10 ms·

Ask HN: Bitcoin business unexpectedly taking off, help!

152 points by mhluongo 13y ago

I launched a service to buy gift cards for bitcoin earlier this week (cardforcoin.com) and it's doing far better than I expected. Like, in a scary way. I have a full-time job, and was hoping to carve out a small bit of passive income, not launch a full-blown startup. I could really use some advice from anyone else who's run a bitcoin business, dealt with an unexpected success, or could get me in touch with a lawyer interested in the BTC world who might start pro-bono. PS - Earlier discussion - https://news.ycombinator.com/item?id=7144067 PPS - I want to leave the link for context, but if you'd actually like to use the service, please wait a bit / until the weekend. EDIT - I'm not accepting cards until this gets on the road to straightened out, for obvious reasons. If anyone has any particular further insights please drop me an email.

deleted 13y ago
[deleted]
hahainternet 13y ago
That's a pretty damn neat idea. I've neither run a bitcoin business nor am I a lawyer. Just thought I'd comment and congratulate you on your idea, if you end up needing tech or systems advice I'm sure I or someone else here can answer.
TomGullen 13y ago
How automated is it? Any parts that could be automated that aren't? That would be step 1 I think. Secondly, don't panic! Thirdly, consider if I sell you my Starbucks card balance and I was evil, could I some how phone Starbucks up and say my card was lost/stolen? What happens in this instance? It's the biggest risk you need to look at from what I can see at first glance. Perhaps test this. Fourthly, is there a difference between a gift card and reward card? Coincidentally we just bought a reward card today for our startup (we drink lots of coffee). It looks like it has a similar number format as a gift card, and the Starbucks FAQ says they can refund a balance from the moment it's reported as stolen/lost: http://www.starbucks.co.uk/customer-service/faqs/card http://www.starbucks.co.uk/customer-service/faqs/card Fifthly, become aquainted with the law. Gift cards in the UK at least are considered as "Like cash" as far as I am aware. This means you could be setting yourself up for a bit of legal trouble down the line if you are considered a transmitter or money or such. As other posters point out, the reason for your early success could be because you are being used as a money laundering service without you being aware of the fact. And a question, what exactly are you doing with all these cards? Selling them on somehow? Or keeping them? If this is too much risk/pressure for you, and you feel out your comfort zone, consider selling it as is for BTC. I'm sure you'll find a buyer for a good sum. If you like risk, want to make some money then good luck! Let the adventure begin. Although it sounds like as soon as you get any volume and Starbucks catches wind you'd be pretty easy to shut down. That's one of the better outcomes for you as well I think, the legal risks sound significant. If it was mine, I'd look for a quick sale and pass the risk on.
- lucaspiller 13y ago
  > could I some how phone Starbucks up and say my card was lost/stolen? What happens in this instance? It's the biggest risk you need to look at from what I can see at first glance. Perhaps test this. I lost my Starbucks card and somebody used it. I had auto topup, so they kept using it :) After I reported it, Starbucks replied two days later, cancelled it and transferred the remaining balance. Still I lost about £15 from the auto topup.
  - mhluongo 13y ago
    I'm not accepting registered cards, which changes the fraud vectors quite a bit. No auto-reload, etc.
bira 13y ago
What scares you? If you outline your worries, you can problably get better answers addressing them.
- mhluongo 13y ago
  I don't know, these are pretty good answers. My concerns: the law, fraud, and finding a balance between this and my full-time job, in that order. Overarching theme- how to make this work while minimizing my personal risk.
aosmith 13y ago
Shoot me an email... I may be able to help here <aosmith-at-gmail>.
_sentient 13y ago
ITT: People who do want to start full-blown startups, and are more than happy to replicate your idea. If your moonlight project is seeing significant traction, imagine what could be done with full-time commitment and funding. I think it's in the nature of an entrepreneur to always be hunting for promising new ventures. And that's not a bad thing. Just a heads up.
- grimtrigger 13y ago
  If thats true, then the people in this thread would make excellent partners. Give them some equity and let them your headaches. ps. I'd be interested: www.aakilfernandes.com
