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Topic: FinCEN addresses Bitcoin - page 5. (Read 28359 times)

newbie
Activity: 25
Merit: 0
March 19, 2013, 05:51:35 PM
Excerpt from prepared remarks of

Jennifer Shasky Calvery,
Director,
Financial Crimes Enforcement Network

She gave the keynote in Miami this morning for today's session of the MoneyLaundering.com's 18th annual AML conference.

Thanks for finding this, interesting follow-up.
newbie
Activity: 25
Merit: 0
March 19, 2013, 05:41:37 PM

Apparently anyone selling any type of virtual currency on ebay or craiglist is now a money transmitter, and as such a MSB, and as such now in violation of FinCEN interpretation if they haven't registered as an MSB.

There has to be some lawyer out there who is interested in Bitcoins and who can offer their interpretation on this matter.

Yes, me. I wrote up a quick take for the Bitcoin Foundation here: https://bitcoinfoundation.org/blog/?p=152
legendary
Activity: 1204
Merit: 1002
RUM AND CARROTS: A PIRATE LIFE FOR ME
March 19, 2013, 05:35:41 PM
This is good news. With clear rules the economy can really begin to prosper. For the paranoid among us: ASIC IS YOUR SAVIOR.
legendary
Activity: 2506
Merit: 1010
March 19, 2013, 05:07:31 PM
Excerpt from prepared remarks of

Jennifer Shasky Calvery,
Director,
Financial Crimes Enforcement Network

She gave the keynote in Miami this morning for today's session of the MoneyLaundering.com's 18th annual AML conference.

Quote
To date, FinCEN’s analysts have explored and produced reference products for law enforcement on many traditional and emerging payment systems. These include: cross border funds transfers and correspondent accounts, money transmitters, online payment systems, prepaid cards, and mobile payments. FinCEN’s analysts then follow up this work by providing in-person analysis and training to thousands of investigators each year.

In addition to developing products to help law enforcement follow the financial trails of emerging payments methods, FinCEN also develops guidance for the financial industry to clarify their regulatory responsibilities as they relate to emerging areas.

In fact, just yesterday, FinCEN issued interpretive guidance to clarify the applicability of BSA regulations to virtual currencies. The guidance responds to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of persons who use virtual currencies or make a business of exchanging, accepting, and transmitting them.

FinCEN’s rules define certain businesses or individuals as money services businesses (MSBs) depending on the nature of their financial activities. MSBs have registration requirements and a range of anti-money laundering, recordkeeping, and reporting responsibilities under FinCEN’s regulations. The guidance considers the use of virtual currencies from the perspective of several categories within FinCEN’s definition of MSBs.

The guidance explains how FinCEN’s “money transmitter” definition applies to certain exchangers and system administrators of virtual currencies depending on the facts and circumstances of that activity. Those who use virtual currencies exclusively for common personal transactions like receiving payments for services or buying goods online are not affected by this guidance. Those who are intermediaries in the transfer of virtual currencies from one person to another person, or to another location, are money transmitters that must register with FinCEN as MSBs unless an exception applies. Some virtual currency exchangers are already registered with FinCEN as MSBs, though not necessarily as money transmitters. The guidance clarifies definitions and expectations to ensure that businesses engaged in similar activities are aware of their regulatory responsibilities.

 - http://www.fincen.gov/news_room/speech/pdf/20130319.pdf
 - http://bit.ly/YpohMG  <-- PDF Viewer in Google Docs.
sr. member
Activity: 294
Merit: 250
You are a geek if you are too early to the party!
March 19, 2013, 02:30:38 PM
This is bad, bad news.

First they got your attention, then they regulate, then they take over.

Then they kill it.

I think the real freedom is going to be found on the BTC-e exchange with the Russians and the Chinese. At least you know you can't trust them!
With the US making noises, the EU will copy them, and before you know it, bitcoin will be rebuilt, minus the bits that made it a threat to governments.

Oh well, lets just ride this sucker until it runs out of steam! Smiley

It's not too late to buy back in.......

