7 ms·

US financial regulator: We could regulate Bitcoin “if we wanted”

40 points by shawndumas 14y ago

Zikes 14y ago
I have no doubt they could. They could pass all kinds of laws about how Bitcoin should be operated. Enforcing those laws is another matter.
- Vivtek 14y ago
  I think you'll find that the US government can enforce them incredibly effectively - if you're not too big to fail.
- craigyk 14y ago
  As long as people need to use USD for most purchases, then yes. As long as businesses are required to keep track of and report their earnings, then yes. As long as the government could easily afford enough hardware to takeover the blockchain, then yes.
  - falcolas 14y ago
    Taking up the sarcasm cape: It explains the development of all the NSA datacenters lately - they want in on bitcoin mining!
- danielrhodes 14y ago
  The laws are primarily enforced with businesses, not individuals. That's why there are so few US-based bitcoin startups: operating legally means you have to become a money-transmitter and follow a ton of rules which are expensive and nullify many of Bitcoin's benefits.
- dragonwriter 14y ago
  > I have no doubt they could. They could pass all kinds of laws about how Bitcoin should be operated. What they are saying is that passing laws is not an issue; the laws providing the regulatory authority have already been passed. > Enforcing those laws is another matter. Not really; at least, as regards the ability to engage in significant business activities that involve bitcoin.
madaxe 14y ago
I could lasso the moon "if I wanted".
protomyth 14y ago
Is Bitcoin a currency or a commodity? Does its classification affect who get to do what with it?
- iaw 14y ago
  It could be either but for ease of prosecution they'll probably dump it into the commodity category because (I believe) it gives them more regulatory leeway in their efforts. I don't believe that the CFTC [1] regulates currency transactions but they definitely regulate commodities. [1] http://www.cftc.gov/index.htm http://www.cftc.gov/index.htm
benjamincburns 14y ago
> [T]he new rules stipulate that "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" and is therefore subject to these federal regulations. That's a scary statement. The "money transmitter" moniker is a very pay-to-play scheme for which it isn't particularly easy for a common person to achieve licensing. If they start enforcing this, it'll stop pretty much all US involvement in Bitcoin something akin to the crackdowns on online gambling. Would it be difficult to enforce? Sure. But then when you do get caught they'll throw the book at you. If this really is the current legal status of Bitcoin, here's hoping they do in fact decide to regulate it in a way that preserves the average citizen's ability to participate. Edit: I'm not a finance person, but I think this may also be a way for major financial institutions (existing licensed money transmitters) to seize control of the Bitcoin markets in the US. Essentially they would take the place of a Bitcoin exchange and pay on your behalf, but you would never have custody of your own bitcoin funds. This of course would somewhat (if not entirely) diminish the value of Bitcoin as a trading instrument, but preserve its value as a payment mechanism. The gov't would like this since it would remove most of the anonymity from the process as well.
- gamblor956 14y ago
  This was discussed 2 or 3 weeks ago, when the government's position on bitcoin was first released. They consider exchanges and bitcoin transaction processors (i.e,. Coinbase) to be money transmitters subject to regulation. Individual users (miners, bitcoin holders) are not money transmitters subject to regulation.
  - deleted 14y ago
    [deleted]
  - dragonwriter 14y ago
    > This was discussed 2 or 3 weeks ago, when the government's position on bitcoin was first released. The guidance on the "Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies" was released almost 2 months ago (March 18, 2013.) > They consider exchanges and bitcoin transaction processors (i.e,. Coinbase) to be money transmitters subject to regulation. True. > Individual users (miners, bitcoin holders) are not money transmitters subject to regulation. Less completely true. Per the guidance [1], anyone who "buys or sells convertible virtual currency for any reason is a money transmitter [...] unless a limitation to or exemption from the definition applies to the person", and more specifically with regard to miners "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." [1] http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001....
johnohara 14y ago
"I don't want to regulate everything under the sun," Chilton added in the CNBC interview. "If you guys want to be a shill for the financial industry and support a chattel currency that people use to purchase drugs and money with—have a party, man. My job is a regulator; I'm going to look after it." “The bank that is storing my money is highly regulated by federal regulators and backed by a government with a huge army behind it,” James Angel, a business professor at Georgetown University, told Ars last month. http://www.despair.com/arrogance.html http://www.despair.com/arrogance.html
JonnieCache 14y ago
