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In 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

In 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 ago
It 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 ago
  That'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.
- ChuckMcM 14y ago
  That is correct, and even if you are a bitcoin miner and you only use the coins you mine to procure goods you aren't subject. However if you are an exchange, or it would seem an escrow agent see this: "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." Which would cover a service where, for a small fee, you accept bitcoins from party A, wait for you to acknowledge a transaction in some way, and then release those bitcoins to party B. As I understand what is written this would apply to Silkroad itself, but not the buyers or sellers on silk road. It is entirely unclear to me if you are regulated if you trade bitcoins for Laundry Detergent and buy laundry detergent from others for Bitcoins. (see previous discussion of how Tide became a currency for drug dealers)
acabal 14y ago
I don't dispute any of that, but in an ideal Bitcoin economy people wouldn't need to convert to USD. Obviously the Bitcoin economy isn't at that point yet and people need the USD to peg "value" to what a Bitcoin is. But eventually, if Bitcoin becomes more widely accepted, shouldn't the economy settle on to what 1BTC is "worth" regardless of what other currencies are doing?
- thinkcomp 14y ago
  Sure, but frankly I don't think the United States Department of the Treasury or any federal judge cares about the ideal Bitcoin economy. This letter addresses the real economy we live in today and for the foreseeable future, and it gives enforcement agencies a very bright green light to seize assets and put people in jail.
- betterunix 14y ago
  "in an ideal Bitcoin economy people wouldn't need to convert to USD" So how do you think they will pay their taxes? How do you think businesses will repay their loans? Do you really think the US government will accept Bitcoin tax payments, or that banks would be stupid enough to issue loans in a deflationary currency that conveys no legal protections? Bitcoin's only real value in its ability to ultimately be sold for a fiat currency.
  - freefrancisco 14y ago
    "Bitcoin's only real value in its ability to ultimately be sold for a fiat currency" You have that backwards, a fiat currency's only real value is in its ability to ultimately be exchanged for goods and services that you need or want, for things of actual value. So if bitcoin is not directly exchangeable for dollars but it is exchangeable for other things, it doesn't ultimately matter. The no arbitrage conditions of financial markets guarantees that even if bitcoin is not tradeable for dollars directly, it will preserve its value if it is easily tradeable for something of actual value.
    - betterunix 14y ago
mrb 14y ago
"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" Very unlikely. There are, today, many exchanges that run outside of US jurisdiction: btc-e, btc.de, btcchina, virwox, cavirtex, bitcoin-central, etc. Anybody in the world can sell bitcoins for something on one of these exchanges, then convert that something to USD.
- elliottcable 14y ago
  Unless I mis-understand, isn't this basically money laundering? Or rather, I suppose, bitcoin laundering?
- thinkcomp 14y ago
  Yes--assuming that exchange A is still on-line, which maybe isn't such a good assumption...
  - mrb 14y ago
    It is pretty much impossible to take down all bitcoin exchanges. If some are taken down, others will pop up. Decentralized systems like Bitcoin are very resilient. This the same reason why the Internet has not found a way to "take down illegal peer-to-peer file sharing".
    - Nursie 14y ago
      While this is true, one or more countries ruling btc illegal could quite effectively stop it becoming mainstream and destroy its value.
      - mrb 14y ago
        By the time this happens (if it happens), I postulate that Bitcoin will be too mainstream to be stopped. And in the history of man, when people want something illegal (drugs, weapons, prostitution, etc), no law will "destroy the value" of these things and even less stop people from wanting them.
lifeisstillgood 14y ago
Why is a bitcoin any different to any other alternative currency then - in the UK there are small cooperatives reading their own currencies, Linden dollars etc in MMOs - why is bitcoin wrong?
- nivloc 14y ago
  Local currencies are a mess of jurisdiction, but generally legitimate currency, or for the purposes of this document, 'real'. Linden Dollars (along with WoW gold, EVE ISK), are owned by the respective developers. That database entry denoting your Titan isn't yours per se, you're just allowed to have it rendered as long as you abide by the terms of service.
jackgavigan 14y ago
"..if you run a Bitcoin exchange in the United States..." It doesn't just apply to the United States. See http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A001.html http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A... for info on how entities located outside the US will qualify as MSBs (and be subject to the registration and reporting requirements of the Bank Secrecy Act) if they "offer MSB services in the United States from foreign locations." None of this is at all surprising and won't have come as a surprise to anyone with an ounce of common sense. The same principle of extra-territoriality has been applied to foreign banks that deal in USD or accept deposits from US citizens, and to online gambling sites that accept payments from people located in the US.
retrogradeorbit 14y ago
> 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. You mean USD. Bitcoins can be converted to other currencies outside the United States.
s_baby 14y ago
>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. There are potential loopholes here. You can still buy liquid assets with bitcoins and sell those assets for cash. For example, you can have a provder that sells gold for bitcoins, and buys gold for cash.
- knowaveragejoe 14y ago
  I think those providers will stop accepting bitcoins when you can no longer convert them to USD. There isn't enough other essential goods and services that people are willing to trade BTC for yet.
- URSpider94 14y ago
  The way I read the letter, simply inserting an intermediate value store in this trivial way would not eliminate the need for licensing as a money transfer agent.
  - s_baby 14y ago
    So break it up into two seamless entities. Like ebay and paypal.
malandrew 14y ago
How about Bitcoin exchanges get around the 47 licenses issue by sticking together and performing tit-for-tat trades with other transmitters. If every transmitter has licenses for 4+ states, then it should be possible to break up trades into small chunks and send them along the network to other transmitters.
duncan_bayne 14y ago
They're not backwards; regulators have many incentives to kill any competition with State-mandated fiat currency.