bencollier49 13y ago
Aren't most gift cards "non-transferable"?
- antidaily 13y ago
  Heck no.
- mcherm 13y ago
  Most gift cards can be used in person for purchases without any sort of ID -- which means that they can be effectively "transferred" to anyone. In fact, that's rather the point. They're called "gift" cards because you're expected to transfer ("give") them to someone else!
jstalin 13y ago
WARNING - get legal advice now. You'll likely come under the umbrella of money transmission business laws meaning that you need to register with your state and the federal government (assuming you're in the USA).
- cal2 13y ago
  I think this should be step #1. Even if everything is in fact kosher, approving/solidifying any money-related operations would be a great idea (especially with Bitcoin's increasing relevance and scrutiny).
  - poopsintub 13y ago
    Step NOW. Put up a maintenance window and figure out if it is even reasonable to continue. The risk seems outrageously high.
davidpaulkrug 13y ago
Take a deep breath. It just means you have a good idea. Develop a system to streamline everything and enjoy the profits.
cushychicken 13y ago
I would recommend speaking with an accountant or financial adviser before the lawyer first - you'll still need the lawyer, but if it's really blowing up, you'll need some advice regarding taxable status of all this newfound digital income. Congratulations on your success, no matter what direction you decide to go with it!
- maaku 13y ago
  I think he'll need more help regarding the legality of running a non-licensed money transmitter which is ideally suited for money laundering credit from stolen identities...
  - cushychicken 13y ago
    Upon reflection and more comments read, yes, I think you're quite right.
dreamdu5t 13y ago
My guess is it's exploding because people are desperate for untraceable ways to convert cash into bitcoins. Most likely other services like this have popped up but then shut down for fraud related legal issues, or people are scared to start them.
rasengan 13y ago
How are you handling fraud?
- mhluongo 13y ago
  Hand-verification right now before payout, though I'm locking it down further now.
  - ozi 13y ago
    Perhaps there's an api you can use to do the heavy lifting like http://dev.maxmind.com/minfraud/ http://dev.maxmind.com/minfraud/ or http://www.subuno.com/developers.html http://www.subuno.com/developers.html
    - eli 13y ago
      This is a really hard problem that will not be easily offloaded to someone else.
patio11 13y ago
I would strongly consider not running a money transmitter as a side business. If you do not understand that you are running a money transmitter, I will be happy to elaborate. I would also mention, on the assumption you're not aware of it, that you are offering fairly effective money laundering for credit card thieves at below-market rates for that service, and you can expect heavy dedicated adversarial interest. I rather expect you are receiving it already and are as-yet unaware of it. Feel free to ask for more elaboration if you do not understand the mechanics of how this works, or why it will quickly dominate the pool of people willing to receive $50 in consideration for $100 of Starbucks cards.
- foobarqux 13y ago
  Do you have any good references on money transmission and how to operate one? What does and does not qualify, approaches to deal with the regulations as an upstart, etc.
  - andrewfong 13y ago
    The short answer is (in California at least) it's a huge pain in the ass to comply with money transmission laws. You definitely need a lawyer. You might need a large amount of capital to backstop the business. You should also keep in mind that there is some uncertainty over what the law entails right now (hence the need for a lawyer), especially with respect to bitcoin. There is at least one ongoing lawsuit over California's money transmission laws. California info: http://www.dbo.ca.gov/Licensees/money_transmitters/ http://www.dbo.ca.gov/Licensees/money_transmitters/ Other states will have their own requirements. Depending on the nature of the business, you may have to interact with the SEC and FINRA. Again, get a lawyer.
    - foobarqux 13y ago
      Are there any small companies that may superficially appear to be money transmitters but are not?
      - 13y ago
acangiano 13y ago
I think part of your success comes from having created the ability to, de facto, buy Bitcoins via credit card. Any credit card (e.g., stolen ones). That's also your biggest legal challenge. That's what should scare you. But if you can sort out those details and regulations with a good lawyer, you shouldn't be afraid of success and taking projects as far as they'll go.
