $5 mail-in-rebate via AMEX gift card"?

yorby 9y ago

crypto is just like pizza and has nothing to do with currencies in the US, no?

auston 9y ago

> Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US. We've had some conversations with our legal team at Cooley & some conversations with outside counsel at Goodwin Procter. They have not been able to reach consensus on whether we fall within regulatory oversight. Until then, we're not going to be selling anymore in the United States. It comes down to whether this is art or a collectible or not. We're working on it & have stopped sales for the time being. :) > Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does. This is a fair point, there is actually trust on both sides of the relationship here - we're trusting that our customers will not chargeback & they're trusting us not to steal their keys. > Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad. We originally thought so as well. When we sold a bunch we were surprised & started talking to our customers. It turns out, they don't want to go through the hassle of finding a wallet creator, disconnecting their computer from the internet, generating a wallet, writing down private keys or mnemonics & securing them. You can think of this kind of how car dealerships don't run their own mail servers anymore or pizza places don't run their own instance of a bind DNS server. They want the convenience of not having to worry about it. We're currently working hard on a v2 that makes it a bit more secure while maintaining usability. > I don't get this. We really didn't either, but the people that have trusted us with their money helped us understand this: Everyone who is working on cryptocurrency projects is suffering from the curse of knowledge [1] - most of them don't care about the end user. 1. https://en.wikipedia.org/wiki/Curse_of_knowledge https://en.wikipedia.org/wiki/Curse_of_knowledge

CPLX 9y ago
> we're trusting that our customers will not chargeback I remember when I was young once, too.
htormey 9y ago
Glad you guys got a lawyer to look into this. Thread very carefully with crypto, taxes and the US government. Good luck.