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US Treasury Guidance on Virtual Currencies (aka Bitcoins)
- wilfra 14y agoCan somebody translate that into English please?
- rheide 14y agoThe gist I got from it is that the US government is aware of bitcoin, has some casual ruleset surrounding it and will not (for now) take action against anyone using it, or if they do, it'll only be the exchanges, not individuals. Looks like Bitcoin is safer than a Cyprian bank.
- bdcs 14y agoAnd it also appears users converting BTC to USD (etc) need to be MSBs. As a (non-MSB) miner, one can use their BTC to buy anything but dollars... What a strange regulatory limbo to be trapped in...
- wilfra 14y agoCan drive a big rig through that loophole though, if it's that simple. i.e. convert to Euros and convert that to dollars elsewhere - or buy something of value and then sell it on ebay etc etc.
- Vivtek 14y agoToday.
- bayesianhorse 14y agoIt would be safer than a Cyprian bank if BTC prices were as stable as the Euros. For all the criticisms it received, the EUR is more stable than most of the currencies it replaced, and it did not see a single crash in prices as bad as BTC has seen several times. So really, you shouldn't worry about the possibility of the government taking 7% of your money if the alternative is a virtual currency that seen losses of more than 75% in a single day.
- retrogradeorbit 14y agoExcept for the fact that we don't yet know the full extent of the Cypriot haircut, but it looks that some will be paying way more than 7%. Closer to 15% for some [1]. They've now extended the "bank holiday" to "Thursday" [2]. And at least BTC is convertible in a crisis without a central authority. If you can't get your money from the bank at all (which is the case with Bank Holidays) then it's not much good to you. In a systemic financial collapse, between having BTC on my local computer [3] and having numbers on a computer in a failed financial institution, I know which one I'd rather have. You may feel differently, and that's fine. [1: http://www.zerohedge.com/news/2013-03-18/worst-case-big-depositors-cyprus-1526-haircut http://www.zerohedge.com/news/2013-03-18/worst-case-big-depo... ] [2: http://www.zerohedge.com/news/2013-03-18/cyprus-bank-holiday-gets-another-extension-bank-reopening-now-set-thursday http://www.zerohedge.com/news/2013-03-18/cyprus-bank-holiday... ] [3: Well, the private key assosciated with the BTC blockchain that those BTC are assigned to ]
- trotsky 14y agoAnyone acting as a BTC broker dealer, exchange, wallet, mining pool, speculator or miner that sells BTC has been put on notice that they're required to comply with a bunch of regulations including licensing, transaction reporting and suitable checks to ensure your counterparties aren't terrorists or people laundering money.
- wilfra 14y agoAre you sure it applies to speculators? Can you quote that part?
- trotsky 14y agoI'm not sure, no. However: In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency. Consider a common flow of: speculator USD -> counterparty -> speculator BTC -> counterparty -> speculator USD The transaction in the middle has the speculator exchanging BTC between two parties without any goods or services changing hands.
- wilfra 14y agoYou can speculate in real currencies without adhering to any special regulations, so there is no reason to think they would try to twist the word 'exchange' here to mean that.
- trotsky 14y agoA user is a person that obtains virtual currency to purchase goods or services
- wilfra 14y agoAs I said, you can buy real currency as a speculator and you aren't required to follow any regulations. Forcing speculators in digital currencies to meet the same requirements as financial institutions would be absurd. I realize one could make a case that that is what they mean here but common sense dictates that was not the intent, and it is extremely unlikely speculators have anything to be concerned about.
- jmomo 14y agoThe grey 'n baldy club at the Fed decided to shake their cane at Bitcoin and inadvertently made all the online gaming companies (EA, Valve, Ubisoft, Zynga) crap their pants in unison.
- pyre 14y agoIt only applies to gaming currencies if they can be readily converted back to dollars. For example, this doesn't affect the 'tokens' you buy to play skeeball at Chuck-E-Cheese's because you don't exchange those back to dollars.