- mhluongo 13y ago
  One of the steps to de-risk the cards will be a waiting period- new cards won't be accepted unless they've been activated X days/months. That should seriously lower the chance of stolen cards getting through.
rbosinger 13y ago
Are you planning on drinking a lot of coffee?
- joosebox 13y ago
  I feel dumb, but I'm wondering this too. How does he convert the Starbucks cards to anything not coffee - or not take a loss converting them to cash?
  - nacs 13y ago
    Well you can buy cookies, muffins and such with it too so maybe he's using it to feed himself. But yeah I'm not seeing what the OP's benefit is unless coffee = same as cash for OP.
    - jaredsohn 13y ago
      There are a variety of websites that will give you at least some cash for your cards (useful if you have accumulated cards that you otherwise won't use).
grotm001 13y ago
You can find a lawyer to work for equity on EquityLancer
- rhino369 13y ago
  I won't want to belittle anyone, but payment processing law is really complicated. I doubt you'll find someone with experience willing to take equity. It's not like making simple LLC membership agreements and employment contracts. This stuff is complex federal regulations.
ChuckMcM 13y ago
Advice: Shut it down before you get raided and shut down and your "side business" becomes "going to court and defending yourself." What you clearly didn't realize is that long before BitCoin was popular, gift cards were one of the ways criminals laundered money. There are even discussions about which gift cards can be sold for the least discount. Gift cards can be sold for cash, so you are in effect, operating a bitcoin exchange.
- ilamont 13y ago
  From the New York Times (1): "In March, the Financial Crimes Enforcement Network, part of the Treasury Department, issued guidelines (2) telling businesses involved in the exchange of digital currencies that they needed to register as money services businesses and comply with a variety of rules to prevent money laundering. New York’s Department of Financial services began an inquiry in August to determine guidelines for digital currency businesses, issuing nearly two dozen subpoenas (3) to start-ups, investors and others involved in the emerging field." 1. http://www.nytimes.com/2013/10/31/technology/bitcoin-pursues-the-mainstream.html?_r=0 http://www.nytimes.com/2013/10/31/technology/bitcoin-pursues... 2. http://www.fincen.gov/news_room/nr/pdf/20130318.pdf http://www.fincen.gov/news_room/nr/pdf/20130318.pdf 3. http://www.dfs.ny.gov/about/press2013/memo1308121.pdf http://www.dfs.ny.gov/about/press2013/memo1308121.pdf
swalsh 13y ago
This is a cool concept, A lot of people let you trade bitcoin for cards, but the opposite is really useful too! I'd love this business in dollars.
pemulis 13y ago
I just pinged you on Twitter, @jdshutt. I know a lawyer who specializes in tax law and is very interested in cryptocurrencies. If you want to get in touch with her, you can reach me at john.d.shutt@gmail.com and I'll send her e-mail. I'm on board with everyone saying that you need to talk to a lawyer sooner rather than later, and should work with someone who knows the area.
- gamblor956 13y ago
  Tax law isn't very relevant here; the primary areas of concern are federal money transmission laws and criminal state and federal anti-laundering laws.
  - dragonwriter 13y ago
    > the primary areas of concern are federal money transmission laws and criminal state and federal anti-laundering laws. Shouldn't that be "federal and state" in both cases, not just the anti-laundering case?
    - gamblor956 13y ago
      Yes, but too late to edit it.
  - a1icey 13y ago
    Actually, tax law is just the less scary area of risk.
samstave 13y ago
WRT lawyer: go talk to orrick. They will get you properly incorporated and will give you a ton worth of upfront legal help and won't require payment until you raise capital if that's needed. If you crash and burn, they charge you nothing.
- deleted 13y ago
  [deleted]
icedchai 13y ago
How are you getting your bitcoin? Are you mining, or buying it at retail (coinbase, etc)? You are providing a channel for money laundering, so you will likely come under scrutiny if this gets popular.
- mhluongo 13y ago
  Retail.
beachstartup 13y ago
my advice to you is either decide to pursue this full time, eyes wide open with regard to the risks, both legal and financial... or shut it down and return all the money. you can't half-ass this kind of thing.
MVf4l 13y ago
