7 ms·

I don't think much of Bitcoin but even I tend to read this and think, "Well, screw the banks, we have Bitcoin."

by Eliezer 13y ago

javajosh 13y ago
If FDIC insurance is the issue, then simply offer uninsured accounts. I don't see why this is an issue.
- justincormack 13y ago
  Its not the issue, the issue is that these are, Federally, proceeds of crime, and could be seized by Federal law enforcement and the banks charged for money laundering offences.
  - olefoo 13y ago
    And that right there is why legalization will be an unsure thing in this country for at least the next decade. If you are going into the marijuana business get good legal advice and have a competent defense lawyer on retainer. There could quite easily be a crackdown if the next president wants to revert things or is too heavily beholden to the parts of federal law enforcement that benefit from the drug war.
  - nightski 13y ago
    What about the sales tax that is being collected? Is there any precedent for that?
- deleted 13y ago
  [deleted]
minimax 13y ago
Not sure that really helps. They are worried about their security because they don't want to get robbed. If I can break in and hold a gun to your head until you irreversibly transfer me all your bitcoins then you have basically the same security problem. If your response is that they should keep all their bitcoins in a safe place then maybe we can think about what sorts of safe places you can keep items worth tens of thousands of dollars and then I think you basically end up back at banks.
- pfisch 13y ago
  Safety Deposit boxes and banks are not necessarily the same entity.
  - bertil 13y ago
    If you can have two identities (say, one shell Mary-Jane seller, and one profit-making landlord) then the bank would easily accept the landlord’s account. I doubt such structure are allowed, or would pass Federal scrutiny according to Colorado banks, otherwise, the problem would be solved already. The other possibility is that this solution is obvious, but lobbying for bank accounts is part of making Mary-Jane a more acceptable trade.
    - dagw 13y ago
      A recent Planet Money podcast talked about this problem and the pot store owner in Colorado they interviewed had done more or less that. His store was owned by shell company that had a bank account, but he was unwilling to go into too much details on the exact legal setup. I got the feeling it was a bit of legal grey area and that the bank was happy with it only as long as they could honestly claim ignorance.
- wyager 13y ago
  The store owner owns the private keys. The stores themselves only get access to the pubkeys. Or they use a service that holds all the keys for them. Unlike with physical cash, you can easily put any arbitrary amount of physical separation between the place the transaction occurs and the place the money is "stored".
  - minimax 13y ago
    I think in your scenario the store owner is still at risk of being physically coerced into transferring his bitcoins to an assailant, no?
    - wyager 13y ago
mjolk 13y ago
Yes, because your landlord accepts bitcoin. Or, if you have a home, the bank.
- bertil 13y ago
  I won’t describe Hacker News reflex to offer BitCoin as a solution to all woes as ‘smart’, but most (e-)commerce actually use solutions that convert BitCoins to dollars as the transaction happen (or within the next 10 minutes). The problem here is to hide to the bank (or rather give them plausible deniability towards Federal authority) that the money came from the sale of Mary-Jane. I doubt a shell company would suffice — however, the problem isn’t to get dollars sent to your account.
jonnybgood 13y ago
I don't think that's the appropriate attitude to take. If you want Mary Jane legalization and tolerance in the mainstream, you need the banks. In other words, relying purely on BTC will only hinder the progress towards federal legalization for the simple fact BTC is not mainstream.
Freestyler_3 13y ago
If im getting the banks right, they are kind of saying you should launder your clean money before they can take it.
brownbat 13y ago
Yeah, they're cash heavy. They'd probably willingly exchange it for something lighter weight at a reasonable fee, so long as they could get cash back out again when they needed to. Someone really just needs to set up a BTC ATM in these places, see what happens. Maybe convince the owners to take bitcoin, off chance it creates a thriving use case for both, and demonstrates the ability/limits of BTC as a banking substitute.
auntienomen 13y ago
Bitcoin's not a very good solution for these guys. The fluctuations in the value of BTC could really screw up their cash flow. "Uh, sorry guys. China made a minor change in thier banking laws, and we're a little short of cash at the moment. We can't pay you this week, but it's probable that we'll be able to pay you next week."
- FellowTraveler 13y ago
  This isn't true. A business can receive Bitcoin and convert it all to gold daily. They can sell some of this gold for cash to pay their expenses. They can also start a separate company, say, an investment company, to take the gold and store it, or convert it to dollars or stocks. There are lots of solutions made possible by Bitcoin, none of which are impacted in the slightest by the investment volatility of Bitcoin.
toblender 13y ago
You beat me to it. I think Bitcoin has managed to infect our minds...
patio11 13y ago
Does using Bitcoin avoid the trip to the local government tax agency with $51,000 in hard currency? They'll accept payments in anything, as long as anything is US dollars. Does using Bitcoin help assist someone who has a debit card purchase marijuana? Bear in mind that this person is likely non-technical. They're also physically present at a marijuana distributor, and sufficiently difficult processes will cost them a 30 minute car drive to another marijuana distributor, who transacts via cash and an ATM or using the ATm->distributor's account loophole. Does using Bitcoin help Totally Not A Marijuana Dispensary LLC avoid the scrutiny of its bank's compliance department such that they can maintain a business bank account, write checks to employees and vendors, demonstrate a credible revenue/expense history and thereby secure credit, and otherwise plug into the mainstream financial system? For example, will large wire transfers coming in from an identifiable company in Tokyo, or their cutouts, raise less flags than dealing in equivalent amounts of cash, like every pizzeria, car wash, laundromat, video arcade, etc in America? The last one might not be obvious, so as someone who has extensive experience with American and Japanese banks doing routine wire transfers between each other: this reads as Very Effing Exotic to risk/compliance officers and even if you're utterly aboveboard you'll be asked to explain yourself a lot. I get to have a quick chat with the manager of my bank branch for every single wire, and let's just say it is a very good thing that I have a US passport, an accountant on speed dial, a stack of invoices and contracts, sterling credit, and the interconnected stack of social privileges which let me convince skeptical people that I'm an "international professional" rather than "drug dealer" in five minutes of conversation.
- arohner 13y ago
  > They'll accept payments in anything, as long as anything is US dollars. Sometimes, not even then: "One dispensary owner told me about taking seven thousand dollars in cash to the Washington Department of Revenue, to pay his monthly tax bill. He was turned away, because the teller refused to deposit his “drug money.”" http://www.newyorker.com/reporting/2013/11/18/131118fa_fact_keefe?currentPage=all http://www.newyorker.com/reporting/2013/11/18/131118fa_fact_...
  - rmc 13y ago
    Interesting legal/tax follow question? Does he still owe the tax money? I presume that argument won't go down well with the tax man, but could be interesting if he got to court.

