Agreed the law is beyond horrible but CA law is independent of federal law. No federal agency has even indicated that the foundation needs or "should" register as a MSB. They lack standing to challenge a law that nobody has even claimed applies to them.
Entirely possible (although unlikely) that the foundation fights it out with CA and has provisions of the CA law ruled to not apply to Bitcoin exchanges or overtuned completely as being overly broad and capricious. None of that would have any standing against the federal BSA unless someone in authority somewhere at least indicates the BSA applies to the foundation. No, nobody in CA can make that claim and honestly as crappy as FinCEN is they are a shinning beacon of legislative review compared to the utter nonsense coming from California so I wouldn't expect they would even open that door.
Topic: FinCEN (Read 2798 times)
TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
The Foundation challenged this in its response letter. It may yet get litigated if not legislated.
Agreed however US law is slanted against such action. There is an issue of standing. For example the foundation has not registered as a MT, they have not been indicted by the SEC, by their own admission they are not a MT. Therefore they have no standing to fight this in federal court.
...familiar examples snipped
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&group=02001-03000&file=2030-2043
See 22713. (a)
There are lots of problems with the law. It looks to be crafted by BIG banking alone without much review, and is deeply anti-business and against California's general interests.
TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
The Foundation challenged this in its response letter. It may yet get litigated if not legislated.
Agreed however US law is slanted against such action. There is an issue of standing. For example the foundation has not registered as a MT, they have not been indicted by the SEC, by their own admission they are not a MT. Therefore they have no standing to fight this in federal court. The SEC wouldn't even defend such an action they would simply file motion to have the case dismissed for lack of standing. To fight it in court requires you to violate the law, get charged, and then use that as a defense. Most entities won't take that route, they will a) comply (even if they know that the law is stupid/bogus, b) go around the law (operate outside the US for non-US clients), or c)willfully violate the law in such a manner that makes prosecution difficult (aka Silk Route method). It is entirely possible there will NEVER be a well funded, well operated entity which has standing.
I will give you a concrete example. DC had a gun ban for 30+ years. It was obviously unconstitutional, it wasn't licensing, or registration it was a complete ban on the most common form of firearm used for self defense. It wasn't a ban on carrying in public, or transporting, or use. It was an absolute ban on personal ownership in all forms and places with the city. It took 30+ years to find someone with standing and not for a lack of trying. There were dozens of cases which were summarily dismissed for a lack of standing. To have standing would require someone in DC to a)have a firearm, b) bring it into the city, and c) take it in person to a Police Station in an attempt to register it. If they did that they would have standing when denied, they also would be arrested on the spot and would be looking at 5 to 15 years in prison for unlawful possession of a firearm. Not surprisingly nobody had standing. Lots of people broke the law in secret but since they didn't attempt to register it they lacked standing, many more requested to register a firearm but since they didn't have a firearm they also lacked standing. It wasn't until the Heller case that a civil rights group found a plaintiff with standing. Mr. Heller was a licensed security guard and as such had a limited license to carry a firearm ONLY on duty. While on duty he took it to a Police Station and attempted to have his work firearm registered for personal use and was denied. BLAMO.... the legal challenge survive a motion to dismiss and the rest is history. Even then the court cases took 7 years to reach a decision by the Supreme Court and required a legal team with costs over a million US dollars. Had there not been that "Heller loophole" it is entirely possible that the DC gun ban would still be standing today. Not due to any Constitutional merit but merely because no plaintiff had the required standing to challenge it.
TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
The Foundation challenged this in its response letter. It may yet get litigated if not legislated.
Because FINCEN felt the need to force Bitcoin (square peg) into a round hole (existing MSB regulations) and the only place it would fit (kinda) was Money Transmitter classification. They DID NOT determine that exchanging USD for BTC (or BTC for USD) was similiar to someone exchanging USD for EUR or EUR for USD = currency exchange. They decided exchanging BTC to USD was similar to Bob paying Alice by using a third party (think Western Union) = Money Transmitter.
There is a classification called "foreign currency exchange" which is a MSB (money service business) but isn't a MT (money transmitter). Using "common sense" OF COURSE exchanging Bitcoin for "real" currencies has more in common with a currency exchange then money transmission but FINCEN couldn't make that fit (regulations define the words foreign in foreign currency exchange). The only thing they could force Bitcoin (square peg) into in the MSB regs (round hole) with a massive amount of force (asinine leaps of logic) was Money Transmitter.
TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
There is a classification called "foreign currency exchange" which is a MSB (money service business) but isn't a MT (money transmitter). Using "common sense" OF COURSE exchanging Bitcoin for "real" currencies has more in common with a currency exchange then money transmission but FINCEN couldn't make that fit (regulations define the words foreign in foreign currency exchange). The only thing they could force Bitcoin (square peg) into in the MSB regs (round hole) with a massive amount of force (asinine leaps of logic) was Money Transmitter.
