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Topic: FinCEN Ruling Requested for Bitcoin Mining (Read 2703 times)

sr. member
Activity: 746
Merit: 253
June 11, 2013, 01:15:27 PM
#31

I have to agree with MSantori here.  This looks like it was written by someone without a clear understanding of the legal issues involved.

First of all, you can not request an administrative ruling on an issue that is the subject of an enforcement action or court case.  If you believe that the facts of your case are similar enough to Liberty Reserve that you would be affected by a ruling in that case, then you would need to make that argument to the court.

It really is not at all clear what you are requesting from FinCEN.  You bring up the issue of reversibility of payments.  Reversibility of payments is possible under the Electronic Funds Transfer Act.  The definition of electronic funds transfer under this act refers to "ordering, instructing, or authorizing a financial institution to debit or credit a consumer's account".  I am not aware of any claim that bitcoin falls within this definition (and it pretty clearly does not).  The statement regarding Liberty Reserve indicates that FInCEN director Calvery thinks irrevocable payments are a bad idea, and this is used to bolster the argument that LR is laundering money, but nowhere does it state that irrevocable payments are per se illegal.

I would strongly suggest that you retain legal counsel and withdraw this request or amend it to address the specific factual circumstances that you are concerned about.  Your request in its current form is likely to be dismissed, and this will simply make it more difficult for you to get the answers that you seek.
legendary
Activity: 974
Merit: 1000
In a fantastic post, DeathAndTaxes states:

.....cut
At the federal level there is no MT license, or specific MT registration. There is only a MSB registration.  When you register as an MSB you indicate the reason for MSB registration.  MT is one of those sub types.  A company declares all the regulated activity they are engaged in and as such a company can register multiple sub types.
.....cut

https://bitcointalksearch.org/topic/m.2432003
sr. member
Activity: 298
Merit: 250
Play2Live pre-sale starts on January 25th
for me these rules are clear enough:

- mining = unregulated
- cashing out = regulated


I agree there guidance seems pretty clear cut, if you mine and use the coins for yourself or you buy coins and use them for yourself, it is not regulated.
Basically, it is the selling of the coins to individuals for USD that requires reporting as an MSB under Fincen.
At least that's how I read this:
http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html



What clarification do you hope to get? What aspect of the existing guidance is unclear? Maybe I'm missing something.

What I am saying is that if I cash out using an exchange that is already an MSB then there should be no additional regulation on me.  Under those specific circumstances I should be a Money transmitter I should not have to register as an MSB.


You're absolutely right on this point clarification is required. The existing guidance leaves room to interpret it either way, but I'm inclined to say you're right because using an exchange is not the same as selling to a "person" which is how the statute defines it.
It will be interesting to see how this develops further.
sr. member
Activity: 298
Merit: 250
Play2Live pre-sale starts on January 25th
for me these rules are clear enough:

- mining = unregulated
- cashing out = regulated


I agree there guidance seems pretty clear cut, if you mine and use the coins for yourself or you buy coins and use them for yourself, it is not regulated.
Basically, it is the selling of the coins to individuals for USD that requires reporting as an MSB under Fincen.
At least that's how I read this:
http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html



What clarification do you hope to get? What aspect of the existing guidance is unclear? Maybe I'm missing something.
legendary
Activity: 1358
Merit: 1000
legendary
Activity: 1358
Merit: 1000
https://www.facebook.com/permalink.php?id=138401546325686&story_fbid=154657731366734

bitinstant exchanges fincen mtgox regulation united states US usa
FINCEN: Bitcoin Users Not Regulated, Exchanges Are

Government regulation has for a long time been a gray area for Bitcoin, both in the United States and elsewhere. Although we have seen a number of disparate government reports either simply talking about Bitcoin or providing a regulatory opinion on some aspect of Bitcoin exchange, to date we have not seen anything close to a conclusive statement on digital currencies from any government organization in any country in the world. The problem is a difficult one; nearly all laws to date that attempted to regulate online payments of any form have all assumed a central issuer, and in the case of Bitcoin it could be just as easily argued that everyone is an issuer or that no one is. Today, however, we have gained a much clearer picture of what regulation for Bitcoin will look like, as FINCEN just released a paper clarifying their position on virtual currencies, touching on the concept of “decentralized digital currency” in detail with Bitcoin clearly in mind.
legendary
Activity: 1358
Merit: 1000
for me these rules are clear enough:

- mining = unregulated
- cashing out = regulated

all in between should be clarified by bitcoin foundation, I see this as one of their main tasks. IMO it's a waste of time and money when individuals try to do this.

