This is a good article, and writers have gone their way to being helpful. Perhaps someone who better understands financial law may shed light on this, but if anyone can be called Bitcoin issuers, then those are operators.
Topic: An interesting read about Bitcoin & legislation... (Read 15417 times)
Thanks for posting that. It is indeed an interesting read. And kudos to the person who wrote such a comprehensive and informative response (even if it does essentially amount to "maybe, ask your lawyers").
I guess it is not interesting read but also a keynote for newcomers
nice
/begin tl;dr version:
If you want to be in the business of buying and selling bitcoins, read these links and hire a lawyer or just forget about it.
Biz: Barrier to entry.
Tech: Stifling of innovation in payment system technology.
Politics: Hindrance of social progress, maintaining overreaching govt. control.
/end tl;dr
It bears mention that the U.K. and the E.U. are even more deeply in debt to major international banking interests than the U.S, even post-obamasaster. As much as the U.S. govt. is bought by the banks, the E.U. govt. is even more so.
The fees that financial service firms pay to lawyers, bankers, and accountants to comply with the cited regulations and their ilk in all developed nations are, per annum, an order of magnitude larger than the entire market capitalization of the Bitcoin project. The fees that these private firms charge the end-users for the simple, automated act of addition and subtraction in a ledger pass-through these regulatory compliance fees with a hefty markup.
That's why we are seeing 3% tax on electronic money transactions for legitimate businesses, and 25% to 40% tax on criminal enterprises. Taxes paid to the private firms that have "captured" the regulatory agencies like the FSA. They spend a small portion of these fees on lobbying to maintain and expand the regulations that allow them to demand these "rents", as they are known in political science. Another small chunk goes to the "no work" and "no show" employment contracts for former top regulators.
It's hundreds of billions of dollars a year. Hundreds of thousands of middle to upper-class families are supported by these fees paid to private companies. The right to collect fees taxes is created by administrative agencies in an almost entirely undemocratic fashion. Agencies like the FSA. These people are going to jealously protect their parasitic (value-extraction, no value added) role in the economy. Entire careers and livelihoods depend on it, in numbers an order of magnitude larger than the number of bitcoin users.
If you want to be in the business of buying and selling bitcoins, read these links and hire a lawyer or just forget about it.
Biz: Barrier to entry.
Tech: Stifling of innovation in payment system technology.
Politics: Hindrance of social progress, maintaining overreaching govt. control.
/end tl;dr
It bears mention that the U.K. and the E.U. are even more deeply in debt to major international banking interests than the U.S, even post-obamasaster. As much as the U.S. govt. is bought by the banks, the E.U. govt. is even more so.
The fees that financial service firms pay to lawyers, bankers, and accountants to comply with the cited regulations and their ilk in all developed nations are, per annum, an order of magnitude larger than the entire market capitalization of the Bitcoin project. The fees that these private firms charge the end-users for the simple, automated act of addition and subtraction in a ledger pass-through these regulatory compliance fees with a hefty markup.
That's why we are seeing 3% tax on electronic money transactions for legitimate businesses, and 25% to 40% tax on criminal enterprises. Taxes paid to the private firms that have "captured" the regulatory agencies like the FSA. They spend a small portion of these fees on lobbying to maintain and expand the regulations that allow them to demand these "rents", as they are known in political science. Another small chunk goes to the "no work" and "no show" employment contracts for former top regulators.
It's hundreds of billions of dollars a year. Hundreds of thousands of middle to upper-class families are supported by these fees paid to private companies. The right to collect fees taxes is created by administrative agencies in an almost entirely undemocratic fashion. Agencies like the FSA. These people are going to jealously protect their parasitic (value-extraction, no value added) role in the economy. Entire careers and livelihoods depend on it, in numbers an order of magnitude larger than the number of bitcoin users.
Very Interesting, thanks for posting.
... you could say that Bitcoins would enable easy funding for terrorists and organised crime ...
Any kind of money that works well for businesses and honest citizens will also work well for criminals. Goes without saying.That's why govts should focus on the underlying crimes, not on the payment instrument.
regulators and governments don't want funds to be easily transferred to and from terrorists or organized crime, and that is exactly what bitcoin would enable.
Well yes, if you don't look too deep then you could say that Bitcoins would enable easy funding for terrorists and organised crime.
But if we have "script kiddies" relieving seasoned Bitcoiners of their coins. How long would it take a sophisticated attack by a governemnt intelligence agency to relieve criminals of private keys.
Ask yourself "What would Jason Bourne do ?".
Aye, or how long would it take them to build a big fat database of exactly who each one belongs to and just quietly 'watch'?
regulators and governments don't want funds to be easily transferred to and from terrorists or organized crime, and that is exactly what bitcoin would enable.
Well yes, if you don't look too deep then you could say that Bitcoins would enable easy funding for terrorists and organised crime.
But if we have "script kiddies" relieving seasoned Bitcoiners of their coins. How long would it take a sophisticated attack by a governemnt intelligence agency to relieve criminals of private keys.
Ask yourself "What would Jason Bourne do ?".
Quote
Our favoured approach at the moment is that one asks whether the value functions like money, whether or not it is money in the more traditional sense.
It could mean any medium which, by practise, freely passes through the community in final discharge of debts and full payment for goods and services, being accepted equally without reference to the character or credit of the person who offers it and who in turn can tender it to others in discharge of debts or payment for goods or services, even though it may not be legal tender.