How scary is it? I guess the selling point of your idea is actually "anonymous". Some holders bought bitcoins at $0.1/BTC, now they are spending coins like having a 99% off. Well, if $0.1/BTC looks too dramatic, fine, let's say they bought at $200/BTC, still, 70% (which was paid off by newcomers if you think about it). What I'm saying is the prosperity is based on how much profit your users will get, like Groupon (in the early days when they were providing huge discounts). While newcomers now are buying coins at high, how long do you think the prosperity could last? Not sure if i'm thinking it right. Just wanted to point out.
deleted 13y ago
[deleted]
gnaritas 13y ago
Yes, money laundering is profitable, but I wouldn't call it safe; I'd shut it down fast before you get yourself into real trouble.
ionwake 13y ago
On the top - does anyone know a good reliable place where you can get Starbucks Gift cards - for Bitcoin?
will_brown 13y ago
Taking the service offline was a good move. You can request an administrative ruling from FinCEN. It would be prudent to meet with an attorney first and have the attorney draft and send the letter (it may receive a quicker response on attorney letterhead). As a side note attorneys can not contact you, they can send you advertisements or return your calls but they can not directly contact you, you must contact an attorney. Therefore any attorney who contacts you as a result of this post should immediately raise a red flag in you mind. In the meantime here is FinCEN's guidance on virtual currencies: http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.... And FinCEN's final rule on prepaid access(aka gift cards): http://www.fincen.gov/news_room/nr/html/20110726b.html http://www.fincen.gov/news_room/nr/html/20110726b.html
- sumedh 13y ago
  > As a side note attorneys can not contact you, they can send you advertisements or return your calls but they can not directly contact you, As someone who does not have much idea about laws, why can't an attorney contact him?
  - will_brown 13y ago
    Well the answer as to why is because the Model Rules of Professional Conduct prohibit said conduct. Specifically Rule 7.3, Direct Contact with Prospective Clients, reads as follows: (a) A lawyer shall not by in‑person, live telephone or real-time electronic contact solicit professional employment when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless the person contacted: (1) is a lawyer; or (2) has a family, close personal, or prior professional relationship with the lawyer. Now you may be curious about the justification of the rule...ever hear of the term ambulance chaser? It is a nasty term for attorneys who preyed on prospective clients in very vulnerable states who otherwise would not be able to make a voluntary and informed decision. The rule is meant to protect the public and profession from said behavior.
    - sumedh 13y ago
deleted 13y ago
[deleted]
cnp 13y ago
Wow, as soon as I read that article about this I KNEW it was going to explode. Even at that low rate of exchange. Great idea, but stay away from the shady ones.
blazespin 13y ago
The reason you're successful is because no one rational will compete in this space because of the legal liability. I've seen that many times, segments which are profitable until you realize the legal quagmire you've wandered into and appreciate very well why no one else is doing it.
codezero 13y ago
I'm curious about the mechanics of this. What stops someone from giving their number for BitCoin, then using the card anyways? After you sell/trade your card, how do others use it to buy coffee?
noonespecial 13y ago
If it were me, I'd back slowly away from this particular sleeping dog. You're playing both ends against the middle here. Fraudsters on one side and what can only be described as a vengeful, willfully belligerent government on the other. Both have infinite resources compared to you and a strong desire to do you harm.
ty4 13y ago
Incorporate in Switzerland, I can help. tyfour at gmx.ch
jordsmi 13y ago
I really would be more careful with this site if I were you. You need to get pictures of the receipt or something, because if not you are just going to get alot of carded giftcards which will just have the money revoked shortly.
TheMakeA 13y ago
There appear to be a lot of people knowledgeable on money transmitters here so maybe someone can shine some light on this: How are app stores/online marketplaces/AirBnb/Kickstarter not also money transmitters?
dpweb 13y ago
I'm shocked that on a programmers/hackers forum people would tell a guy not to start a business because there's "probable" illegality. This kind of thing is the basis of all FUD. There's obviously enormous gray area regarding btc's legality. Get your advice from an professional lawyer.