Does FinCEN have a representation on this forum yet ? or anyone employed by the organisation to speak in a kind of autonomous way?
legendary
Activity: 974
Merit: 1000
Bitcoin is simply a group of individuals pursuing their own interests.  There is no "ship" or other central authority.  The Bitcoin Foundation is simply a group of Bitcoiners who decided to call themselves a "Foundation" and they have no official status.    

In any case an e-mail sent by one person asking for a clarification is not going to change everything and there is ample opportunity for others to comment or seek their own clarifications.
It's great you take care of this, I just thought it should be handled by a central "authority" to reach consent for the whole community. If BF doesn't want or can not do this, we maybe should try to bring them this way.

One point is that it would be hard to FinCen to back up that a pool miner is doing a financial transaction.  A pool itself is bundling transactions together so while I don't agree they should be regulated there is room for FinCen to play.
As of my understanding, as long as a pool makes no conversions of Crypto Currencies (BTC -> LTC etc.) or exchanges to real currencies (BTC -> US$ etc.) and only sends the pro rata outcome of the mining itself, it's not regulated. But youre right, it's ambiguous and could be interpreted as transmission, though I doubt thats the stuff they're after.
Realized (cashed out) earnings of this activity (fees, donations etc.) have to be stated as income.
legendary
Activity: 1386
Merit: 1004
One point is that it would be hard to FinCen to back up that a pool miner is doing a financial transaction.  A pool itself is bundling transactions together so while I don't agree they should be regulated there is room for FinCen to play.
legendary
Activity: 974
Merit: 1000
for me these rules are clear enough:

- mining = unregulated
- cashing out = regulated

all in between should be clarified by bitcoin foundation, I see this as one of their main tasks. IMO it's a waste of time and money when individuals try to do this.
sr. member
Activity: 332
Merit: 250
Then again, if he did hire a lawyer familiar with FINCEN regulation, and paid a handsome sum, what incentive is there, really, for that lawyer to get them to say that bitcoin mining is NOT regulated.  If he succeeds, all he succeeds in doing is losing a customer, a bitcoin miner that has no further need of his legal services.  There is an inherent conflict of interest with any lawyer experienced with finCEN regulations for MST or MSB in that if they win by getting bitcoin left unregulated, they lose for themselves and all their friends.
full member
Activity: 168
Merit: 100
To ACB: Are you working with a local attorney?  I think it's great that you are trying to influence the rulemaking process.  It's civic participation at its finest; you are rocking the boat, and that's the only way change is made in this country.  That said, it looks to me like you are flying solo.  Most people who do this don't fly solo.  They do it with legal counsel.  Without a knowledgeable lawyer at your side, you risk rocking the boat in the wrong direction.  As a bitcoiner myself, that concerns me.

In sum, you seem to be lobbying to affect the regulation of an entire industry without someone who knows how the regulations truly work.  There must be a local attorney that you can work with in New Jersey that can guide you through this process, help you focus your communications, and aid you in representing the industry in a more effective manner.

I recommended in my original post that if you have a high-stakes issue then definitely get an attorney familiar with Money Services Business/FinCEN issues.  In my case it is not high enough stakes to get an attorney.  They issued a clarification about mining.  I contacted them to explain it informally and they directed me to the formal process so I filed it.  I don't claim to represent any industry and I only asked about stuff that involves me (mining and the effect of FinCEN activities on the Bitcoin exchange price).  If some else wants to get involved in the issue they are free to send in their own comments, etc.  If I am granted a conference and someone else wants to take part and attend I won't object to that.  Actually there are other people who would be better at this than me so maybe it will spur others to get involved but without a central authority I am not sure who would do this sort of thing.

I know Bitinstant spent a lot on legal fees and they had posted awhile back that they would share information.  I would think that some sort of collaborative approach to reduce legal fees would be the way to go.  To do this properly you need someone familiar with FinCEN staff and how they approach things as well as the rules, administrative decisions, and court cases.  You would probably need a 6-figure retainer to a DC law firm just to get started.

