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I actually built a very comprehensive site that did this exact thing back in 2011, even hiring a very good designer to help me with the graphics (paid with Bit

I actually built a very comprehensive site that did this exact thing back in 2011, even hiring a very good designer to help me with the graphics (paid with Bitcoins -- about 60 BTC for his work if I recall). The mobile web frontend for the Bitcoins->Card side worked well enough that I would load it up and use it to buy coffee at my local Starbucks via the PDF417-code that Starbucks uses. However, I never released due to all the regulatory issues. Very unfortunately, FinCEN still considers this type of transaction to be an exchange of value, and thereby regulated. At the time, FinCEN still hadn't released their guidelines on digital currencies, but they were increasing their regulatory stance on gift cards. The situation is still not completely clear, even now, but I'm pretty sure that FinCEN will try to claim that this type of operation a money transmitter, with all the headaches that this brings. Also, I wasn't sure if Starbucks would try to do something crazy like sue me to take down the site. But it was primarily my fear of FinCEN that caused me to drop the idea and put the code in storage. Regulation is taking a heavy toll on this country's innovation; this is just one very small example. Interestingly, I had no problems getting a business bank account for the idea back then. I think it'd be much harder now. Despite spending 6 weeks part-time on a project that I ended up scraping, I don't regret it since it was my first major Python project and eventually led me to learn lots of implementation details of the Bitcoin protocol itself (though that certainly wasn't necessary for my project). Edit: clarity

mhluongo 13y ago
Any citations on the FinCen fears?
- eric_bullington 13y ago
  Read through the administrative rulings here to get a feel for the general approach FinCEN takes on these issues: http://www.fincen.gov/statutes_regs/rulings/ http://www.fincen.gov/statutes_regs/rulings/ If you read through those rulings, you'll see that FinCEN takes a very broad view on exchanges of value falling into the category of money transmission. Also, read through their new stringent guidelines for sellers of gift cards (sellers of prepaid access). Here's a good summary: http://www.dorsey.com/EU_giftcard_121211/ http://www.dorsey.com/EU_giftcard_121211/ In my case, I was planning on both buying and selling gift cards (digitally, for a mobile frontend to display barcode). My best hope was to be considered a seller of prepaid access, which brought some hope because the strict KYC guidelines didn't kick in until $1000, if I recall correctly. However, since I bought and sold, I was pretty sure that FinCEN would instead consider me a money transmitter, whose KYC requirements start at $0. It's totally possible for these kinds of businesses to fly under the radar for years, and never be affected. But the moment some ambitious bureaucrat learns about a project like this and decides to made a federal case of it (literally), or some kid's arrested for possession of marijuana who moved money through this type of business, then it's misery for everyone on the receiving end.
panarky 13y ago
It's a shame FinCEN regs are so onerous, they're really stifling startups and ensuring that innovation will happen outside the US. It's pretty vague, but it's easy to interpret the latest guidance to say that exchanging one digital currency for another requires a license, customer identification, suspicious transaction reporting, etc. Even if you never touch dollars, euros, yen or any other "real" currency, are you still a "money transmitter", no matter how small the amount? http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G... "If the choice for regulators is to permit money laundering on the one hand, or to permit innovation on the other, we are always going to choose squelching the money laundering first." http://www.bloomberg.com/news/2014-01-29/new-york-state-regulator-promises-tough-bitcoin-rules.html http://www.bloomberg.com/news/2014-01-29/new-york-state-regu... Good luck exchanging stored-value for digital currency in this environment.
- eric_bullington 13y ago
  A business that buys/sells gift cards for Bitcoin is a bit of a grey area I think, but I'm absolutely sure that FinCEN considers exchanging Bitcoin for alts to be money transmission, regardless of the amount involved, and once they catch up with the technology, they'll start looking to make a precedent. And yes, these businesses will simply take place outside of the U.S., taking all those jobs with them.
  - deleted 13y ago
    [deleted]
  - asveikau 13y ago
    I have not looked into these details being discussed at all, but the "sending jobs elsewhere" angle sounds nutty. I have to assume that money transfers are also regulated in the places you're thinking of, especially if it is a developed country or a desirable place to live. I mean, you can't reasonably expect to just set yourself up as a bank without jumping through a few hoops.
    - eric_bullington 13y ago
maxerickson 13y ago
This is actually a case where we just need better regulation of gift cards. Basically, the store should be required to exchange them for cash. Any associated fees for that should be built into the purchase price. This obviates third party exchanges and only 'damages' what is really a crappy gift (in the sense that it isn't a whole lot more creative than cash but is worth less).
- eric_bullington 13y ago
  Yeah, this isn't that kind of regulation. This is purely about transfer of money to prevent money laundering, in FinCEN's eyes. These regulations aren't about the customer.
  - maxerickson 13y ago
    I'm not confused. I'm protesting the use of gift card exchange as an example of innovation. I phrased it in terms of sensible regulation because you proposed that the alternative to bad regulation was no regulation. If you cited a specific rule that was onerous and explained why it didn't actually accomplish anything, that would be different.
    - eric_bullington 13y ago
      I am confused. Can you point out exactly where I propose that the alternative to bad regulation is no regulation? In the proper political environment, I'm actually not opposed to "good regulation". The problem is, the bureaucrats are taking the appetite of part of the public for "good regulations" and using that political capital to make more barrier regulations -- the bad type. Worst of all, they enforce these regulations with SWAT teams and long federal prison terms [1, just one example of many, since I know you'll ask]. So as long as the government is continuing to pass more barrier regulations meant to prop up the big corporations through regulatory capture, and as long as they continue to enforce those regulations at gunpoint instead of with some sort of civil court like a civilized country would, they get no pass from me for more "good regulations". 1. http://www.wired.com/threatlevel/2013/01/coder-charged-for-gambling-software/ http://www.wired.com/threatlevel/2013/01/coder-charged-for-g...

