FinCEN addresses Bitcoin - page 3. | Bitcointalksearch.org

tytus

sr. member

Activity: 250

Merit: 250

Quote from: DeathAndTaxes on March 19, 2013, 09:04:29 PM

Quote from: tytus on March 19, 2013, 08:15:03 PM

A reasonable way to test how these guidelines work in practice would be to inform FinCEN about suspected illegal activity of the "Linden Lab's currency brokerage" and monitor what happens then.
I am not sure if asking FinCEN about interpretations will bring us further. I have no idea how vague official clarifications are in US, but in Poland You get 4 different (contradictory) official opinions and none of them tells You the answer to your questions. Provoking court decisions was always a slow but more reliable alternative.

You can seek an administrative ruling. Essentially it is a letter which requires FinCEN to provide specific written direction/clarification. While it isn't the "law", if FinCEN gives you an administrative ruling stating "x" it provides some measure of protection if they later change their mind.

I think we should request this administrative ruling as soon as possible to give at least "some measure of protection" to US businesses accepting BTC. Otherwise they will leave the BTC economy. I think we should try to convince FinCEN that a person/business who/that is converting his/its own BTC to (fiat) currency is a USER (not a transmitter or administrator). I think we could also accept that such transactions should be reported if they exceed a certain value (>$10,000) but this will be taken care of by the exchanges. They will report this.

The latest FinCEN guidelines allow BTC transactions in excess of $10,000 (worth of value) without any reporting (the transaction is public but I am sure FinCEN would like to know who is the owner of the transacted BTC). I doubt this will stay that way.

=> We can expect modifications of the FinCEN guidelines sooner or later.

markm

legendary

Activity: 2940

Merit: 1090

The question of notary servers was brought up on the #opentransactions channel.

An Open Transactions server is a notary server that notarises documents as a kind of witness, so for example Alice provides a message saying she is giving something to Bob, and the server signs it; Bob provides a message saying he is accepting that thing from Alice, and the server signs it.

Thus Alice and Bob are exchanging notes and the server is presumably acting somewhat like a notary public, notarising that it did in fact see those messages that Alice and Bob exchanged.

Presumably these guidelines are not about people who act as notaries? Or does notarising financial information make these guidelines somehow get involved?

-MarkM-

Vladimir

hero member

Activity: 812

Merit: 1001

-

GideonGono, you are correct. It does not makes sense to normal people, to me and you. However, this is exactly in spirit of all this BS AML/KYC legislation. It is exactly what the regulators want. Which is to install gatekeepers on money flaw, create barriers for competition and create a moat around their masters' business of fleecing the population.

GideonGono

hero member

Activity: 2086

Merit: 501

★Bitvest.io★ Play Plinko or Invest!

What I don't understand is how they plan to enforce the designation of miners as MSBs. When does a miner even fall under US jurisdiction? Consider the following scenarios:

A US based miner selling btc for USD on a US based exchange

A US based miner selling btc for forex on a US based exchange

A US based miner selling btc for USD/forex on a foreign based exchange

A US based miner mining through a foreign proxy IP

Designating exchanges as an MSB makes sense, but designating miners as such doesn't make any logical sense at all. It's like a private gold prospector finding gold and selling it and them being required to have an MSB license. Or someone picking up a wallet full of euros and needing an MSB license to trade those euros for USD. I guess the govt will just have to learn the hard way.

SZD

newbie

Activity: 33

Merit: 0

Has there been any actual specific guidance or response on if an individual mining coins then converting them for USD is defined as a money transmitter? That would mean 99.9% of miners for btc->usd would be breaking the law (and could go to jail?) I'd really like to start mining Cry

acoindr

legendary

Activity: 1050

Merit: 1002

I just had a thought on this line:

Quote

In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

That last part "or other value that substitutes for currency" I think was included to refer to MoneyPaks, Amazon Gift cards etc., possibly other things too, but I think that's what they had in mind primarily.

virtuallylaw

newbie

Activity: 25

Merit: 0

Quote from: repentance on March 19, 2013, 06:58:26 PM

Patrick, do we also run up against the issue of people laying themselves open to sanctions if they take intermediate steps to avoid these provisions - such as purchasing something with BTC they have mined but then selling their purchases? As the original source of the BTC isn't a "serious crime" or predicate offence (which is key in relation to how FATF defines money laundering), then it's hard to argue such a strategy is money-laundering per se and yet my instinct is that taking such steps could well be an offence in its own right (especially if done repeatedly).

That sounds an awful lot like Structuring (structuring transactions), which is one technique for laundering money. One example of structuring would be attempts to avoid triggering the FinCEN reporting that kicks in at $10,000 per transaction by breaking up high value transactions and sending them in sub-$10,000 batches. Most financial institutions have algorithms and other detection techniques to catch and report this kind of behavior and it can land you in very serious trouble.