- nightpool 14y agoThat still catches Diablo III, among others.
- deleted 14y ago[deleted]
- rvkennedy 14y agoNow this is getting interesting. For a decentralized virtual currency: A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. I would translate that to mean "no sales tax"... and that won't last long.
- wilfra 14y agoWhat that means is that people mining bitcoins don't need to adhere to the regulations for Money Servicing Businesses (MSBs): http://www.fincen.gov/financial_institutions/msb/ http://www.fincen.gov/financial_institutions/msb/ However bitcoin exchanges/wallets (i.e. Coinbase) will need to. Edit: It's not so simple. See child/grandchild comments.
- vilhelm_s 14y agoAnd also > By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter. This sounds like they want miners to register as money transmitters?
- meric 14y agoOnly if they convert it to a real currency. I think they are permitted to use it to procure goods and services.
- Steuard 14y agoI assume that depends on what the miner does with their bitcoins. My reading is that if they spend them directly as bitcoins, then no. If they convert them to US dollars, then yes. (I'm willing to believe that the latter is more common, of course.)
- wilfra 14y agoGood catch. Looks like miners can only avoid being classified an MSB if they use their mined coins to buy goods and services. If they simply convert them to cash, they'll have to follow the regulations.
- thinkcomp 14y agoIn other words, if you run a Bitcoin exchange in the United States and you don't have 47 money transmission licenses, you'd better call your lawyer. If you own Bitcoins, you should prepare for the very real possibility that one day, depending on arbitrary state or USDOJ enforcement actions, you may never be able to convert your Bitcoins back to dollars. For a sense of how backwards our financial regulators are, and how poorly they understand the issues at hand, take a look for yourself: https://www.facecash.com/legal/brown.html#document27 https://www.facecash.com/legal/brown.html#document27 Actual quotes: "We don't regulate technology," and "We don't treat every applicant exactly the same." —Teveia Barnes, Commissioner, California Department of Financial Institutions (This was last week in Sacramento.) Everyone should also familiarize themselves with 18 U.S.C § 1960: http://www.plainsite.org/laws/index.html?id=14426 http://www.plainsite.org/laws/index.html?id=14426 It's a federal crime to break your state's money transmission law that operates independently of, but is likely to be affected by, FinCEN's federal guidance.
- meric 14y agoIt seems that participating in the bitcoin economy, using bitcoins to procure goods and services, as well as accepting bitcoins for providing goods and services is okay, but a service for allowing conversion of bitcoins to USD will require a license (Is that true for every other currency?). If I read it right, it makes sense. If not, please correct me, in addition to the downvote.
- thinkcomp 14y agoThat's mostly right to my reading, but FinCEN letters are not laws. They're clarifications about regulations published in the Federal Register which are themselves clarifications about laws. FinCEN has published other letters that distinguish between money transmitters and "payment processors," the latter being companies that work exclusively on behalf of merchants to facilitate payments. Even though this interpretive ruling has the effect of a federal regulation, state agencies such as the California DFI choose to actively ignore these rulings and make up their own. So, what is California's interpretation? We don't know, because as Commissioner Barnes pointed out last Monday, the DFI hasn't issued any of its own interpretive rulings about the Money Transmission Act, ever, and before it does--even though it plans to--the legislature will likely amend the law, which means they'll delay some more. Now multiply this mess by 47. That's how clear it is. If you really want the details, my comment letter to the legislature is a good place to look. http://www.plainsite.org/flashlight/download.html?id=31313747 http://www.plainsite.org/flashlight/download.html?id=3131374... P.S. I'm not a lawyer. Don't listen to me.
- wmf 14y agoCoincidentally, the largest Bitcoin exchange is moving from Japan to the US in less than two weeks. http://coinlab.com/transition http://coinlab.com/transition
- andrewpi 14y agoNot moving entirely, just 'outsourcing' their US business to Coinlab, I believe.