Anyone fancy weighing in on what he means here? "If you guys want to be a shill for the financial industry and support a chattel currency that people use to purchase drugs and money with—have a party, man. My job is a regulator; I'm going to look after it." What is a chattel currency in this context? It seems to refer to a "commodity as currency" arrangement but there is clearly some extra implied meaning that I'm not getting. What does he mean about "shill for the financial industry?" Is he referring to sellers of bitcoin derivatives, or is he trying to claim that the "real" financial industry is involved? The colloquial nature of his tone almost suggests sarcasm. What's the deal?
- jlgreco 14y ago
  That part is so weird that my knee-jerk reaction is that it is meant to cause fear, uncertainty, and doubt.
- drcode 14y ago
  He uses the word "chattel" because it's a term that was used in the slave trade, but he can get away with it because technically it's just another word for "currency". It's a disgraceful smear. This is clearly going to get ugly. EDIT: Some stats from Google search, since this is a sensitive point and people are questioning what I'm saying (quotes included in the search): "chattel currency": 72 results "chattel property": 46,600 results "chattel slavery": 335,000 results
  - w1ntermute 14y ago
    A fundamental advantage of BTC is that it's supposed to be free of government regulation or other forms of centralized control. The correct response to this is to (be absolutely sure that the government can't regulate it, and then) just ignore whatever the government says.
    - Nursie 14y ago
      This works fine until real-world businesses start being shut down for accepting it. Not saying this will happen, but a determined government could easily put a huge dent in bitcoin usage.
mkbrody 14y ago
“The bank that is storing my money is highly regulated by federal regulators and backed by a government with a huge army behind it,” James Angel, a business professor at Georgetown University, told Ars last month. The irony is that: 1. Bitcoin doesn't need a highly regulated financial institution to securely store your money (but it does require highly secure technology). 2. Acknowledging that the only thing backing legal tender post gold-standard is coercive force (you could even argue that implied force is the main driver behind market demand for $USD - i.e. petrodollars, the EURO, the Federal Reserve, government agencies that only accept payment in $USD, etc.).
- Cushman 14y ago
  > 1. Bitcoin doesn't need a highly regulated financial institution to securely store your money (but it does require highly secure technology). Only if you don't consider protection from theft an attribute of secure money storage. If somebody compromises my bank account credentials, it will be annoying and time consuming but I will ultimately get my money back. If somebody steals my bitcoin wallet, I am shit out of luck.
  - jeffasinger 14y ago
    Bitcoin is like cash. If someone steals a bunch of cash from you, you're likely to be out of luck. You could build a complicated banking system on top Bitcoin too, that could do things like reverse unauthorized transactions, but that would get rid of the reason some people are really interested in Bitcoin.
    - krupan 14y ago
      Someone could build the banking system for those who would like the warm fuzzies it gives them, and others could still choose not to use it, keeping their bitcoins in their own wallet in their own house. Again, just like cash. The cool thing is that, unlike cash, you can send and receive bitcoin to and from anywhere in the world electronically without that big banking system's help!
    - Cushman 14y ago
ttrreeww 14y ago
It's the drug wars all over again.
Tycho 14y ago
The beautiful thing about BitCoin and governments is this 'dammed if they do, damned if they don't' dynamic. If they try to regulate Bitcoin, the legitimise it as a currency and invite the masses to use it, thus diminishing the power of their fiat currencies, which is what they were trying to avoid in the first place...
- dublinben 14y ago
  Bitcoin is already pretty painful to use. I don't think regulating it would encourage use in any way. If anything, it would remove the primary reason most people have for using it, independence from the government.
  - w1ntermute 14y ago
    BTC isn't inherently painful to use. Things are improving a lot.
    - cynoclast 14y ago
      And fast.
    - tocomment 14y ago
      How are things improving?
drcode 14y ago
> "I don't want to regulate everything under the sun." The fact that he spells it out so clearly definitely is a great relief. </sarcasm>
venomsnake 14y ago
Or we could say Bitcoin is religion. It is faith and math combined.
jeremyjh 14y ago
I think it is great news for BTC. This sort of coverage can only legitimize it. It is a complete fantasy if people think the USG will not wet their beak in the BTC trough. If they find themselves unable to tax and regulate BTC transactions then they will probably find it necessary to destroy it instead.
grimtrigger 14y ago
Statements like this put a chilling effect over the whole industry, even if they never take any action. Bitcoin users should push for a letter of no-action by the CFTC.
- iaw 14y ago
  I think you'd have a better chance getting a response from Obama on the issue before the CFTC chimed in. The limited experience I've had with the CFTC (and other financial regulatory entities) implies that they want to maintain the broadest reach possible and will rarely, if ever, offer clarifying statements. We have literally asked for clarification on sections of regulations before and offered several scenarios asking which interpretation was correct. The response : "we can't offer an opinion on that." Even though they would be the ones enforcing it.