As I recall, under the BSA you don't need a predicate offense to be found guilty of structuring. The act of avoiding or attempting to avoid BSA reporting is itself a crime.

In your example, it's not textbook structuring (or smurfing), because you are moving value from bitcoin to goods to real money (if I'm reading this correctly). In addition you are assuming there was no predicate offense, so it would appear that there is no money laundering issue.

DeathAndTaxes

donator

Activity: 1218

Merit: 1079

Gerald Davis

Quote from: tytus on March 19, 2013, 08:15:03 PM

A reasonable way to test how these guidelines work in practice would be to inform FinCEN about suspected illegal activity of the "Linden Lab's currency brokerage" and monitor what happens then.
I am not sure if asking FinCEN about interpretations will bring us further. I have no idea how vague official clarifications are in US, but in Poland You get 4 different (contradictory) official opinions and none of them tells You the answer to your questions. Provoking court decisions was always a slow but more reliable alternative.

You can seek an administrative ruling. Essentially it is a letter which requires FinCEN to provide specific written direction/clarification. While it isn't the "law", if FinCEN gives you an administrative ruling stating "x" it provides some measure of protection if they later change their mind.

mpfrank

sr. member

Activity: 247

Merit: 250

Cosmic Cubist

Quote from: hazek on March 18, 2013, 07:24:11 PM

Quote from: jgarzik on March 18, 2013, 07:20:33 PM

tl;dr... bitcoins are legal

And you need a +$1million dollar worth money transmitter license if you want to mine and sell them for fiat Roll Eyes

So, the way I read this, only mining pool operators or solo miners would need to do this. If you're just participating in a mining pool, you're not technically engaged in mining yourself, you are just selling a computational service of processing work units and producing shares. Only the mining pool operator is actually producing new Bitcoins (putting the new block together); you as an individual pool contributor aren't.

acoindr

legendary

Activity: 1050

Merit: 1002

tytus

sr. member

Activity: 250

Merit: 250

A reasonable way to test how these guidelines work in practice would be to inform FinCEN about suspected illegal activity of the "Linden Lab's currency brokerage" and monitor what happens then.
I am not sure if asking FinCEN about interpretations will bring us further. I have no idea how vague official clarifications are in US, but in Poland You get 4 different (contradictory) official opinions and none of them tells You the answer to your questions. Provoking court decisions was always a slow but more reliable alternative.

repentance

hero member

Activity: 868

Merit: 1000

It's worth remembering that this was pretty much expected and that enterprises have been preparing for it.

The thing which was largely unexpected is miners themselves being regarded as money transmitters if they sell their BTC.

BTC Books

member

Activity: 84

Merit: 10

Quote from: Maged on March 19, 2013, 08:05:18 PM

Quote

c. Bitcoin

A final type of convertible virtual currency activity involves bitcion, a virtual currency (1) that has no central repository and no single administrator, and (2) that persons may mine.

A miner that uses bitcoin to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a miner that sells bitcoins to another person for fiat is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts bitcoin from one person and transmits it to another person as part of the acceptance and transfer of fiat.

This practically effects:

1) Exchanges, but they already knew that.
2) Middlemen that convert bitcoin to USD, like BitPay.
3) Mining pools that directly allow you to cash out in USD.

Now here's a thought...

According to the way I read this:

Quote

"In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency."

...the bitcoin mixers and laundry sites are not on the hook as money launderers. Does it look like that to you?

Maged

legendary

Activity: 1204

Merit: 1015

Quote from: Elwar on March 19, 2013, 06:18:31 PM

Quote

c. De-Centralized Virtual Currencies

A final type of convertible virtual currency activity involves a de-centralized convertible virtual currency (1) that has no central repository and no single administrator, and (2) that persons may obtain by their own computing or manufacturing effort.

A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, 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. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

This part gets ignored but I am a bit confused by it.

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency". It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)." Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

"Currency" is quite well-defined:

Quote

FinCEN's regulations define currency (also referred to as "real" currency) as "the coin and paper money of the United States or of any other country that is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance."

So, let me translate this from legalese (but remember that I am not a lawyer) to Bitcoin in practical terms:

Quote

c. Bitcoin

A final type of convertible virtual currency activity involves bitcoin, a virtual currency (1) that has no central repository and no single administrator, and (2) that persons may mine.

A miner that uses bitcoin to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, a miner that sells bitcoins to another person for fiat is engaged in transmission to another location and is a money transmitter. In addition, a person is an exchanger and a money transmitter if the person accepts bitcoin from one person and transmits it to another person as part of the acceptance and transfer of fiat.