I don't think much of Bitcoin but even I tend to read this and think, "Well, screw the banks, we have Bitcoin."

by Eliezer 13y ago

I don't think much of Bitcoin but even I tend to read this and think, "Well, screw the banks, we have Bitcoin."

javajosh 13y ago

If FDIC insurance is the issue, then simply offer uninsured accounts. I don't see why this is an issue.

justincormack 13y ago
Its not the issue, the issue is that these are, Federally, proceeds of crime, and could be seized by Federal law enforcement and the banks charged for money laundering offences.
- olefoo 13y ago
  And that right there is why legalization will be an unsure thing in this country for at least the next decade. If you are going into the marijuana business get good legal advice and have a competent defense lawyer on retainer. There could quite easily be a crackdown if the next president wants to revert things or is too heavily beholden to the parts of federal law enforcement that benefit from the drug war.
- nightski 13y ago
  What about the sales tax that is being collected? Is there any precedent for that?
deleted 13y ago
[deleted]

minimax 13y ago

Not sure that really helps. They are worried about their security because they don't want to get robbed. If I can break in and hold a gun to your head until you irreversibly transfer me all your bitcoins then you have basically the same security problem. If your response is that they should keep all their bitcoins in a safe place then maybe we can think about what sorts of safe places you can keep items worth tens of thousands of dollars and then I think you basically end up back at banks.

pfisch 13y ago
Safety Deposit boxes and banks are not necessarily the same entity.
- bertil 13y ago
  If you can have two identities (say, one shell Mary-Jane seller, and one profit-making landlord) then the bank would easily accept the landlord’s account. I doubt such structure are allowed, or would pass Federal scrutiny according to Colorado banks, otherwise, the problem would be solved already. The other possibility is that this solution is obvious, but lobbying for bank accounts is part of making Mary-Jane a more acceptable trade.
  - dagw 13y ago
    A recent Planet Money podcast talked about this problem and the pot store owner in Colorado they interviewed had done more or less that. His store was owned by shell company that had a bank account, but he was unwilling to go into too much details on the exact legal setup. I got the feeling it was a bit of legal grey area and that the bank was happy with it only as long as they could honestly claim ignorance.
wyager 13y ago
The store owner owns the private keys. The stores themselves only get access to the pubkeys. Or they use a service that holds all the keys for them. Unlike with physical cash, you can easily put any arbitrary amount of physical separation between the place the transaction occurs and the place the money is "stored".
- minimax 13y ago
  I think in your scenario the store owner is still at risk of being physically coerced into transferring his bitcoins to an assailant, no?
  - wyager 13y ago

mjolk 13y ago

Yes, because your landlord accepts bitcoin. Or, if you have a home, the bank.