152 points by mhluongo 13y ago

deleted 13y ago

[deleted]

hahainternet 13y ago

That's a pretty damn neat idea. I've neither run a bitcoin business nor am I a lawyer. Just thought I'd comment and congratulate you on your idea, if you end up needing tech or systems advice I'm sure I or someone else here can answer.

TomGullen 13y ago

How automated is it? Any parts that could be automated that aren't? That would be step 1 I think. Secondly, don't panic! Thirdly, consider if I sell you my Starbucks card balance and I was evil, could I some how phone Starbucks up and say my card was lost/stolen? What happens in this instance? It's the biggest risk you need to look at from what I can see at first glance. Perhaps test this. Fourthly, is there a difference between a gift card and reward card? Coincidentally we just bought a reward card today for our startup (we drink lots of coffee). It looks like it has a similar number format as a gift card, and the Starbucks FAQ says they can refund a balance from the moment it's reported as stolen/lost: http://www.starbucks.co.uk/customer-service/faqs/card http://www.starbucks.co.uk/customer-service/faqs/card Fifthly, become aquainted with the law. Gift cards in the UK at least are considered as "Like cash" as far as I am aware. This means you could be setting yourself up for a bit of legal trouble down the line if you are considered a transmitter or money or such. As other posters point out, the reason for your early success could be because you are being used as a money laundering service without you being aware of the fact. And a question, what exactly are you doing with all these cards? Selling them on somehow? Or keeping them? If this is too much risk/pressure for you, and you feel out your comfort zone, consider selling it as is for BTC. I'm sure you'll find a buyer for a good sum. If you like risk, want to make some money then good luck! Let the adventure begin. Although it sounds like as soon as you get any volume and Starbucks catches wind you'd be pretty easy to shut down. That's one of the better outcomes for you as well I think, the legal risks sound significant. If it was mine, I'd look for a quick sale and pass the risk on.

lucaspiller 13y ago
> could I some how phone Starbucks up and say my card was lost/stolen? What happens in this instance? It's the biggest risk you need to look at from what I can see at first glance. Perhaps test this. I lost my Starbucks card and somebody used it. I had auto topup, so they kept using it :) After I reported it, Starbucks replied two days later, cancelled it and transferred the remaining balance. Still I lost about £15 from the auto topup.
- mhluongo 13y ago
  I'm not accepting registered cards, which changes the fraud vectors quite a bit. No auto-reload, etc.

bira 13y ago

What scares you? If you outline your worries, you can problably get better answers addressing them.

mhluongo 13y ago
I don't know, these are pretty good answers. My concerns: the law, fraud, and finding a balance between this and my full-time job, in that order. Overarching theme- how to make this work while minimizing my personal risk.

aosmith 13y ago

Shoot me an email... I may be able to help here <aosmith-at-gmail>.

_sentient 13y ago

ITT: People who do want to start full-blown startups, and are more than happy to replicate your idea. If your moonlight project is seeing significant traction, imagine what could be done with full-time commitment and funding. I think it's in the nature of an entrepreneur to always be hunting for promising new ventures. And that's not a bad thing. Just a heads up.

grimtrigger 13y ago
If thats true, then the people in this thread would make excellent partners. Give them some equity and let them your headaches. ps. I'd be interested: www.aakilfernandes.com

bencollier49 13y ago

Aren't most gift cards "non-transferable"?