40 points by shawndumas 14y ago

Zikes 14y ago

I have no doubt they could. They could pass all kinds of laws about how Bitcoin should be operated. Enforcing those laws is another matter.

Vivtek 14y ago
I think you'll find that the US government can enforce them incredibly effectively - if you're not too big to fail.
craigyk 14y ago
As long as people need to use USD for most purchases, then yes. As long as businesses are required to keep track of and report their earnings, then yes. As long as the government could easily afford enough hardware to takeover the blockchain, then yes.
- falcolas 14y ago
  Taking up the sarcasm cape: It explains the development of all the NSA datacenters lately - they want in on bitcoin mining!
danielrhodes 14y ago
The laws are primarily enforced with businesses, not individuals. That's why there are so few US-based bitcoin startups: operating legally means you have to become a money-transmitter and follow a ton of rules which are expensive and nullify many of Bitcoin's benefits.
dragonwriter 14y ago
> I have no doubt they could. They could pass all kinds of laws about how Bitcoin should be operated. What they are saying is that passing laws is not an issue; the laws providing the regulatory authority have already been passed. > Enforcing those laws is another matter. Not really; at least, as regards the ability to engage in significant business activities that involve bitcoin.

madaxe 14y ago

I could lasso the moon "if I wanted".

protomyth 14y ago

Is Bitcoin a currency or a commodity? Does its classification affect who get to do what with it?

iaw 14y ago
It could be either but for ease of prosecution they'll probably dump it into the commodity category because (I believe) it gives them more regulatory leeway in their efforts. I don't believe that the CFTC [1] regulates currency transactions but they definitely regulate commodities. [1] http://www.cftc.gov/index.htm http://www.cftc.gov/index.htm

benjamincburns 14y ago

> [T]he new rules stipulate that "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" and is therefore subject to these federal regulations. That's a scary statement. The "money transmitter" moniker is a very pay-to-play scheme for which it isn't particularly easy for a common person to achieve licensing. If they start enforcing this, it'll stop pretty much all US involvement in Bitcoin something akin to the crackdowns on online gambling. Would it be difficult to enforce? Sure. But then when you do get caught they'll throw the book at you. If this really is the current legal status of Bitcoin, here's hoping they do in fact decide to regulate it in a way that preserves the average citizen's ability to participate. Edit: I'm not a finance person, but I think this may also be a way for major financial institutions (existing licensed money transmitters) to seize control of the Bitcoin markets in the US. Essentially they would take the place of a Bitcoin exchange and pay on your behalf, but you would never have custody of your own bitcoin funds. This of course would somewhat (if not entirely) diminish the value of Bitcoin as a trading instrument, but preserve its value as a payment mechanism. The gov't would like this since it would remove most of the anonymity from the process as well.

gamblor956 14y ago
This was discussed 2 or 3 weeks ago, when the government's position on bitcoin was first released. They consider exchanges and bitcoin transaction processors (i.e,. Coinbase) to be money transmitters subject to regulation. Individual users (miners, bitcoin holders) are not money transmitters subject to regulation.
- deleted 14y ago
  [deleted]
- dragonwriter 14y ago
  > This was discussed 2 or 3 weeks ago, when the government's position on bitcoin was first released. The guidance on the "Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies" was released almost 2 months ago (March 18, 2013.) > They consider exchanges and bitcoin transaction processors (i.e,. Coinbase) to be money transmitters subject to regulation. True. > Individual users (miners, bitcoin holders) are not money transmitters subject to regulation. Less completely true. Per the guidance [1], anyone who "buys or sells convertible virtual currency for any reason is a money transmitter [...] unless a limitation to or exemption from the definition applies to the person", and more specifically with regard to miners "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." [1] http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001....

johnohara 14y ago

"I don't want to regulate everything under the sun," Chilton added in the CNBC interview. "If you guys want to be a shill for the financial industry and support a chattel currency that people use to purchase drugs and money with—have a party, man. My job is a regulator; I'm going to look after it." “The bank that is storing my money is highly regulated by federal regulators and backed by a government with a huge army behind it,” James Angel, a business professor at Georgetown University, told Ars last month. http://www.despair.com/arrogance.html http://www.despair.com/arrogance.html

JonnieCache 14y ago

Anyone fancy weighing in on what he means here? "If you guys want to be a shill for the financial industry and support a chattel currency that people use to purchase drugs and money with—have a party, man. My job is a regulator; I'm going to look after it." What is a chattel currency in this context? It seems to refer to a "commodity as currency" arrangement but there is clearly some extra implied meaning that I'm not getting. What does he mean about "shill for the financial industry?" Is he referring to sellers of bitcoin derivatives, or is he trying to claim that the "real" financial industry is involved? The colloquial nature of his tone almost suggests sarcasm. What's the deal?