It's a tough spot, I know.  A six-figure retainer is probably overstating it a bit, but you're right: regulatory attorneys aren't cheap.  The Bitcoin industry needs a well-funded industry group that can engage the proper legal counsel so that competing individual interests don't sink the whole ship.  In any event, good luck!
sr. member
Activity: 392
Merit: 250
♫ A wave came crashing like a fist to the jaw ♫
To ACB: Are you working with a local attorney?  I think it's great that you are trying to influence the rulemaking process.  It's civic participation at its finest; you are rocking the boat, and that's the only way change is made in this country.  That said, it looks to me like you are flying solo.  Most people who do this don't fly solo.  They do it with legal counsel.  Without a knowledgeable lawyer at your side, you risk rocking the boat in the wrong direction.  As a bitcoiner myself, that concerns me.

In sum, you seem to be lobbying to affect the regulation of an entire industry without someone who knows how the regulations truly work.  There must be an attorney that you can work with in New Jersey that can guide you through this process, help you focus your communications, and aid you in representing the industry in a more effective manner.

@MSantori,
Can you point us in the right direction for whom might be the best lawyer for this type of work?
I realize that this industry does not have any precedent, (or does it?)
full member
Activity: 168
Merit: 100
To ACB: Are you working with a local attorney?  I think it's great that you are trying to influence the rulemaking process.  It's civic participation at its finest; you are rocking the boat, and that's the only way change is made in this country.  That said, it looks to me like you are flying solo.  Most people who do this don't fly solo.  They do it with legal counsel.  Without a knowledgeable lawyer at your side, you risk rocking the boat in the wrong direction.  As a bitcoiner myself, that concerns me.

In sum, you seem to be lobbying to affect the regulation of an entire industry without someone who knows how the regulations truly work.  There must be a local attorney that you can work with in New Jersey that can guide you through this process, help you focus your communications, and aid you in representing the industry in a more effective manner.
legendary
Activity: 974
Merit: 1000
I don't believe they will make mining illegal, because they just don't care about it. They only need to cut the ropes to cashout (whats already happening at the moment).

In the future (2 years?) you will mine 2 months and get 10.000 BTC, because 99% of the miners quit mining. These 10.000 BTC can be exchanged against a cool, unique Sheldon-T-Shirt during checkout of your next purchase at Amazon. Or 5% discount when you buy a new AMD graphic card. Or a WOW "Mithril tuning fork of the winds", which distracts your enemy for 2 seconds and can be used once every 3 hours. Or other cool stuff like that.
full member
Activity: 182
Merit: 100
So this should make bitcoin mining illegal then for 99% of miners.
legendary
Activity: 974
Merit: 1000
....cut

Example One:
If I mine AltCoins, and sell those for BTC, and then Sell those BTC for US Dollars, does that make me a user or a transmitter?

Example Two:
If I mine BTC, and sell that on one exchange for LTC, and then back again to BTC, can I then sell those for US Dollars without being a transmitter? Or is that considered laundering?

Example Three:
What if I was playing the market with my mined BTC, exchanging them for LTC and WDC and back to BTC?

1. Transmitter / regulated

2. Transmitter / regulated

3. User / not regulated

When crypto currency changes to real currency or the other way round, they want to know about it {2}.
Any business that accepts crypto currency for goods or services is by their definition an exchanger and transmitter {3}.
No small business will be able to comply and by this, they try to break the neck of crypto currencies and leave it as a kind of monopoly money for nerds {1}.

hero member
Activity: 577
Merit: 500
Indeed  Angry
legendary
Activity: 3038
Merit: 1032
RIP Mommy
Delay, deter, deny. It's how government works (against humanity).

At the end of the delay period, the "ruling" will deter (chill) economic liberty, and those who cannot afford to pay millions of dollars in legal and government fees will effectively be denied.
donator
Activity: 1218
Merit: 1079
Gerald Davis
He filed it June 2nd.  These things move at the speed of government.   Bookmark it and check back in 60-90 days.  30 days for a response would be an a amazing feat of hyper efficiency for a regulator.
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