- olefoo 14y agoI see that the prepaid accounts for cellular and game access can be sanitized. I expect at least one shady MVNO to offer prepaid SIM cards that can be recharged with BTC as that's a very easy way to move cash across national borders; and I expect that telco's are treated with pretty much the same laissez faire attitude as HSBC was with respect to money laundering.
- fpgeek 14y agoHow would money laundering via prepaid SIMs work? Every time I've gotten a prepaid card, I've had to show identification (usually a passport outside the US). From what I recall the ostensible reason for this is to track people who might use a cell phone as a remote bomb trigger. Nevertheless, if there is an ID associated with each prepaid SIM, I'd think that would be the hook that could be used to penetrate a money-laundering scheme. Am I missing something?
- eru 14y agoI don't remember having to show an ID for prepaid SIM in the UK.
- thaumasiotes 14y agoI have bought SIM cards in the US and China. In neither case was there even an opportunity to show ID.
- wiredfool 14y agoI bought one from a vending machine in Heathrow that took cash.
- olefoo 14y agoIt's not the end-user who's likely to be doing money laundering, although that might happen any how. Here's a sketch of how it might work, an entity with a large amount of USD in bank accounts in the US, that wishes to move the money elsewhere without triggering SARs pays USD for prepaid wireless service which they use to provision prepaid wireless cards, which loudly advertise that they can be funded using BTC. Millions of people who are locked out of the "real" economy in one way or another start using BTC to buy wireless minutes, or electricity, or nights in capsule motels; whatever fungible commodity the prepaid service provider can get a good deal on. Those BTC are perhaps transferred back into TND, ISK, CHF or some other local currency, or kept as an offshore BTC fund. Connoisseurs of global financial crime will recognize that this is basically a souped up internet speed version of the Peso Exchange that doesn't rely on shipping goods to overseas locations. Now if a player with enough legitimate cover were to run this playbook, they could do it as a branded card and basically own the public perception of prepaid card good for all kinds of things that can get paid for by the internet... Not to say that there aren't issues with this model, and this is not a game one could get into with less than 30 Million USD in liquid assets. But there are a surprisingly large number of organisations that could field both the front businesses and the free cash flow to run this. And a slightly smaller number that could do it in a way that wouldn't wind up with their executive team on the Interpol watchlists.
- daxelrod 14y agoDoes this guidance also apply to video game virtual currencies as well? My initial assumption was that "convertible" means it only applies to currencies that can be exchanged back and forth with fiat currency, but I don't explicitly see that stated.
- deepblueocean 14y agoInsofar as such currencies can be converted back and forth to "real" currency, yes, they're covered. I think that's what the document is trying to get at when it discusses "centralized" virtual currencies.
- apapli 14y agoIt probably also applies to loyalty programs - eg frequent flyer points etc.
- jmomo 14y agoI doubt the authors were smart enough to think of this, and I don't think most people here have really thought of this yet. The online gaming industry is going to be very interested in this once they realize the potential impacts. In the case of Diablo III, you can sell your in-game virtual gold for real money in their Real Money Auction House, via PayPal. Other games have less official means of exchanging between currencies, but that's at least one official/built-in version that I can think of.
- jarin 14y agoThey're covered in the "centralized virtual currencies" section. Since Diablo gold only exists on Blizzard's servers, it is a centralized virtual currency. Blizzard and gold selling sites are considered MSBs, but not users.
- drucken 14y agoThis seems a bit of a landgrab or an exploitable (regulation-sense) ambiguity: In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency. So, if you only exchange virtual currency, do you now fall under US FinCEN rules or does, say, virtual currency not count as a "substitute" for currency?