antidaily 13y ago
Heck no.
mcherm 13y ago
Most gift cards can be used in person for purchases without any sort of ID -- which means that they can be effectively "transferred" to anyone. In fact, that's rather the point. They're called "gift" cards because you're expected to transfer ("give") them to someone else!

jstalin 13y ago

WARNING - get legal advice now. You'll likely come under the umbrella of money transmission business laws meaning that you need to register with your state and the federal government (assuming you're in the USA).

cal2 13y ago
I think this should be step #1. Even if everything is in fact kosher, approving/solidifying any money-related operations would be a great idea (especially with Bitcoin's increasing relevance and scrutiny).
- poopsintub 13y ago
  Step NOW. Put up a maintenance window and figure out if it is even reasonable to continue. The risk seems outrageously high.

davidpaulkrug 13y ago

Take a deep breath. It just means you have a good idea. Develop a system to streamline everything and enjoy the profits.

cushychicken 13y ago

I would recommend speaking with an accountant or financial adviser before the lawyer first - you'll still need the lawyer, but if it's really blowing up, you'll need some advice regarding taxable status of all this newfound digital income. Congratulations on your success, no matter what direction you decide to go with it!

maaku 13y ago
I think he'll need more help regarding the legality of running a non-licensed money transmitter which is ideally suited for money laundering credit from stolen identities...
- cushychicken 13y ago
  Upon reflection and more comments read, yes, I think you're quite right.

dreamdu5t 13y ago

My guess is it's exploding because people are desperate for untraceable ways to convert cash into bitcoins. Most likely other services like this have popped up but then shut down for fraud related legal issues, or people are scared to start them.

rasengan 13y ago

How are you handling fraud?

mhluongo 13y ago
Hand-verification right now before payout, though I'm locking it down further now.
- ozi 13y ago
  Perhaps there's an api you can use to do the heavy lifting like http://dev.maxmind.com/minfraud/ http://dev.maxmind.com/minfraud/ or http://www.subuno.com/developers.html http://www.subuno.com/developers.html
  - eli 13y ago
    This is a really hard problem that will not be easily offloaded to someone else.

patio11 13y ago

I would strongly consider not running a money transmitter as a side business. If you do not understand that you are running a money transmitter, I will be happy to elaborate. I would also mention, on the assumption you're not aware of it, that you are offering fairly effective money laundering for credit card thieves at below-market rates for that service, and you can expect heavy dedicated adversarial interest. I rather expect you are receiving it already and are as-yet unaware of it. Feel free to ask for more elaboration if you do not understand the mechanics of how this works, or why it will quickly dominate the pool of people willing to receive $50 in consideration for $100 of Starbucks cards.

foobarqux 13y ago
Do you have any good references on money transmission and how to operate one? What does and does not qualify, approaches to deal with the regulations as an upstart, etc.
- andrewfong 13y ago
  The short answer is (in California at least) it's a huge pain in the ass to comply with money transmission laws. You definitely need a lawyer. You might need a large amount of capital to backstop the business. You should also keep in mind that there is some uncertainty over what the law entails right now (hence the need for a lawyer), especially with respect to bitcoin. There is at least one ongoing lawsuit over California's money transmission laws. California info: http://www.dbo.ca.gov/Licensees/money_transmitters/ http://www.dbo.ca.gov/Licensees/money_transmitters/ Other states will have their own requirements. Depending on the nature of the business, you may have to interact with the SEC and FINRA. Again, get a lawyer.
  - foobarqux 13y ago
    Are there any small companies that may superficially appear to be money transmitters but are not?
    - 13y ago

acangiano 13y ago

I think part of your success comes from having created the ability to, de facto, buy Bitcoins via credit card. Any credit card (e.g., stolen ones). That's also your biggest legal challenge. That's what should scare you. But if you can sort out those details and regulations with a good lawyer, you shouldn't be afraid of success and taking projects as far as they'll go.

mhluongo 13y ago
One of the steps to de-risk the cards will be a waiting period- new cards won't be accepted unless they've been activated X days/months. That should seriously lower the chance of stolen cards getting through.