bertil 13y ago
I won’t describe Hacker News reflex to offer BitCoin as a solution to all woes as ‘smart’, but most (e-)commerce actually use solutions that convert BitCoins to dollars as the transaction happen (or within the next 10 minutes). The problem here is to hide to the bank (or rather give them plausible deniability towards Federal authority) that the money came from the sale of Mary-Jane. I doubt a shell company would suffice — however, the problem isn’t to get dollars sent to your account.

jonnybgood 13y ago

I don't think that's the appropriate attitude to take. If you want Mary Jane legalization and tolerance in the mainstream, you need the banks. In other words, relying purely on BTC will only hinder the progress towards federal legalization for the simple fact BTC is not mainstream.

Freestyler_3 13y ago

If im getting the banks right, they are kind of saying you should launder your clean money before they can take it.

brownbat 13y ago

Yeah, they're cash heavy. They'd probably willingly exchange it for something lighter weight at a reasonable fee, so long as they could get cash back out again when they needed to. Someone really just needs to set up a BTC ATM in these places, see what happens. Maybe convince the owners to take bitcoin, off chance it creates a thriving use case for both, and demonstrates the ability/limits of BTC as a banking substitute.

auntienomen 13y ago

Bitcoin's not a very good solution for these guys. The fluctuations in the value of BTC could really screw up their cash flow. "Uh, sorry guys. China made a minor change in thier banking laws, and we're a little short of cash at the moment. We can't pay you this week, but it's probable that we'll be able to pay you next week."

FellowTraveler 13y ago
This isn't true. A business can receive Bitcoin and convert it all to gold daily. They can sell some of this gold for cash to pay their expenses. They can also start a separate company, say, an investment company, to take the gold and store it, or convert it to dollars or stocks. There are lots of solutions made possible by Bitcoin, none of which are impacted in the slightest by the investment volatility of Bitcoin.

toblender 13y ago

You beat me to it. I think Bitcoin has managed to infect our minds...

patio11 13y ago

Does using Bitcoin avoid the trip to the local government tax agency with $51,000 in hard currency? They'll accept payments in anything, as long as anything is US dollars. Does using Bitcoin help assist someone who has a debit card purchase marijuana? Bear in mind that this person is likely non-technical. They're also physically present at a marijuana distributor, and sufficiently difficult processes will cost them a 30 minute car drive to another marijuana distributor, who transacts via cash and an ATM or using the ATm->distributor's account loophole. Does using Bitcoin help Totally Not A Marijuana Dispensary LLC avoid the scrutiny of its bank's compliance department such that they can maintain a business bank account, write checks to employees and vendors, demonstrate a credible revenue/expense history and thereby secure credit, and otherwise plug into the mainstream financial system? For example, will large wire transfers coming in from an identifiable company in Tokyo, or their cutouts, raise less flags than dealing in equivalent amounts of cash, like every pizzeria, car wash, laundromat, video arcade, etc in America? The last one might not be obvious, so as someone who has extensive experience with American and Japanese banks doing routine wire transfers between each other: this reads as Very Effing Exotic to risk/compliance officers and even if you're utterly aboveboard you'll be asked to explain yourself a lot. I get to have a quick chat with the manager of my bank branch for every single wire, and let's just say it is a very good thing that I have a US passport, an accountant on speed dial, a stack of invoices and contracts, sterling credit, and the interconnected stack of social privileges which let me convince skeptical people that I'm an "international professional" rather than "drug dealer" in five minutes of conversation.

arohner 13y ago
> They'll accept payments in anything, as long as anything is US dollars. Sometimes, not even then: "One dispensary owner told me about taking seven thousand dollars in cash to the Washington Department of Revenue, to pay his monthly tax bill. He was turned away, because the teller refused to deposit his “drug money.”" http://www.newyorker.com/reporting/2013/11/18/131118fa_fact_keefe?currentPage=all http://www.newyorker.com/reporting/2013/11/18/131118fa_fact_...
- rmc 13y ago
  Interesting legal/tax follow question? Does he still owe the tax money? I presume that argument won't go down well with the tax man, but could be interesting if he got to court.