- deepblueocean 14y agoAs far as my non-lawyer view takes me, that line is simply meant to catch the case where you exchange a de-centralized virtual currency for something (anything) else of value that's meant to substitute for currency in some context (i.e. what if you traded BTC for gold? For certificates that represent gold? For another virtual currency like WoW gold?). That is, FinCEN is saying that you're still a money transmitter if you accept Bitcoins for anything else the Treasury considers to be equivalent to currency (which means, roughly, it can be readily converted back to currency), but not for goods and services. That way, you can't claim not to be subject to the rules just because you don't exchange Bitcoins for dollars. Remember, the idea here is to make rules that allow FinCEN to track large flows of capital and generally prevent money laundering. So they're concerned with the situation where I give you bitcoins for gold and then turn around and sell the gold for clean dollars.
- joe_the_user 14y agoNot really a land-grab. Just the landlord walking up to some folks picnicking and mentioning, "by the way, you are on my land". Or equivalently - "Hi, I just wanted to mention that your leash is exactly this long. Thanks for listening" It's not like the government isn't always thinking about the importance of its control over the currency.
- drucken 14y agoControl of currency in the form of legal tender, yes that would be fully understandable. But I'm talking specifically about the passage on "decentralized virtual currency" and all that is being exchanged is virtual currency. For example, you charge a fee in the virtual currency itself (or some other virtual currency) for exchanging it in some way that does not involve legal tender of any jurisdiction.
- mrbrannon 14y agoThis faintly gives me nightmares remembering the difficulties the US government caused converting poker winnings back into US dollar payouts. If something doesn't outright break current laws, we have a tendency to just legislate it out of existence. I want bit coins to succeed but this seems like a real possibility.
- nym 14y agoThis is driving the price up, and is great news. I know of two businesses with FinCEN registration IDs: http://howdoyoubuybitcoins.com/from/ziggap/ http://howdoyoubuybitcoins.com/from/ziggap/ http://howdoyoubuybitcoins.com/from/bitinstant/ http://howdoyoubuybitcoins.com/from/bitinstant/ Digital cash isn't going away anytime soon.
- betterunix 14y agoI am not sure it is accurate to call Bitcoin "digital cash," given that it does not actually meet the formal definition of a secure digital cash system -- Bitcoin is not secure against a polynomial time adversary.
- lhnn 14y agodigital cash != secure digital cash system Bitcoin is digital cash, in the colloquial usage of the term cash. Somewhat anonymous, liquid, and typically possessed by the owner.
- pyre 14y ago| Accepting and transmitting anything of value | that substitutes for currency makes a person a | money transmitter under the regulations | implementing the BSA This makes it sound like anyone that anyone engaging in a financial transaction is a "money transmitter."
- hayksaakian 14y agoAlong with facebook coins, diablo 3 gold, and linden dollars. + any mobile game with "coins" that can be bought with dollars
- ajross 14y agoWhere can I convert that stuff to dollars? Yes, they have "value", but they aren't currency. Often there's a "market" you can find to convert real world currency in to game junk. But there are no symmetrical markets for buying dollars with game current. That's a vitally important distinction, and part of the definition of a currency. Bitcoin is a currency. It was designed that way, there is no attempt to hide that fact, and everyone involved knows what it is. Pretending that a currency exchange won't be regulated like other exchanges is just fantasy.
- breser 14y agoIn the case of Diablo3 you can buy in game gold for money off the real money auction house. Going the other way you can sell gold for money on the real money auction house and in return can receive the money into a PayPal account. There is a transaction fee of 15% of the total sale price for converting to real money. This is on top of the transaction fee for selling the item on the real money auction house which is either $1 (items) or 15% (consumables including gold). http://us.battle.net/d3/en/game/guide/items/auction-house#fees http://us.battle.net/d3/en/game/guide/items/auction-house#fe... So sending money from one person to another via diablo3 gold would cost 30% or possibly less if you buy items with the gold you buy and sell them on the real money auction house, though that's probably slower and more time consuming. Alternatively you can transfer the money to a Blizzard account, which can be used to buy items on Blizzard's own store. This avoids the 15% fee for the transfer of real money (but not the listing fee). However, laundering money with Blizzard merchandise is probably a risky business. That said, if you bought enough of a game right around it's release that was popular it might be worthwhile. PayPal itself is a registered MSB. So that may avoid the issue for Blizzard in the case of the route of converting to real money via PayPal. However, I'm not clear if the regulation applies in the case of buying goods and services from a Blizzard account. I'd say the fact that you can trade gold in game between players is itself another problem for Blizzard. I'm not a lawyer, this isn't legal advice, etc...