I'm just going to milk what I have. Wink

Having seen how the libertarian ideal of the internet of the early 90s got regulated to hell, I'm not holding out much hope for bitcoin, but I'm not selling until I have enough to buy some land! Wink
legendary
Activity: 1050
Merit: 1002
March 19, 2013, 02:29:39 PM
Disclaimer: I am not a lawyer.

tl;dr - if you people want to say your thing has value, and swap that amongst yourselves, then our hands are off. However, if you want to say your thing can be traded for our thing then we regulate that.
------------

First, note this applies to the U.S., but Bitcoin is global. So any one govt's reaction to it never affects all of Bitcoin.

The U.S. reaction I think can be viewed in simple terms: use of Bitcoin in its own economy is fine and not subject to regulation. The govt appears to concede it can't prohibit people bartering with bitcoins if they choose to. That's huge.

At the same time, the govt isn't going to stand idly by while bitcoin merges with its own monopolistic hold on "real" currency. Therefore, the reaction appears to target the two points at which this, in their view, happens: mining (bringing bitcoins into existence) which sucks away USD value into bitcoins; and exchanges which allow the trade of bitcoins for things of financial value, thus establishing their value.
sr. member
Activity: 476
Merit: 250
March 19, 2013, 02:28:41 PM
I was just looking at some of the fines for failure to register

Good luck tracking a crypto-currency. Wink
sr. member
Activity: 448
Merit: 250
March 19, 2013, 02:27:14 PM
I was just looking at some of the fines for failure to register

Quote
IV. CIVIL MONEY PENALTY
FinCEN may impose civil money penalties against a money transmitter, or any person who
owns or controls a money transmitter, for violations of money services business registration
requirements.14 FinCEN may assess a civil money penalty for failure to register as a money
transmitter, in an amount up to $5,000 per violation. Each day a violation continues constitutes a
separate violation. FinCEN may assess civil money penalties against a money transmitter, or any
partner, director, officer, or employee thereof, for each willful violation of anti-money laundering
program requirements. A penalty of $25,000 per day may be assessed for failure to establish and
implement an adequate written anti-money laundering program.
15 A separate violation occurs for
each day the violation continues.
full member
Activity: 196
Merit: 100
Another block in the wall
March 19, 2013, 01:59:21 PM
This is bad, bad news.

First they got your attention, then they regulate, then they take over.

Then they kill it.

I think the real freedom is going to be found on the BTC-e exchange with the Russians and the Chinese. At least you know you can't trust them!
With the US making noises, the EU will copy them, and before you know it, bitcoin will be rebuilt, minus the bits that made it a threat to governments.

Oh well, lets just ride this sucker until it runs out of steam! Smiley

It's not too late to buy back in.......
sr. member
Activity: 310
Merit: 250
March 19, 2013, 01:50:24 PM
All MSBs have to register and are then subject to expensive fees and regulatory practices by their states.

This part ("are then") is not quite correct.

The state and federal laws are disconnected, even if they are intentionally similar in many cases.  Becoming an MSB or MT at the federal level does not immediately trigger a state requirement.  A state requirement to -- for example -- undergo a background check or provide a surety bond is not triggered by becoming an MSB.  The state requirement is triggered by... your transmitting money in a regulated fashion.

A couple US states do not require money transmitter/MSB-like licenses, leaving only the federal requirements to handle.




http://www.fincen.gov/forms/files/fin107_msbreg.pdf

For those curious, this is the actual federal form.
sr. member
Activity: 294
Merit: 250
You are a geek if you are too early to the party!
March 19, 2013, 01:42:26 PM
This is bad, bad news.

First they got your attention, then they regulate, then they take over.

Then they kill it.

I think the real freedom is going to be found on the BTC-e exchange with the Russians and the Chinese. At least you know you can't trust them!
With the US making noises, the EU will copy them, and before you know it, bitcoin will be rebuilt, minus the bits that made it a threat to governments.

Oh well, lets just ride this sucker until it runs out of steam! Smiley
full member
Activity: 154
Merit: 100
March 19, 2013, 01:32:36 PM
If I'm interpreting this correctly the definition for Centralized Virtual Currencies would apply not just to Second Life's Linden dollars, but also to WoW gold and any other video game economy?

Quote
In contrast to real currency, "virtual" currency is a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction. This guidance addresses "convertible" virtual currency. This type of virtual currency either has an equivalent value in real currency, or acts as a substitute for real currency.


By the preceding definition, Magic the Gathering: Online tix are a virtual currency, as they have an equivalent cash value (a dollar) and are a substitute for real currency in the game (they are used to pay event entry fees, and are a preferred medium of exchange for purchasing cards when trade partners cannot be found).

