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Funny, in the profile of Mt Gox in The Verge[1] they said: > Mt. Gox estimates it costs $25 million in the first year to become fully compliant in the US. But

by nikcub 13y ago

Funny, in the profile of Mt Gox in The Verge[1] they said: > Mt. Gox estimates it costs $25 million in the first year to become fully compliant in the US. But considering a regulator could potentially swoop in and seize funds if a violation were found, it’s worth it. I called bull[2] on that figure when that post was published. The other reason i've stayed away from Mt Gox is despite their claims of compliance, they aren't listed on the Californian DFI website as a registered money agent[3] When that article was posted I also emailed Mt Gox, since I couldn't find them in any registry as an authorized money transmitter, to ask them where that $25M was spent. The response I got was: > Unfortunately, our financial statement is yet to be available. Once it is available and we have the permission to publish it from management, we will release this. [1] http://www.theverge.com/2013/4/1/4154500/mt-gox-barons-of-bitcoin http://www.theverge.com/2013/4/1/4154500/mt-gox-barons-of-bi... [2] https://twitter.com/nikcub/status/321418917803327488 https://twitter.com/nikcub/status/321418917803327488 [3] http://www.dfi.ca.gov/Directory/money_transmitters.html http://www.dfi.ca.gov/Directory/money_transmitters.html

MacsHeadroom 13y ago
Money Transmitters have to post a $25 Million security bond in order to be licensed across the entire U.S. That is were the $25 Million would go. But MtGox never spent that money nor claimed to spend that money as of yet. To my knowledge, they have never made any claims of compliance. They have only said that they plan to become compliant some time this year.
- nikcub 13y ago
  They imply in the article in The Verge that they have spent it, or are going to spend it. When I asked them straight up in an email they didn't say that they didn't spend it, only that they wouldn't disclose where[1]. Anybody reading that article in The Verge would conclude that they have spent the money. That whole article was about assuring people that Mt Gox was safe. At best they were not straight forward and transparent, at worst they lied. Not what I want from a company who is asking me to trust them with my money. Frankly I am shocked that their setup in the USA for Dwolla transfers was nothing more than an ordinary Wells Fargo business account. [1] The email would have been the perfect time to respond with 'well, we haven't actually spent the money on compliance, but we plan to'
- jzila 13y ago
  They don't need to have that full money, however. They pay another company a typical interest rate between 3 and 5% to post that bond on their behalf. So you probably need less than $1M per year to fund those bonds. The bigger issue is that it takes lots of time and effort for back-and-forth with each state to get authorized. One person has maybe the bandwidth to obtain compliance with up to 3 states at a time, and this is for someone who knows the legal background very well. So you need to staff a pretty large compliance department off the bat to become compliant before engaging in money transmission (and thus before earning revenue). That's hugely expensive. source: I work for a money transmitter.
  - yebyen 13y ago
    Oh. So, you don't have to part with $25mil for as long as you want to stay in business, you just need to pay $1mil in non-refundable interest every year until you want to go out of business. Sounds perfectly cromulent.
- eric_bullington 13y ago
  Just to clarify here: based on my not insignificant research on this issue, this $25 million bond is the approximate total cost of the bonds for each state that requires money transmitters to hold a license and a bond. It's not a federal requirement. In fact, as far as I can tell, federal FINCEN compliance doesn't cost anything beyond the cost of the accounting tools to maintain that compliance (which can be very expensive to buy or develop, to be fair). Disclaimer: I am not a lawyer and this is not legal advice, only a conversational comment on the Mt. Gox affair.
  - dragonwriter 13y ago
    > Just to clarify here: based on my not insignificant research on this issue, this $25 million bond is the approximate total cost of the bonds for each state that requires money transmitters to hold a license and a bond. It's not a federal requirement. As I understand it, it is federal requirement that they be licensed by each state into or out of which they will transmit money, but the actual licensing requirements are set state-by-state.
- mbell 13y ago
  Posting a $25M surety bond doesn't cost $25M, rates are usually <10% although its hard to tell for something this high risk.
wmf 13y ago
Wasn't the whole point of the CoinLab buyout to become compliant? Maybe they would have never had this problem if they finished the transition in March as planned.
jsun 13y ago
remember when the story first broke everyone immediately jumped to the conclusion that "big brother" was out to get bitcoin?

by nikcub 13y ago

MacsHeadroom 13y ago

Money Transmitters have to post a $25 Million security bond in order to be licensed across the entire U.S. That is were the $25 Million would go. But MtGox never spent that money nor claimed to spend that money as of yet. To my knowledge, they have never made any claims of compliance. They have only said that they plan to become compliant some time this year.

nikcub 13y ago
They imply in the article in The Verge that they have spent it, or are going to spend it. When I asked them straight up in an email they didn't say that they didn't spend it, only that they wouldn't disclose where[1]. Anybody reading that article in The Verge would conclude that they have spent the money. That whole article was about assuring people that Mt Gox was safe. At best they were not straight forward and transparent, at worst they lied. Not what I want from a company who is asking me to trust them with my money. Frankly I am shocked that their setup in the USA for Dwolla transfers was nothing more than an ordinary Wells Fargo business account. [1] The email would have been the perfect time to respond with 'well, we haven't actually spent the money on compliance, but we plan to'
jzila 13y ago
They don't need to have that full money, however. They pay another company a typical interest rate between 3 and 5% to post that bond on their behalf. So you probably need less than $1M per year to fund those bonds. The bigger issue is that it takes lots of time and effort for back-and-forth with each state to get authorized. One person has maybe the bandwidth to obtain compliance with up to 3 states at a time, and this is for someone who knows the legal background very well. So you need to staff a pretty large compliance department off the bat to become compliant before engaging in money transmission (and thus before earning revenue). That's hugely expensive. source: I work for a money transmitter.
- yebyen 13y ago
  Oh. So, you don't have to part with $25mil for as long as you want to stay in business, you just need to pay $1mil in non-refundable interest every year until you want to go out of business. Sounds perfectly cromulent.
eric_bullington 13y ago
Just to clarify here: based on my not insignificant research on this issue, this $25 million bond is the approximate total cost of the bonds for each state that requires money transmitters to hold a license and a bond. It's not a federal requirement. In fact, as far as I can tell, federal FINCEN compliance doesn't cost anything beyond the cost of the accounting tools to maintain that compliance (which can be very expensive to buy or develop, to be fair). Disclaimer: I am not a lawyer and this is not legal advice, only a conversational comment on the Mt. Gox affair.
- dragonwriter 13y ago
  > Just to clarify here: based on my not insignificant research on this issue, this $25 million bond is the approximate total cost of the bonds for each state that requires money transmitters to hold a license and a bond. It's not a federal requirement. As I understand it, it is federal requirement that they be licensed by each state into or out of which they will transmit money, but the actual licensing requirements are set state-by-state.
mbell 13y ago
Posting a $25M surety bond doesn't cost $25M, rates are usually <10% although its hard to tell for something this high risk.

wmf 13y ago

Wasn't the whole point of the CoinLab buyout to become compliant? Maybe they would have never had this problem if they finished the transition in March as planned.

jsun 13y ago

remember when the story first broke everyone immediately jumped to the conclusion that "big brother" was out to get bitcoin?