mhluongo 13y ago

Any citations on the FinCen fears?

eric_bullington 13y ago
Read through the administrative rulings here to get a feel for the general approach FinCEN takes on these issues: http://www.fincen.gov/statutes_regs/rulings/ http://www.fincen.gov/statutes_regs/rulings/ If you read through those rulings, you'll see that FinCEN takes a very broad view on exchanges of value falling into the category of money transmission. Also, read through their new stringent guidelines for sellers of gift cards (sellers of prepaid access). Here's a good summary: http://www.dorsey.com/EU_giftcard_121211/ http://www.dorsey.com/EU_giftcard_121211/ In my case, I was planning on both buying and selling gift cards (digitally, for a mobile frontend to display barcode). My best hope was to be considered a seller of prepaid access, which brought some hope because the strict KYC guidelines didn't kick in until $1000, if I recall correctly. However, since I bought and sold, I was pretty sure that FinCEN would instead consider me a money transmitter, whose KYC requirements start at $0. It's totally possible for these kinds of businesses to fly under the radar for years, and never be affected. But the moment some ambitious bureaucrat learns about a project like this and decides to made a federal case of it (literally), or some kid's arrested for possession of marijuana who moved money through this type of business, then it's misery for everyone on the receiving end.

panarky 13y ago

It's a shame FinCEN regs are so onerous, they're really stifling startups and ensuring that innovation will happen outside the US. It's pretty vague, but it's easy to interpret the latest guidance to say that exchanging one digital currency for another requires a license, customer identification, suspicious transaction reporting, etc. Even if you never touch dollars, euros, yen or any other "real" currency, are you still a "money transmitter", no matter how small the amount? http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G... "If the choice for regulators is to permit money laundering on the one hand, or to permit innovation on the other, we are always going to choose squelching the money laundering first." http://www.bloomberg.com/news/2014-01-29/new-york-state-regulator-promises-tough-bitcoin-rules.html http://www.bloomberg.com/news/2014-01-29/new-york-state-regu... Good luck exchanging stored-value for digital currency in this environment.

eric_bullington 13y ago
A business that buys/sells gift cards for Bitcoin is a bit of a grey area I think, but I'm absolutely sure that FinCEN considers exchanging Bitcoin for alts to be money transmission, regardless of the amount involved, and once they catch up with the technology, they'll start looking to make a precedent. And yes, these businesses will simply take place outside of the U.S., taking all those jobs with them.
- deleted 13y ago
  [deleted]
- asveikau 13y ago
  I have not looked into these details being discussed at all, but the "sending jobs elsewhere" angle sounds nutty. I have to assume that money transfers are also regulated in the places you're thinking of, especially if it is a developed country or a desirable place to live. I mean, you can't reasonably expect to just set yourself up as a bank without jumping through a few hoops.
  - eric_bullington 13y ago

maxerickson 13y ago

This is actually a case where we just need better regulation of gift cards. Basically, the store should be required to exchange them for cash. Any associated fees for that should be built into the purchase price. This obviates third party exchanges and only 'damages' what is really a crappy gift (in the sense that it isn't a whole lot more creative than cash but is worth less).

eric_bullington 13y ago
Yeah, this isn't that kind of regulation. This is purely about transfer of money to prevent money laundering, in FinCEN's eyes. These regulations aren't about the customer.
- maxerickson 13y ago
  I'm not confused. I'm protesting the use of gift card exchange as an example of innovation. I phrased it in terms of sensible regulation because you proposed that the alternative to bad regulation was no regulation. If you cited a specific rule that was onerous and explained why it didn't actually accomplish anything, that would be different.
  - eric_bullington 13y ago
    I am confused. Can you point out exactly where I propose that the alternative to bad regulation is no regulation? In the proper political environment, I'm actually not opposed to "good regulation". The problem is, the bureaucrats are taking the appetite of part of the public for "good regulations" and using that political capital to make more barrier regulations -- the bad type. Worst of all, they enforce these regulations with SWAT teams and long federal prison terms [1, just one example of many, since I know you'll ask]. So as long as the government is continuing to pass more barrier regulations meant to prop up the big corporations through regulatory capture, and as long as they continue to enforce those regulations at gunpoint instead of with some sort of civil court like a civilized country would, they get no pass from me for more "good regulations". 1. http://www.wired.com/threatlevel/2013/01/coder-charged-for-gambling-software/ http://www.wired.com/threatlevel/2013/01/coder-charged-for-g...