A minor personal comment about the FinCEN document - I enjoyed reading it. It's nice to have a human response to an issue - it serves as a reminder that they're humans too, just like us.
I agree with most of what you are saying - they're definitely stuck betwen a rock and a hard place. I'd go as far as saying it's an issue not with those laws being old, but laws being old in general as a result of the legal/political process. Cryptocurrencies move a lot faster than the law can.
I'm surprised that you can't see any reason at all to treat miners like money transmitters though. Considering their talking about dealing with money laundering, one of the ways the do deal with it is by being aware of suspicious transactions in all places where there's likely to be large volumes or transactions of money. In the grand scheme of things ($6billion laundered money) most miners don't handle large amounts of cash. But in relation to the Bitcoin ecosystem, they do. Miners at some point, have hold of every Bitcoin ever in existence. If the Bitcoin economy continues growing, the miners are going to be very very useful people to know if you want to know where money is being made, and where it's initially being distributed - both of which are useful nuggets of info in the context of preventing laundering. As you mentioned, they either sit and do nothing and watch money get laundered, or try and do something. Even if that something is something stupid, the sooner they try it, the quicker an optimal solution for both gov't and citizen can be reached - it's better to have the inconvenience now whilst Bitcoin is small.
Most places where people make money or where money is created are subject to monetary laws. If someone mines a shed load of Bitcoins, and someone else buys them in cold hard dirty laundered cash, how are FinCEN supposed to know about that to prevent it? They can't just assume the person will honestly come forward and admit it - Liberty Reserve certainly didn't. Although the method of trying to know about all the money that moving everywhere, I suspect, is probably quite a inefficient and possibly/probably ineffective, but that's the way it is until someone comes up with a better way of doing it. It's certainly not ideal though.
Topic: FinCEN Issues New Clarification on BitCoin [June 13, 2013] - page 2. (Read 2758 times)
I know I'm usually doing close statutory analysis on this forum, but since Calvery's speech was more meditation than legislation, I'll just say something in the same vein.
The speech reads like an advocacy piece, mixed with a little self-congratulation, which is not totally inappropriate for a federal enforcement agency that just nabbed some very bad people. It just would have been helpful to hear some recognition of the round peg/square hole problem that is endemic to applying money transmission regulation to a BTC business.
I get it, though. FinCEN is in a tight spot. There are a lot of reasons to treat some aspects of virtual currencies just like they treat fiat. For example BTC can be used for just as many nefarious purposes as USD. That said, there are just as many reasons to treat some aspects of virtual currencies completely differently. For example, there doesn't strike me as any reason at all to treat miners, even large scale ones, as money transmitters. So it stands to reason that a if a competent, well-meaning regulator could simply snap her fingers and create an appropriate regulatory regime tailored carefully to BTC businesses, she would do so.
Unfortunately, that's not how our democracy generally - and our federal system specifically - works. FinCEN can only work with the tools it has. Ancient tools. Tools that were never crafted to deal with cryptocurrency. The Bank Secrecy Act, the first and biggest tool in FinCEN's belt, was enacted in 1970... one year prior to the invention of the floppy disk. The floppy disk. The legislature that passed the BSA would be shocked to hear that their laws would be regulating someone who ran his business using the computer in his backpack, let alone someone whose computer could carry millions of dollars in convertible value within it.
So, the regulators are faced with a choice: they can watch despondently as money gets laundered and innocent consumers' stored value disappears to a non-extraditional jurisdiction, lamenting all the while that their unwieldy tools just don't fit the job at hand. Or, they can make do with the tools they have and fight some crime. They chose the latter. I get it.
Of course, the unwieldy tool at their disposal is the BSA. The BSA is literally a canon in the US. Figuratively, though, it's a cannon, and they're using it to kill a fly. To be sure, they lit the fuse and now the fly is a gonner: money launderers can't use BTC to avoid AML requirements. Mission accomplished. The crystal glass that fly was sitting on, though, is shattered. So is the table, the chairs, the place-setting, and everyone at the table. The collateral damage is staggering.
For me, the collateral damage is having to tell BTC entrepreneurs - seasoned, well-funded businessmen - that their brilliant business plan is dead in the water because the regulatory requirements will demolish their bottom line. It's having to tell them that the states haven't explicitly spoken on the issue yet, and they won't for a long time, but when they do, they'll likely follow the federal lead. I would tell these men that they should be proud of how their regulators are ever-vigilant. How the regulators have made creative use of their limited legal resources. How they have refused to wait for the legislature to come to their aid. I would tell them these things, but it wouldn't satisfy them. Not in the least.
That's how I know that FinCEN has made the wrong choice, that it's over-reached, and that its grasp is strangling legitimate innovation. FinCEN is in a tough spot. I get it. But there's a saying among lawyers: tough cases make bad law. FinCEN is dealing with a very, very tough case.
The speech reads like an advocacy piece, mixed with a little self-congratulation, which is not totally inappropriate for a federal enforcement agency that just nabbed some very bad people. It just would have been helpful to hear some recognition of the round peg/square hole problem that is endemic to applying money transmission regulation to a BTC business.
I get it, though. FinCEN is in a tight spot. There are a lot of reasons to treat some aspects of virtual currencies just like they treat fiat. For example BTC can be used for just as many nefarious purposes as USD. That said, there are just as many reasons to treat some aspects of virtual currencies completely differently. For example, there doesn't strike me as any reason at all to treat miners, even large scale ones, as money transmitters. So it stands to reason that a if a competent, well-meaning regulator could simply snap her fingers and create an appropriate regulatory regime tailored carefully to BTC businesses, she would do so.
Unfortunately, that's not how our democracy generally - and our federal system specifically - works. FinCEN can only work with the tools it has. Ancient tools. Tools that were never crafted to deal with cryptocurrency. The Bank Secrecy Act, the first and biggest tool in FinCEN's belt, was enacted in 1970... one year prior to the invention of the floppy disk. The floppy disk. The legislature that passed the BSA would be shocked to hear that their laws would be regulating someone who ran his business using the computer in his backpack, let alone someone whose computer could carry millions of dollars in convertible value within it.
So, the regulators are faced with a choice: they can watch despondently as money gets laundered and innocent consumers' stored value disappears to a non-extraditional jurisdiction, lamenting all the while that their unwieldy tools just don't fit the job at hand. Or, they can make do with the tools they have and fight some crime. They chose the latter. I get it.
Of course, the unwieldy tool at their disposal is the BSA. The BSA is literally a canon in the US. Figuratively, though, it's a cannon, and they're using it to kill a fly. To be sure, they lit the fuse and now the fly is a gonner: money launderers can't use BTC to avoid AML requirements. Mission accomplished. The crystal glass that fly was sitting on, though, is shattered. So is the table, the chairs, the place-setting, and everyone at the table. The collateral damage is staggering.
For me, the collateral damage is having to tell BTC entrepreneurs - seasoned, well-funded businessmen - that their brilliant business plan is dead in the water because the regulatory requirements will demolish their bottom line. It's having to tell them that the states haven't explicitly spoken on the issue yet, and they won't for a long time, but when they do, they'll likely follow the federal lead. I would tell these men that they should be proud of how their regulators are ever-vigilant. How the regulators have made creative use of their limited legal resources. How they have refused to wait for the legislature to come to their aid. I would tell them these things, but it wouldn't satisfy them. Not in the least.
That's how I know that FinCEN has made the wrong choice, that it's over-reached, and that its grasp is strangling legitimate innovation. FinCEN is in a tough spot. I get it. But there's a saying among lawyers: tough cases make bad law. FinCEN is dealing with a very, very tough case.
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