jlgreco 14y ago
That part is so weird that my knee-jerk reaction is that it is meant to cause fear, uncertainty, and doubt.
drcode 14y ago
He uses the word "chattel" because it's a term that was used in the slave trade, but he can get away with it because technically it's just another word for "currency". It's a disgraceful smear. This is clearly going to get ugly. EDIT: Some stats from Google search, since this is a sensitive point and people are questioning what I'm saying (quotes included in the search): "chattel currency": 72 results "chattel property": 46,600 results "chattel slavery": 335,000 results
- w1ntermute 14y ago
  A fundamental advantage of BTC is that it's supposed to be free of government regulation or other forms of centralized control. The correct response to this is to (be absolutely sure that the government can't regulate it, and then) just ignore whatever the government says.
  - Nursie 14y ago
    This works fine until real-world businesses start being shut down for accepting it. Not saying this will happen, but a determined government could easily put a huge dent in bitcoin usage.

mkbrody 14y ago

“The bank that is storing my money is highly regulated by federal regulators and backed by a government with a huge army behind it,” James Angel, a business professor at Georgetown University, told Ars last month. The irony is that: 1. Bitcoin doesn't need a highly regulated financial institution to securely store your money (but it does require highly secure technology). 2. Acknowledging that the only thing backing legal tender post gold-standard is coercive force (you could even argue that implied force is the main driver behind market demand for $USD - i.e. petrodollars, the EURO, the Federal Reserve, government agencies that only accept payment in $USD, etc.).

Cushman 14y ago
> 1. Bitcoin doesn't need a highly regulated financial institution to securely store your money (but it does require highly secure technology). Only if you don't consider protection from theft an attribute of secure money storage. If somebody compromises my bank account credentials, it will be annoying and time consuming but I will ultimately get my money back. If somebody steals my bitcoin wallet, I am shit out of luck.
- jeffasinger 14y ago
  Bitcoin is like cash. If someone steals a bunch of cash from you, you're likely to be out of luck. You could build a complicated banking system on top Bitcoin too, that could do things like reverse unauthorized transactions, but that would get rid of the reason some people are really interested in Bitcoin.
  - krupan 14y ago
    Someone could build the banking system for those who would like the warm fuzzies it gives them, and others could still choose not to use it, keeping their bitcoins in their own wallet in their own house. Again, just like cash. The cool thing is that, unlike cash, you can send and receive bitcoin to and from anywhere in the world electronically without that big banking system's help!
  - Cushman 14y ago

ttrreeww 14y ago

It's the drug wars all over again.

Tycho 14y ago

The beautiful thing about BitCoin and governments is this 'dammed if they do, damned if they don't' dynamic. If they try to regulate Bitcoin, the legitimise it as a currency and invite the masses to use it, thus diminishing the power of their fiat currencies, which is what they were trying to avoid in the first place...

dublinben 14y ago
Bitcoin is already pretty painful to use. I don't think regulating it would encourage use in any way. If anything, it would remove the primary reason most people have for using it, independence from the government.
- w1ntermute 14y ago
  BTC isn't inherently painful to use. Things are improving a lot.
  - cynoclast 14y ago
    And fast.
  - tocomment 14y ago
    How are things improving?

drcode 14y ago

> "I don't want to regulate everything under the sun." The fact that he spells it out so clearly definitely is a great relief. </sarcasm>

venomsnake 14y ago

Or we could say Bitcoin is religion. It is faith and math combined.

jeremyjh 14y ago

I think it is great news for BTC. This sort of coverage can only legitimize it. It is a complete fantasy if people think the USG will not wet their beak in the BTC trough. If they find themselves unable to tax and regulate BTC transactions then they will probably find it necessary to destroy it instead.

grimtrigger 14y ago

Statements like this put a chilling effect over the whole industry, even if they never take any action. Bitcoin users should push for a letter of no-action by the CFTC.

iaw 14y ago
I think you'd have a better chance getting a response from Obama on the issue before the CFTC chimed in. The limited experience I've had with the CFTC (and other financial regulatory entities) implies that they want to maintain the broadest reach possible and will rarely, if ever, offer clarifying statements. We have literally asked for clarification on sections of regulations before and offered several scenarios asking which interpretation was correct. The response : "we can't offer an opinion on that." Even though they would be the ones enforcing it.