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> [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 e

> [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 13y 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 13y ago
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- dragonwriter 13y 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....
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drcode 13y ago
My hope is that this will play out in the same way as the RIAA law suits: Since law suits are expensive, they have to ask for 5K+ at a minimum in each law suit (or if they do criminal suits, 6 months plus of jail time) However, the only people they can charge are P2P participants, so in the case of bitcoin, mainly a bunch of college students trying to be entrepreneurial. (Charging exchanges is another issue... in this post I'm talking about trying to directly go after the core bitcoin system.) Charging a bunch of nice college kids with 6 months jail time for buying a bitcoin is the worst PR disaster imaginable. So I'm hoping this kind of crackdown is untenable, from a political standpoint, and that bitcoins remain effectively unregulated.
- iaw 13y ago
  This is the US Government, not the RIAA. The US Government is not motivated by profit but limited by budgetary constraints. It would not be implausible for the US govt to monitor packets for the BTC protocol and start tying transactions/wallets to IP addresses. At that point have the local PD walk around issuing citations and then go after the big fish with lawyers. Also, who cares about PR here? No one running the crackdown would actually be an elected official, they'd all be appointed...
  - drcode 13y ago
    You make some good points.
jnbiche 13y ago
If you read closely, he's only talking about regulating Bitcoin derivatives, not Bitcoin itself: "there is more than a colorable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction." But yeah, the sarcasm is inappropriate a regulator. But not surprising..
sliverstorm 13y ago
It sounds like it would only impact miners. Americans can participate in Bitcoin without mining.
falcolas 13y ago
Hmm. There could be significant impact on videogames, like Diablo III? "Creates a unit of convertible virtual currency": Plays long enough to obtain a legendary item and... "sells those units to another person for real currency": sells the legendary item on the real money auction house. That's a very scary statement indeed. It's too broad, and could be brought to bare against too many concepts in the digital world.
- benjamincburns 13y ago
  Again, I'm not a finance person, but I believe you could argue that the legendary item is a virtual good, rather than a virtual currency so long as it had in-game value aside from use as a monetary instrument. The money transmitter regulations might (should) apply to sale of in-game currencies, however as these are only valuable as instruments of trade. That said, it's probably totally legal if one were to use bitcoin to purchase a virtual good such as a legendary item, (allowable without restriction under the guideline) and then sell said virtual good for USD or another currency. Following that line of reasoning it wouldn't be too outrageous for commodities markets to open up trading in-game goods for the sole purpose of virtual currency exchange. But that's pretty contrived...

gamblor956 13y 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 13y ago
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dragonwriter 13y 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....
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drcode 13y ago

My hope is that this will play out in the same way as the RIAA law suits: Since law suits are expensive, they have to ask for 5K+ at a minimum in each law suit (or if they do criminal suits, 6 months plus of jail time) However, the only people they can charge are P2P participants, so in the case of bitcoin, mainly a bunch of college students trying to be entrepreneurial. (Charging exchanges is another issue... in this post I'm talking about trying to directly go after the core bitcoin system.) Charging a bunch of nice college kids with 6 months jail time for buying a bitcoin is the worst PR disaster imaginable. So I'm hoping this kind of crackdown is untenable, from a political standpoint, and that bitcoins remain effectively unregulated.

iaw 13y ago
This is the US Government, not the RIAA. The US Government is not motivated by profit but limited by budgetary constraints. It would not be implausible for the US govt to monitor packets for the BTC protocol and start tying transactions/wallets to IP addresses. At that point have the local PD walk around issuing citations and then go after the big fish with lawyers. Also, who cares about PR here? No one running the crackdown would actually be an elected official, they'd all be appointed...
- drcode 13y ago
  You make some good points.

jnbiche 13y ago

If you read closely, he's only talking about regulating Bitcoin derivatives, not Bitcoin itself: "there is more than a colorable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction." But yeah, the sarcasm is inappropriate a regulator. But not surprising..

sliverstorm 13y ago

It sounds like it would only impact miners. Americans can participate in Bitcoin without mining.

falcolas 13y ago

Hmm. There could be significant impact on videogames, like Diablo III? "Creates a unit of convertible virtual currency": Plays long enough to obtain a legendary item and... "sells those units to another person for real currency": sells the legendary item on the real money auction house. That's a very scary statement indeed. It's too broad, and could be brought to bare against too many concepts in the digital world.

benjamincburns 13y ago
Again, I'm not a finance person, but I believe you could argue that the legendary item is a virtual good, rather than a virtual currency so long as it had in-game value aside from use as a monetary instrument. The money transmitter regulations might (should) apply to sale of in-game currencies, however as these are only valuable as instruments of trade. That said, it's probably totally legal if one were to use bitcoin to purchase a virtual good such as a legendary item, (allowable without restriction under the guideline) and then sell said virtual good for USD or another currency. Following that line of reasoning it wouldn't be too outrageous for commodities markets to open up trading in-game goods for the sole purpose of virtual currency exchange. But that's pretty contrived...