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Now this is getting interesting. For a decentralized virtual currency: A person that creates units of this convertible virtual currency and uses it to purchase
by rvkennedy 14y ago
Now 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.
- AnthonyMouse 14y agoSo what happens if they mine bitcoins and use them to buy some commodity which they immediately resell for dollars?
- stelford 14y agoAnd how would that work if, for devils advocacy sake, someone hires an ec2 with gpu's instance in (say) Canada and mines using that computer ? Is that not a 'foreign exchange' ? Is the de-centralised currency then 'taxed' on the location it was mined, from the initiating location or the final destination ? This headache has only jst begun..
- deepblueocean 14y agotl;dr No. IANAL. If you mine Bitcoins, you hold them. If you want to exchange them, you can give them to someone in exchange for dollars (in which case the exchange is an MSB and is subject to the rules for money transmitters) or you can give them to someone in exchange for "real or virtual goods or services", in which case you're fine, or you can hold them, in which case they don't care. On the other hand, if you happen to mine some coins and then set up a lemonade stand in front of your house where you sell those coins to somebody in exchange for real dollars, then you are a money transmitter according to the guidelines.
- DennisP 14y agoThat would make sense, but doesn't appear to be what they actually said. They didn't mention that if the party buying your bitcoins for dollars is itself an exchange, the miner is exempt from regulation.
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- jmharvey 14y agoSales tax is an unrelated issue. My local corner store has to collect sales tax, even though it's just a user, and not a transmitter, of dollars.