rbosinger 13y ago

Are you planning on drinking a lot of coffee?

joosebox 13y ago
I feel dumb, but I'm wondering this too. How does he convert the Starbucks cards to anything not coffee - or not take a loss converting them to cash?
- nacs 13y ago
  Well you can buy cookies, muffins and such with it too so maybe he's using it to feed himself. But yeah I'm not seeing what the OP's benefit is unless coffee = same as cash for OP.
  - jaredsohn 13y ago
    There are a variety of websites that will give you at least some cash for your cards (useful if you have accumulated cards that you otherwise won't use).

grotm001 13y ago

You can find a lawyer to work for equity on EquityLancer

rhino369 13y ago
I won't want to belittle anyone, but payment processing law is really complicated. I doubt you'll find someone with experience willing to take equity. It's not like making simple LLC membership agreements and employment contracts. This stuff is complex federal regulations.

ChuckMcM 13y ago

Advice: Shut it down before you get raided and shut down and your "side business" becomes "going to court and defending yourself." What you clearly didn't realize is that long before BitCoin was popular, gift cards were one of the ways criminals laundered money. There are even discussions about which gift cards can be sold for the least discount. Gift cards can be sold for cash, so you are in effect, operating a bitcoin exchange.

ilamont 13y ago
From the New York Times (1): "In March, the Financial Crimes Enforcement Network, part of the Treasury Department, issued guidelines (2) telling businesses involved in the exchange of digital currencies that they needed to register as money services businesses and comply with a variety of rules to prevent money laundering. New York’s Department of Financial services began an inquiry in August to determine guidelines for digital currency businesses, issuing nearly two dozen subpoenas (3) to start-ups, investors and others involved in the emerging field." 1. http://www.nytimes.com/2013/10/31/technology/bitcoin-pursues-the-mainstream.html?_r=0 http://www.nytimes.com/2013/10/31/technology/bitcoin-pursues... 2. http://www.fincen.gov/news_room/nr/pdf/20130318.pdf http://www.fincen.gov/news_room/nr/pdf/20130318.pdf 3. http://www.dfs.ny.gov/about/press2013/memo1308121.pdf http://www.dfs.ny.gov/about/press2013/memo1308121.pdf

swalsh 13y ago

This is a cool concept, A lot of people let you trade bitcoin for cards, but the opposite is really useful too! I'd love this business in dollars.

pemulis 13y ago

I just pinged you on Twitter, @jdshutt. I know a lawyer who specializes in tax law and is very interested in cryptocurrencies. If you want to get in touch with her, you can reach me at john.d.shutt@gmail.com and I'll send her e-mail. I'm on board with everyone saying that you need to talk to a lawyer sooner rather than later, and should work with someone who knows the area.

gamblor956 13y ago
Tax law isn't very relevant here; the primary areas of concern are federal money transmission laws and criminal state and federal anti-laundering laws.
- dragonwriter 13y ago
  > the primary areas of concern are federal money transmission laws and criminal state and federal anti-laundering laws. Shouldn't that be "federal and state" in both cases, not just the anti-laundering case?
  - gamblor956 13y ago
    Yes, but too late to edit it.
- a1icey 13y ago
  Actually, tax law is just the less scary area of risk.

samstave 13y ago

WRT lawyer: go talk to orrick. They will get you properly incorporated and will give you a ton worth of upfront legal help and won't require payment until you raise capital if that's needed. If you crash and burn, they charge you nothing.

deleted 13y ago
[deleted]

icedchai 13y ago

How are you getting your bitcoin? Are you mining, or buying it at retail (coinbase, etc)? You are providing a channel for money laundering, so you will likely come under scrutiny if this gets popular.

mhluongo 13y ago
Retail.

beachstartup 13y ago

my advice to you is either decide to pursue this full time, eyes wide open with regard to the risks, both legal and financial... or shut it down and return all the money. you can't half-ass this kind of thing.