The implications of this 'guidance' appear to be pretty far reaching.

I wonder if they could nail every company that sells gift cards? They are virtual currency.

What about Microsoft xbox points? that's a virtual currency?

Every game online store? Blizzard, EA, all screwed.

This is a huge can of worms.


yes, What about bearer bonds and letters of Credit, Or Stock futures, this guideline is ridiculous
legendary
Activity: 1596
Merit: 1100
March 19, 2013, 01:29:45 PM
All MSBs have to register and are then subject to expensive fees and regulatory practices by their states.

This part ("are then") is not quite correct.

The state and federal laws are disconnected, even if they are intentionally similar in many cases.  Becoming an MSB or MT at the federal level does not immediately trigger a state requirement.  A state requirement to -- for example -- undergo a background check or provide a surety bond is not triggered by becoming an MSB.  The state requirement is triggered by... your transmitting money in a regulated fashion.

A couple US states do not require money transmitter/MSB-like licenses, leaving only the federal requirements to handle.


hero member
Activity: 490
Merit: 500
... it only gets better...
March 19, 2013, 01:28:50 PM
Jesus, you people really don't pay attention to anything at all.

A "money services business" is someone who holds (fiat) money for someone else.

A "money transmitter" is someone who holds (fiat) money for someone else and carries it across jurisdictional boundaries.

"Money" is guaranteed future value.

None of this has anything to do with Bitcoin, although they would like you to believe it does.  It's a hoax.  It's a psy-op.  All they are doing is telling you how they will respond if you try to peg your "virtual currency" to the US dollar.  And they are telling you this because they have to give you notice in order to limit their own liability for any assumptions made regarding their defective ponzi money.  They are limiting their own liability for their practice of transmitting the use of force via scrip, in arbitrarily regulating its value by money-printing and confiscation.

Bitcoin is not pegged to anything.  It does not have "equivalent value" in "real" US dollar currency.  It is not a "substitute" for "real" US dollar currency.  It is not given arbitrary value by anyone and thus is not based on the transmission of force.  It is not "convertible" for anything.  It isn't even "money" technically.

This is 100% nonsense that only applies to perhaps a couple of businesses in the Bitcoin community that peg their vouchers to the US dollar.

If you idiots respond to this in the way in which it was designed for you to respond, and stop mining and increase the centralization of Bitcoin and voluntarily sign up for regulations that don't actually apply to you, then you might as well just flush your Bitcoins down the toilet.

Good one...
sr. member
Activity: 310
Merit: 250
March 19, 2013, 01:22:50 PM
Right, standard I'm not a lawyer disclaimer but here is my interpretation.

Anyone trading bitcoins for fiat with another person is a money transmitter regardless of amount or frequency (though perhaps not if they are using a licensed exchange who takes on the role of MSB). All money transmitters are MSBs. All MSBs have to register and are then subject to expensive fees and regulatory practices by their states.

I would like a lawyer to explain why this interpretation by FinCEN is legal

It does not make sense to me that I grew carrots and sold them I would be a farmer, but if I mined bitcoins and sold them, or earned in game Diablo gold and sold it, or earned second life dollars and sold them, that I would now be subject to extremely expensive regulation.

Apparently anyone selling any type of virtual currency on ebay or craiglist is now a money transmitter, and as such a MSB, and as such now in violation of FinCEN interpretation if they haven't registered as an MSB.

There has to be some lawyer out there who is interested in Bitcoins and who can offer their interpretation on this matter.
member
Activity: 118
Merit: 10
March 19, 2013, 01:11:19 PM
Bitcoin is not pegged to anything.  It does not have "equivalent value" in "real" US dollar currency.  It is not a "substitute" for "real" US dollar currency.  It is not given arbitrary value by anyone and thus is not based on the transmission of force.  It is not "convertible" for anything.  It isn't even "money" technically.

This is what Bitcoin businessmen actually believe.
sr. member
Activity: 260
Merit: 250
March 19, 2013, 01:11:05 PM
At least the regs are acknowledging bitcoin and haven't outlawed in completed. They seem to even be embracing its existance here with a special clause for it.