TL/DR version:
FinCEN wanted to regulated Bitcoin exchanges. The proper thing to do would get Congressional oversight in the form of expanded regulatory powers but that might have taken years. FINCEN did a bunch of mental gymnastics and called exchanging currency money transmission and that is what we are stuck with.
FinCEN is classifying bitcoin as currency and in their guidance it states:
"An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency."
"An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations, unless a limitation to or exemption from the definition applies to the person."
"The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.""
So as discussed previously in the post, it appears that: "If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers."
What still doesn't make sense to me, is you can create an account with Etrade (https://us.etrade.com/investing-trading/forex?ploc=it-nav) and start FOREX trading; which is trading currency. To my knowledge it appears you can do that all day long for the sole purpose of making a profit. However it appears from the recent guidance, if you were to trade bitcoin for the sole purpose of making a profit, then you would need to register with FinCEN. I don't understand why someone would be able to be a "day trader" on Etrade and trade real currency for a profit, however if they were to become a "day trader" with bitcoin, then they would need to register with FinCEN.
What is the difference between trading fiat and trading bitcoin, that would require you to register with FinCEN if you decided to trade bitcoin for a profit? It appears they are both considered currency with FinCEN. I might be totally missing something, but this is what I really don't understand.
"An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency."
"An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations, unless a limitation to or exemption from the definition applies to the person."
"The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.""
So as discussed previously in the post, it appears that: "If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers."
What still doesn't make sense to me, is you can create an account with Etrade (https://us.etrade.com/investing-trading/forex?ploc=it-nav) and start FOREX trading; which is trading currency. To my knowledge it appears you can do that all day long for the sole purpose of making a profit. However it appears from the recent guidance, if you were to trade bitcoin for the sole purpose of making a profit, then you would need to register with FinCEN. I don't understand why someone would be able to be a "day trader" on Etrade and trade real currency for a profit, however if they were to become a "day trader" with bitcoin, then they would need to register with FinCEN.
What is the difference between trading fiat and trading bitcoin, that would require you to register with FinCEN if you decided to trade bitcoin for a profit? It appears they are both considered currency with FinCEN. I might be totally missing something, but this is what I really don't understand.
Would a miner be able to sell bitcoins that he/she mined for gold/silver and not be considered a money transmitter?
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Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?
On that fact pattern, nobody is actually located in the US or doing business with US citizens? I don't believe US regulators would have any jurisdiction over the miner.
If the miner is a US citizen residing in the US, then it's a closer call.
Using the same scenario: What if the miner was a US Citizen and the mining rig was located in the US, but just like in the scenario, the pool sent the bitcoins rewarded to the VPS that was located outside of the country and those mined units were exchanged on a foreign exchange?
Generally speaking if it involves a US entity then our over reaching federal govt is going to claim jurisdiction. Take online poker as an example. US players, playing on foreign servers run by foreign companies and with banks in foreign countries. The Justice department seized the servers, bank accounts, and filed charges against the foreign companies.
Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?
On that fact pattern, nobody is actually located in the US or doing business with US citizens? I don't believe US regulators would have any jurisdiction over the miner.
If the miner is a US citizen residing in the US, then it's a closer call.
Using the same scenario: What if the miner was a US Citizen and the mining rig was located in the US, but just like in the scenario, the pool sent the bitcoins rewarded to the VPS that was located outside of the country and those mined units were exchanged on a foreign exchange?
Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?
On that fact pattern, nobody is actually located in the US or doing business with US citizens? I don't believe US regulators would have any jurisdiction over the miner.
If the miner is a US citizen residing in the US, then it's a closer call.
Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.
Per FinCEN guidance I already answered. If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.
Tragically, the guidance does not literally exclude non-business miners. By its terms:
a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.
Note the use of the word "person" not "business". It's my reading of it, given the context, that there is some argument to be made that persons not engaged in mining "as a business" are exempt. But my opinion is in the minority, and it is contrary to the plain text of the guidance.
Here's an interesting question: A miner set up a VPS in another country and mines with a pool here, the pool sends all of the bitcoins to a wallet located on the VPS in another country; then the miner exchanges those mined units on an exchange located outside of the country. Since the bitcoins were never located in a state that licenses "money transmitters", would this be possible and not violate the guidance?
Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.
Per FinCEN guidance I already answered. If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.
Tragically, the guidance does not literally exclude non-business miners. By its terms:
a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.
Note the use of the word "person" not "business". It's my reading of it, given the context, that there is some argument to be made that persons not engaged in mining "as a business" are exempt. But my opinion is in the minority, and it is contrary to the plain text of the guidance.
Do you think FinCEN is intentionally leaving open the option of going after major miners (such as miners selling PMBs)?
Tragically, the guidance does not literally exclude non-business miners. By its terms:
a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.
Interestingly, I believe you could argue that participants in a mining pool do not "create units of convertible virtual currency".
A USB stick miner could go their entire existence and never even find a block, yet they would be paid by the mining pool.