meric 14y ago

It 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 ago
That'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.
ChuckMcM 14y ago
That is correct, and even if you are a bitcoin miner and you only use the coins you mine to procure goods you aren't subject. However if you are an exchange, or it would seem an escrow agent see this: "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." Which would cover a service where, for a small fee, you accept bitcoins from party A, wait for you to acknowledge a transaction in some way, and then release those bitcoins to party B. As I understand what is written this would apply to Silkroad itself, but not the buyers or sellers on silk road. It is entirely unclear to me if you are regulated if you trade bitcoins for Laundry Detergent and buy laundry detergent from others for Bitcoins. (see previous discussion of how Tide became a currency for drug dealers)

acabal 14y ago

I don't dispute any of that, but in an ideal Bitcoin economy people wouldn't need to convert to USD. Obviously the Bitcoin economy isn't at that point yet and people need the USD to peg "value" to what a Bitcoin is. But eventually, if Bitcoin becomes more widely accepted, shouldn't the economy settle on to what 1BTC is "worth" regardless of what other currencies are doing?

thinkcomp 14y ago
Sure, but frankly I don't think the United States Department of the Treasury or any federal judge cares about the ideal Bitcoin economy. This letter addresses the real economy we live in today and for the foreseeable future, and it gives enforcement agencies a very bright green light to seize assets and put people in jail.
betterunix 14y ago
"in an ideal Bitcoin economy people wouldn't need to convert to USD" So how do you think they will pay their taxes? How do you think businesses will repay their loans? Do you really think the US government will accept Bitcoin tax payments, or that banks would be stupid enough to issue loans in a deflationary currency that conveys no legal protections? Bitcoin's only real value in its ability to ultimately be sold for a fiat currency.
- freefrancisco 14y ago
  "Bitcoin's only real value in its ability to ultimately be sold for a fiat currency" You have that backwards, a fiat currency's only real value is in its ability to ultimately be exchanged for goods and services that you need or want, for things of actual value. So if bitcoin is not directly exchangeable for dollars but it is exchangeable for other things, it doesn't ultimately matter. The no arbitrage conditions of financial markets guarantees that even if bitcoin is not tradeable for dollars directly, it will preserve its value if it is easily tradeable for something of actual value.
  - betterunix 14y ago

mrb 14y ago

"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" Very unlikely. There are, today, many exchanges that run outside of US jurisdiction: btc-e, btc.de, btcchina, virwox, cavirtex, bitcoin-central, etc. Anybody in the world can sell bitcoins for something on one of these exchanges, then convert that something to USD.

elliottcable 14y ago
Unless I mis-understand, isn't this basically money laundering? Or rather, I suppose, bitcoin laundering?
thinkcomp 14y ago
Yes--assuming that exchange A is still on-line, which maybe isn't such a good assumption...
- mrb 14y ago
  It is pretty much impossible to take down all bitcoin exchanges. If some are taken down, others will pop up. Decentralized systems like Bitcoin are very resilient. This the same reason why the Internet has not found a way to "take down illegal peer-to-peer file sharing".
  - Nursie 14y ago
    While this is true, one or more countries ruling btc illegal could quite effectively stop it becoming mainstream and destroy its value.
    - mrb 14y ago
      By the time this happens (if it happens), I postulate that Bitcoin will be too mainstream to be stopped. And in the history of man, when people want something illegal (drugs, weapons, prostitution, etc), no law will "destroy the value" of these things and even less stop people from wanting them.

lifeisstillgood 14y ago

Why is a bitcoin any different to any other alternative currency then - in the UK there are small cooperatives reading their own currencies, Linden dollars etc in MMOs - why is bitcoin wrong?

nivloc 14y ago
Local currencies are a mess of jurisdiction, but generally legitimate currency, or for the purposes of this document, 'real'. Linden Dollars (along with WoW gold, EVE ISK), are owned by the respective developers. That database entry denoting your Titan isn't yours per se, you're just allowed to have it rendered as long as you abide by the terms of service.

jackgavigan 14y ago

"..if you run a Bitcoin exchange in the United States..." It doesn't just apply to the United States. See http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A001.html http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A... for info on how entities located outside the US will qualify as MSBs (and be subject to the registration and reporting requirements of the Bank Secrecy Act) if they "offer MSB services in the United States from foreign locations." None of this is at all surprising and won't have come as a surprise to anyone with an ounce of common sense. The same principle of extra-territoriality has been applied to foreign banks that deal in USD or accept deposits from US citizens, and to online gambling sites that accept payments from people located in the US.

retrogradeorbit 14y ago

> 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. You mean USD. Bitcoins can be converted to other currencies outside the United States.

s_baby 14y ago

>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. There are potential loopholes here. You can still buy liquid assets with bitcoins and sell those assets for cash. For example, you can have a provder that sells gold for bitcoins, and buys gold for cash.

knowaveragejoe 14y ago
I think those providers will stop accepting bitcoins when you can no longer convert them to USD. There isn't enough other essential goods and services that people are willing to trade BTC for yet.
URSpider94 14y ago
The way I read the letter, simply inserting an intermediate value store in this trivial way would not eliminate the need for licensing as a money transfer agent.
- s_baby 14y ago
  So break it up into two seamless entities. Like ebay and paypal.

malandrew 14y ago

How about Bitcoin exchanges get around the 47 licenses issue by sticking together and performing tit-for-tat trades with other transmitters. If every transmitter has licenses for 4+ states, then it should be possible to break up trades into small chunks and send them along the network to other transmitters.

duncan_bayne 14y ago

They're not backwards; regulators have many incentives to kill any competition with State-mandated fiat currency.