So Bitcoins could become money for the purpose of the PSD Regulations if and when they become widely used.
It could mean any medium which, by practise, freely passes through the community in final discharge of debts and full payment for goods and services, being accepted equally without reference to the character or credit of the person who offers it and who in turn can tender it to others in discharge of debts or payment for goods or services, even though it may not be legal tender.
So Bitcoins could become money for the purpose of the PSD Regulations if and when they become widely used.
(emphasis mine)
My reading is that bitcoins are classed as money if and when they become mainstream. Note that the FSA is based on principals not rules...if something looks like a duck and quacks like a duck then it is a duck as far as they are concerned. They would not be interested in protestations about bitcoins merely being solutions to difficult maths problems.
The implication of this (again, by my reading) is that people processing transactions (ie miners) will be regarded as payment processors and subject to the payment services directive (PSD http://www.fsa.gov.uk/pubs/other/PSD_approach.pdf). This requires registration with the FSA if in UK (see section 3.2). If you process more than 3M EUR per month you need full authorisation (section 3.3), involving things like holding reserve capital and paying FSA upfront fee of > 1500 EUR (sec 3.13), otherwise you can get a lightweight authorization. In either case you would appear on a public register (section 3.6). In either case (sec 3.92), you must adhere to anti money laundering regulations and perform customer due diligence checks (sec 3.36).
TL;DR - If bitcoin becomes popular and FSA deems it to be money, legal mining will likely become impossible in the UK and presumably EU.
If you stand back a bit it makes perfect sense - regulators and governments don't want funds to be easily transferred to and from terrorists or organized crime, and that is exactly what bitcoin would enable. Note that I'm not saying whether AML regulation is a 'good' thing or not, just that it is a fact of life.
Quote
For example it could say that in effect each person using Bitcoins to buy something issues the coin because any transfer of a coin creates a new need to get it incorporated into blocks and accepted by the system. That would mean that those who make a business of buying and selling Bitcoins would be issuing a payment instrument. There might also be an argument that anyone creating a new block issues value for the same reason even if no coins are generated.
I don't think such an argumentation could hold up in court: there is no issuing of a payment instrument when you make a Bitcoin transaction. You just transfer the control over some funds to another address - no new value is created.Maybe somebody with a better understanding of financial law can shed some light on this, but if anybody can be called a Bitcoin issuer, then it's the miners.
From now on you have to be very careful when you tell somebody the solution to a math problem - it might require you to get a bank license first
This is the way we view it as well. It will be interesting to see how courts rule on the matter.
Reading that text made me think that bitcoin regulation is similar to the regulation of "air guitars".
You are correct. There is no reason that bitcoin cannot be traded as spoken phrases, dance moves, or even air guitar licks.
Omg, private keys encoded as air guitar licks, using something like a miniature Kinect to sign a transaction... that would be amazing.
Station!
Reading that text made me think that bitcoin regulation is similar to the regulation of "air guitars".
You are correct. There is no reason that bitcoin cannot be traded as spoken phrases, dance moves, or even air guitar licks.
Omg, private keys encoded as air guitar licks, using something like a miniature Kinect to sign a transaction... that would be amazing.
Quote
For example it could say that in effect each person using Bitcoins to buy something issues the coin because any transfer of a coin creates a new need to get it incorporated into blocks and accepted by the system. That would mean that those who make a business of buying and selling Bitcoins would be issuing a payment instrument. There might also be an argument that anyone creating a new block issues value for the same reason even if no coins are generated.
I don't think such an argumentation could hold up in court: there is no issuing of a payment instrument when you make a Bitcoin transaction. You just transfer the control over some funds to another address - no new value is created.Maybe somebody with a better understanding of financial law can shed some light on this, but if anybody can be called a Bitcoin issuer, then it's the miners.
From now on you have to be very careful when you tell somebody the solution to a math problem - it might require you to get a bank license first
Reading that text made me think that bitcoin regulation is similar to the regulation of "air guitars".
You are correct. There is no reason that bitcoin cannot be traded as spoken phrases, dance moves, or even air guitar licks.
Reading that text made me think that bitcoin regulation is similar to the regulation of "air guitars".
tl;dr version, anyone?
Go troll elsewhere, thank you. How is this a troll?
Anyway...
This was probably one of the most interesting paragraphs:
Quote
Moving on, the creation of Bitcoins and sale to users potentially amounts to issuing payment instruments. Therefore the question is whether Bitcoins are payment instruments. This means something used in order to initiate an instruction requesting the execution of a payment transaction. A payment transaction means placing, transferring or withdrawing funds. The key definition is funds. This means banknotes and coins, scriptural money, and electronic money. This means that the question is whether Bitcoins are money.
So is bitcoin "legally" money? ans: depends on courts, national and EU.
There were a bunch of other regulations that bitcoin might fall under, but it all got a bit too lawyer for me.
tl;dr version, anyone?
Go troll elsewhere, thank you.
tl;dr version, anyone?
Interesting indeed. I am more amazed that such an informative and helpful response was solicited from a regulatory agency! 
It is a good post, and the writer has gone out of their way to be helpful. The terms used are familiar in several jurisdictions and obviously the questions posed included important aspects of deposit taking and transfer/aml which trip up many people. One of the nice points is that in the FSR rules, there is probably an exemption, it will be a case of finding it.
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