I could even argue that the participant who finds the block does not "create units" because they (the participant) do not submit the block to the network. The mining pool submits the block.
Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.
Per FinCEN guidance I already answered. If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.
Tragically, the guidance does not literally exclude non-business miners. By its terms:
a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.
Note the use of the word "person" not "business". It's my reading of it, given the context, that there is some argument to be made that persons not engaged in mining "as a business" are exempt. But my opinion is in the minority, and it is contrary to the plain text of the guidance.
Thank you!!
Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.
Per FinCEN guidance I already answered. If it is done infrequently and not for profit then that exemption applies otherwise registration is required for ALL exchangers.
Now is FinCEN going to send storm troopers to break down the door of every unregistered Jalapneo owner? No. That is the problem with poorly written guidance. If the guidance as written won't be enforced then what will be enforced (i.e what is the "defacto line")? Who knows.
Can an individual (non-miner/or miner dealing with coins not mined) in the USA, buy & sell bitcoins on an exchange without needing to register with FinCEN? I still haven't found a clear answer with this question.
Thanks for your post, pedrog. 
I think you'll find the information you're looking for here:
http://www.youtube.com/watch?v=T_QwofDM5x4
Sorry I can't point the exact minute, but the talk is very interesting, you will not get bored.
What I remember is that in the US as a miner you don't have to worry with the money transmitter thing.
Edit: Look 14 minutes in.
http://www.youtube.com/watch?v=T_QwofDM5x4
Sorry I can't point the exact minute, but the talk is very interesting, you will not get bored.
What I remember is that in the US as a miner you don't have to worry with the money transmitter thing.
Edit: Look 14 minutes in.
Thank you for your input!
What about buying bitcoins from an exchange? If that is legal, would you be required to use an exchange that is registered with FinCEN?
What about selling bitcoins that you didn't mine? Again, if it is legal to sell bitcoins on an exchange, are you required to use an exchange that is registered with FinCEN or could you use something like BTC-E?
What about buying bitcoins from an exchange? If that is legal, would you be required to use an exchange that is registered with FinCEN?
What about selling bitcoins that you didn't mine? Again, if it is legal to sell bitcoins on an exchange, are you required to use an exchange that is registered with FinCEN or could you use something like BTC-E?
By the letter of the guidance there is no exemption for using a registered service. Yes it sounds stupid and it is improbable that FinCEN would go after each miner but if you exchange virtual currency for virtual or real currency you are required to register unless an exemption applies. One exemption is for not for profit, infrequent activity.
So to answer your question.
Miner exchanges virtual currency on exchange for USD? Yes an MSB (I doubt this will be enforced but the guidance provides no exemption)
Miner exchanges coins for bullion? No. Sells of goods or services (other than money transmission) are exempt
Miner exchanges one virtual currency for another? Yes an MSB
Once again I don't necessarily agree with this, nor do I think it makes much sense, and it is highly unlikely FinCEN will (or even will be able to) enforce the regs to the letter of the guidance but that is what they advised.
So to answer your question.
Miner exchanges virtual currency on exchange for USD? Yes an MSB (I doubt this will be enforced but the guidance provides no exemption)
Miner exchanges coins for bullion? No. Sells of goods or services (other than money transmission) are exempt
Miner exchanges one virtual currency for another? Yes an MSB
Once again I don't necessarily agree with this, nor do I think it makes much sense, and it is highly unlikely FinCEN will (or even will be able to) enforce the regs to the letter of the guidance but that is what they advised.
If a miner mines bitcoins, would a miner that is not registered as a money transmitter be able to sell them on an exchange that has registered with FinCEN (MtGox, Bitinstant, etc) or would they both have to be registered as a money transmitter?
Would a miner be able to sell bitcoins that he/she mined for gold/silver and not be considered a money transmitter?
Would a miner that mined litecoins be able to exchange them for bitcoins on BTC-E?
Putting mining aside for a moment; Is it legal to transfer funds to BTC-E and buy litecoins and eventually exchange them for Bitcoins on BTC-E when the price is right? Then find an exchange such as Bitinstant or MtGox that apparently has registered with FinCEN to sell the bitcoins for USD? Or would someone in the USA, not be able to use BTC-E because they are not registered?
Is it legal to buy/sell on what appears to be a registered exchange such as MtGox or Bitinstant?
Would a miner be able to sell bitcoins that he/she mined for gold/silver and not be considered a money transmitter?
Would a miner that mined litecoins be able to exchange them for bitcoins on BTC-E?
Putting mining aside for a moment; Is it legal to transfer funds to BTC-E and buy litecoins and eventually exchange them for Bitcoins on BTC-E when the price is right? Then find an exchange such as Bitinstant or MtGox that apparently has registered with FinCEN to sell the bitcoins for USD? Or would someone in the USA, not be able to use BTC-E because they are not registered?
Is it legal to buy/sell on what appears to be a registered exchange such as MtGox or Bitinstant?
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