- dreamdu5t 14y agoHow does this affect bitcoin startups like CoinBase? Do they have a money transmission license? Can you even get one for Bitcoin?
- retrogradeorbit 14y agoAn important point to realise here, that some seem to be missing, is bitcoin is a global currency and these rules only apply inside the United States.
- ufmace 14y agoAt first glance, it looks like it would require all miners and exchanges that convert between BTC and USD to register... However, I also found this: http://www.fincen.gov/financial_institutions/msb/definitions/msb.html http://www.fincen.gov/financial_institutions/msb/definitions... Among other things, it states that there is an activity threshold of $1,000/day before you have to register. Regarding miners, in current exchange rates, there is $180,000 in BTC being mined each day, so you'd have to be doing about 0.5% of the total BTC hashrate, which would currently be around 250Ghash/s, to one organization to qualify. Anyone with a rate that high is basically a for-profit business at this point, and with that income level, I'm not too worried about them having to register. The large pools also have rates well above that, but I'm not sure if they would qualify, depending on exactly how they distribute earnings. As far as exchanges, at that level of business, they pretty much are a substantial financial institution, and I don't see a real problem with them having to register as such. I see it as a net win for Bitcoin - a relatively reasonable amount of regulation, and in return, the implied assurance that there will not be a much more severe level of regulation or an attempt to criminalize anything involving Bitcoin. I think the market is reading it the same way, because BTC seems to be up against the USD on all of the exchanges I checked. Of course, I could be reading this all wrong... I'm no lawyer and I don't really know much of anything about financial regulations.
- RoboTeddy 14y agoThe same page says, > No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity. So, the $1000/day threshold appears not to apply to money transmitters. (I'm not a lawyer)
- ufmace 14y agoHadn't noticed that, could change things... There's a lot of wrinkles in how these laws are actually applied, though. I suppose it will take a while to sort out exactly what each type of entity needs to do.
- humanspecies 14y agoWe should probably realize that the government will find a way to either: 1) Embed itself firmly into the bitcoin process and siphon cash for the bankers who run the government or 2) destroy bitcoin if it's so secure it can run without a government.
- lucb1e 14y ago1) They're already in as deep as they can get. Bank transfers (the way most BTC is traded) already leave an audit trail. The problem is that they can't control the transactions themselves, but they will never be able to, so they're already in as deep as they can get. 2) How would it destroy it? There is quite a lot of distribution already, I think it's not much longer before Bitcoin could survive without official exchanges. They'd also need to outlaw cash if they want to stop Bitcoin from being bought.
- waterlesscloud 14y agoBitcoin Magazine's take - http://bitcoinmagazine.com/fincen-bitcoin-users-not-regulated-exchanges-are/ http://bitcoinmagazine.com/fincen-bitcoin-users-not-regulate...
- URSpider94 14y agoLet's pop back to the big picture here. One of the functions of the Treasury Department is to prevent money laundering. And, by prevent, I mean make onerous for large amounts of money. Like millions or tens of millions or hundreds of millions of dollars. Think Mexican drug cartel money. One way to do that is to log all exchange or transmission transactions above a certain size -- which is what licensed money changers and transmitters have to do. You're not prohibited from performing these transactions, you just have to give them your name and SSN or Taxpayer ID. Sure, there are ways around this, like buying a million rubber duckies in China, then shipping them to the US and selling them at carnivals. But -again- try to import a million of anything, and US Customs will want to know your name and SSN. If you're talking about changing $100 or even $1,000 into BTC, the government doesn't really care. You might think, can't the criminals just split their transactions into small enough chunks that they can avoid the law altogether? Sure, maybe they could (and certainly they do) -- but at some point, having to conduct a thousand individual exchange transactions to move a million bucks starts to get onerous, and is also likely to leave a data trail -- there will be correlations somewhere. It's never going to be impossible to exchange BTC for USD untraceably. The point here, which should come as no surprise, is that the government intends to make it impossible to exchange large amounts of value anonymously without it being annoying, time-consuming and costly.