This practically effects:

1) Exchanges, but they already knew that.
2) Middlemen that convert bitcoin to USD, like BitPay.
3) Mining pools that directly allow you to cash out in USD.

Bitco

sr. member

Activity: 746

Merit: 253

Quote from: Elwar on March 19, 2013, 07:40:36 PM

Quote from: Bitco on March 19, 2013, 07:34:15 PM

Quote from: happywarrior on March 19, 2013, 06:55:26 PM

Quote from: Elwar on March 19, 2013, 06:18:31 PM

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency". It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)." Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".

Yeah, because "currency" here means US and foreign currency. This is a limitation of 31 USC § 5312 (a)(3). They can not just throw "virtual currency" in there. They really deserve to get slapped for trying.

Ok, that makes things more clear.

But what is meant by "value that substitutes for currency"?

Presumably the other "monetary instruments" that they are allowed to regulate under section 5311 et seq: travelers’ checks, bearer negotiable instruments, bearer investment securities, bearer securities, stock on which title is passed on delivery, and similar material.

But who knows really... If they actually try to enforce these regulations, these definitions will probably be argued in court sooner or later.

acoindr

legendary

Activity: 1050

Merit: 1002

Quote from: Elwar on March 19, 2013, 07:40:36 PM

Quote from: Bitco on March 19, 2013, 07:34:15 PM

Quote from: happywarrior on March 19, 2013, 06:55:26 PM

Quote from: Elwar on March 19, 2013, 06:18:31 PM

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency". It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)." Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".

Yeah, because "currency" here means US and foreign currency. This is a limitation of 31 USC § 5312 (a)(3). They can not just throw "virtual currency" in there. They really deserve to get slapped for trying.

Ok, that makes things more clear.

But what is meant by "value that substitutes for currency"?

Yeah, I focused in on the "value that substitutes for currency" too. I think that was intentionally included to give themselves broad interpretation. I think context is the key. FinCEN deals with finance related items. Precious metals can be used to finance buying things, so that would qualify as "value that substitutes for currency" IMO.

What's most interesting though is that virtual currencies themselves might eventually be used to finance buying things (if they became popular enough); at that point they would also qualify as "value that substitutes for currency" so an exchange that transacted no fiat, but only well established crypto-currencies might also then be targeted.

They basically want to regulate exchange of currencies; and currencies, by definition, become currency when a large number of people accept them as such.

Dabs

legendary

Activity: 3416

Merit: 1912

The Concierge of Crypto

How is "real money" defined? Are store credits considered "real money" ? Is jewelry considered "real money"? (Jewelry can be used as an interim barter item before it becomes "real money" and setting a fixed price on such jewelry.) People have suggested valuable metals like gold or silver but not as "real money".

marcus_of_augustus

legendary

Activity: 3920

Merit: 2349

Eadem mutata resurgo

Quote from: DeathAndTaxes on March 19, 2013, 06:50:06 PM

Quote from: flug on March 19, 2013, 06:48:30 PM

Just to clarify, is there anything in this that affects the direct exchange of bitcoins for goods and services?

The guidance specifically states that is NOT a MSB or an activity regulated by FinCEN.

That's good, Silk Road can ignore FinCEN then.

Elwar

legendary

Activity: 3598

Merit: 2386

Viva Ut Vivas

Quote from: Bitco on March 19, 2013, 07:34:15 PM

Quote from: happywarrior on March 19, 2013, 06:55:26 PM

Quote from: Elwar on March 19, 2013, 06:18:31 PM

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency". It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)." Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".

Yeah, because "currency" here means US and foreign currency. This is a limitation of 31 USC § 5312 (a)(3). They can not just throw "virtual currency" in there. They really deserve to get slapped for trying.

Ok, that makes things more clear.

But what is meant by "value that substitutes for currency"?

Bitco

sr. member

Activity: 746

Merit: 253

Quote from: happywarrior on March 19, 2013, 06:55:26 PM

Quote from: Elwar on March 19, 2013, 06:18:31 PM

Everywhere else there is a distinction between virtual currency and real currency. This line just says "currency". It is quite vaque in that it could say "if the person accepts (Bitcoin) from one person and transmits it(Bitcoin) to another person as part of the acceptance and transfer of...value (that substitutes for currency)." Would that mean that every node on the network transferring bitcoins from one person to another is an "exchanger and a money transmitter"?

I think if it just says "currency", they are referring to the FinCEN definition of currency, which excludes "virtual currency".

Yeah, because "currency" here means US and foreign currency. This is a limitation of 31 USC § 5312 (a)(3). They can not just throw "virtual currency" in there. They really deserve to get slapped for trying.

Topic: FinCEN addresses Bitcoin - page 3. (Read 28355 times)