One has to wonder why they are doing this. Presumably there has been a request passed to them from a higher body to put in a law about Bitcoin. I would speculate: the CIA/FBI were aware of the technology a while ago and have passed on an opinion that it does not require heavy regulation at this stage.

So thats what Id say this shows. The federal government are probably not going to take any real action against the currency at this stage of its growth. By extension (given the world follows the US), let's say the US isn't.

IMO we can take from this a very positive message about federal regulation.
donator
Activity: 1218
Merit: 1079
Gerald Davis
March 19, 2013, 12:50:44 PM
Fincen called me back. ... He had no idea

Yeah this is the hard part
Quote
If you get someone knowledgeable on the phone

MSB is an umbrella term.  A money transmitter (or check casher, or issuer of prepaid access) are all MSB.  All Money transmitters are MSB but not all MSB are money transmitters.  FinCen has no specific "Money Transmitter" registration.  They register MSBs.  They register check cashers as MSB, issuers of prepaid access (stored value) as MSBs, and Money Transmitters as MSB.  There are seven activities which a company can declare when registering as a MSB.  It is possible for a single entity to be registered as an MSB conducting more than one activity (i.e. WU is a money transmitter and also issues money orders).

From the source....
Quote
(ff) Money services business. A person wherever located doing business , whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This includes but is not limited to maintenance of any agent, agency, branch, or office within the United States.

(1) Dealer in foreign exchange. ...

(2) Check casher ...

(3) Issuer or seller of traveler's checks or money orders. ...

(4) Provider of prepaid access ...

(5) Money transmitter ...

(6) U.S. Postal Service. ...

(7) Seller of prepaid access. ...

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=1308d21216c7d185f6892cfa3276c899&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.2.3.1


sr. member
Activity: 448
Merit: 250
March 19, 2013, 12:48:12 PM
I am preparing an article about this and I have a call into Fincen for clarification.

If you get someone knowledgeable on the phone clarify that a miner exchanging Bitcoins for "real currency" using a broker/exchange registered as a MSB, doesn't itself need to register as a MSB.

i.e. Bob the miner exchanges coins for USD at CoinFort (a registered MSB).  Bob is not registered as an MSB is Bob compliant?  Lets say Bob is running his mining operation as a business but never sells coins to other individuals but only to CoinFort is he still compliant?



Fincen called me back.  I asked about the definition of "Money Transmitter" and whether the definition applied to one-time or rare transactions by businesses or individuals trigger.  He said that doing even one transaction by an individual requires them to register as  "Money Transmitter"  (I had not seen the rules that requires transmitters to register, only MSB's.)  He then started to talk about travelers checks and check cashing services.

I explained I was writing an article about the new clarifications and how it relates to Bitcoin.  I explained that all kinds of questions arose about who is a Money Transmitter or Money Services Business and what rules they had to follow.  I also asked the Bitcoin mining question. 

He had no idea what Bitcoin was and he said he had to research it and call me back.   
Thanks for the update
legendary
Activity: 1330
Merit: 1000
March 19, 2013, 12:36:04 PM
Jesus, you people really don't pay attention to anything at all.

A "money services business" is someone who holds (fiat) money for someone else.

A "money transmitter" is someone who holds (fiat) money for someone else and carries it across jurisdictional boundaries.

"Money" is guaranteed future value.

None of this has anything to do with Bitcoin, although they would like you to believe it does.  It's a hoax.  It's a psy-op.  All they are doing is telling you how they will respond if you try to peg your "virtual currency" to the US dollar.  And they are telling you this because they have to give you notice in order to limit their own liability for any assumptions made regarding their defective ponzi money.  They are limiting their own liability for their practice of transmitting the use of force via scrip, in arbitrarily regulating its value by money-printing and confiscation.

Bitcoin is not pegged to anything.  It does not have "equivalent value" in "real" US dollar currency.  It is not a "substitute" for "real" US dollar currency.  It is not given arbitrary value by anyone and thus is not based on the transmission of force.  It is not "convertible" for anything.  It isn't even "money" technically.

This is 100% nonsense that only applies to perhaps a couple of businesses in the Bitcoin community that peg their vouchers to the US dollar.

If you idiots respond to this in the way in which it was designed for you to respond, and stop mining and increase the centralization of Bitcoin and voluntarily sign up for regulations that don't actually apply to you, then you might as well just flush your Bitcoins down the toilet.
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