- nwzpaperman 14y agoThe Secret Service is actually the agency tasked with protecting the dollar. SS is under DHS now.
- wilfra 14y agoThey protect it from counterfeiting - they don't regulate money laundering.
- ISL 14y agoIt is, furthermore, illegal in the US to transfer money in small quantities with intent to avoid the reporting requirements. http://en.wikipedia.org/wiki/Structuring http://en.wikipedia.org/wiki/Structuring If any employee in a financial institution thinks you might be structuring transactions, they are obligated to notify authorities.
- aMoniker 14y agoSo if one were to buy and sell some small amount of bitcoins, would that make one a Money Transmitter in need of a license?
- deleted 14y ago[deleted]
- nivertech 14y agoTL;DR If you only buy or mine bitcoins - you are safe. Once you'll try to exchange them for real money - you must be regulated.
- seldo 14y ago"By contrast, a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter." If you mine bitcoins and then convert them to real money (i.e. not buy goods or services with them) then you will be regulated.
- timinman 14y agoBTC seems to like that announcement. It's still climbing.
- zaptheimpaler 14y agoSlight tangent: What is the status on the tax implications and the legality of online gambling with bitcoin? There are a few places online that let you play poker etc. with bitcoins. Is that legal in the US? How are winnings taxed? The wiki(https://en.bitcoin.it/wiki/Tax_compliance#Are_my_bitcoins_taxed_as_income.2C_or_as_capital_gains.3F https://en.bitcoin.it/wiki/Tax_compliance#Are_my_bitcoins_ta...) talks about "Income that is earned through the exchange of services with another person, whether in the form of bitcoins, dollars, or barter;". Would income through gambling fall in that category?
- lhnn 14y agoLet's face it; the intention of Bitcoin is to act as a decentralized currency, controlled by no organization. Anonymity is one of the largest drawing points, if not one of its fundamental goals (though not entirely accomplished, I know). The US and other governments will attempt to bring this tool under their heavy handed, arbitrary and profit-seeking hands to, at best, take money for themselves, and at worst, destroy the currency's usefulness. For those wondering how they can keep their bitcoins out of the hands of mettling governments' hands, look up "bitcoin tumbling" and other forms of laundering.
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- aneth4 14y agoAs long as you can convert bitcoin to some relatively stable currency somewhere in the world, the US government will have a tough time getting a handle on it. There is no reason bitcoin needs to be converted to USD on US soil. If you have to exchange your bitcoin for HKD in Hong Kong, easy methods can arise for this, and it may not be a big issue.
- nateabele 14y agoMy goodness, so many bytes spilled. I wonder what would happen if we took the time and energy we invest in picking apart and analyzing unjust and immoral laws/policies (or playing armchair economist), and directed it at safely circumventing them, and helping others to do the same?
- illuminate 14y agoIt is not as easy and much, much more expensive to "safely" circumvent an unjust/immoral law as it is to critique the problems in any legal system.
- hippich 14y agoAfter my initial post, which caused a lot of discussion - https://news.ycombinator.com/item?id=5398686 https://news.ycombinator.com/item?id=5398686 , I have another question for Y'all: Let's imagine situation where program is created, which uses bitcoins as a payment to automatically buy computing resources and launch more instances of itself. And to get bitcoin to pay for these resources this program provides proxy/VPN service. Does program owe taxes? From what amount? To whom? In what currency?