MVf4l 13y ago

How scary is it? I guess the selling point of your idea is actually "anonymous". Some holders bought bitcoins at $0.1/BTC, now they are spending coins like having a 99% off. Well, if $0.1/BTC looks too dramatic, fine, let's say they bought at $200/BTC, still, 70% (which was paid off by newcomers if you think about it). What I'm saying is the prosperity is based on how much profit your users will get, like Groupon (in the early days when they were providing huge discounts). While newcomers now are buying coins at high, how long do you think the prosperity could last? Not sure if i'm thinking it right. Just wanted to point out.

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gnaritas 13y ago

Yes, money laundering is profitable, but I wouldn't call it safe; I'd shut it down fast before you get yourself into real trouble.

ionwake 13y ago

On the top - does anyone know a good reliable place where you can get Starbucks Gift cards - for Bitcoin?

will_brown 13y ago

Taking the service offline was a good move. You can request an administrative ruling from FinCEN. It would be prudent to meet with an attorney first and have the attorney draft and send the letter (it may receive a quicker response on attorney letterhead). As a side note attorneys can not contact you, they can send you advertisements or return your calls but they can not directly contact you, you must contact an attorney. Therefore any attorney who contacts you as a result of this post should immediately raise a red flag in you mind. In the meantime here is FinCEN's guidance on virtual currencies: http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.... And FinCEN's final rule on prepaid access(aka gift cards): http://www.fincen.gov/news_room/nr/html/20110726b.html http://www.fincen.gov/news_room/nr/html/20110726b.html

sumedh 13y ago
> As a side note attorneys can not contact you, they can send you advertisements or return your calls but they can not directly contact you, As someone who does not have much idea about laws, why can't an attorney contact him?
- will_brown 13y ago
  Well the answer as to why is because the Model Rules of Professional Conduct prohibit said conduct. Specifically Rule 7.3, Direct Contact with Prospective Clients, reads as follows: (a) A lawyer shall not by in‑person, live telephone or real-time electronic contact solicit professional employment when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless the person contacted: (1) is a lawyer; or (2) has a family, close personal, or prior professional relationship with the lawyer. Now you may be curious about the justification of the rule...ever hear of the term ambulance chaser? It is a nasty term for attorneys who preyed on prospective clients in very vulnerable states who otherwise would not be able to make a voluntary and informed decision. The rule is meant to protect the public and profession from said behavior.
  - sumedh 13y ago

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cnp 13y ago

Wow, as soon as I read that article about this I KNEW it was going to explode. Even at that low rate of exchange. Great idea, but stay away from the shady ones.

blazespin 13y ago

The reason you're successful is because no one rational will compete in this space because of the legal liability. I've seen that many times, segments which are profitable until you realize the legal quagmire you've wandered into and appreciate very well why no one else is doing it.

codezero 13y ago

I'm curious about the mechanics of this. What stops someone from giving their number for BitCoin, then using the card anyways? After you sell/trade your card, how do others use it to buy coffee?

noonespecial 13y ago

If it were me, I'd back slowly away from this particular sleeping dog. You're playing both ends against the middle here. Fraudsters on one side and what can only be described as a vengeful, willfully belligerent government on the other. Both have infinite resources compared to you and a strong desire to do you harm.

ty4 13y ago

Incorporate in Switzerland, I can help. tyfour at gmx.ch

jordsmi 13y ago

I really would be more careful with this site if I were you. You need to get pictures of the receipt or something, because if not you are just going to get alot of carded giftcards which will just have the money revoked shortly.

TheMakeA 13y ago

There appear to be a lot of people knowledgeable on money transmitters here so maybe someone can shine some light on this: How are app stores/online marketplaces/AirBnb/Kickstarter not also money transmitters?

dpweb 13y ago

I'm shocked that on a programmers/hackers forum people would tell a guy not to start a business because there's "probable" illegality. This kind of thing is the basis of all FUD. There's obviously enormous gray area regarding btc's legality. Get your advice from an professional lawyer.