Topic: Is in-face trading bitcoins lawful in US? (Read 933 times)

They are.

So does that mean companies like Bitinstant/ZipZap and Coinbase are registered MSB's?

Thanks Nova! That was very insightful

Thanks for explanation!

Yes the question is actually if you will engage in the act of money exchange as a regular feature of your business or if it's more or less a 1 off thing.
Person to person transactions are unregulated as long as they aren't regular, but if the amount gets big enough, the IRS & DEA are going to want to have a papertrail or they will give you a free colonoscopy.

Businesses are different depending on how they treat the transaction.
Walmart will cash your paycheck and they make a business out of the cashing of it, so they had to register as a money service business (bank actually).

However the small local grocery store down the street from my house will cash your paycheck if you ask them to, with the understanding that you will be using some portion of the paycheck there to buy your groceries.  They do not make a business of cashing payroll checks, it's just a customer convenience and they don't charge a fee for cashing it.  There is an underlying assumption that you will buy groceries, and that is the primary motive in the money exchange, i.e. most of it will be spent there.
Either way, it's not a regular part of their business thus they don't have to register.

If you have a stand selling hotdogs and people pay you in bitcoins, you don't have to register.  
If you regularly exchange bitcoins for cash out of your hotdog stand as part of your business then you do.
Same thing if you regularly cash payroll checks, or even give cash back on debit (this rule is under debate and subject to change, usually though it's not you that registers but your provider, who then subjects you to limits on it).

The same is true of all virtual currencies, pre-paid cards, money paks, and anything which can be treated for all intents and purposes like money.

At some point it may just come down to a determination of the US Treasury department as to whether or not you need to register.  However as a Treasury Agent once told me, "If you are even asking the question, then the answer is yes.  This is because if you register and don't engage, there is no penalty.  But if you engage and are unregistered the penalties are very severe and they do have the power to "pull back corporate veil" and hold officers of a company personally liable for money laundering."
It's a bit like realizing you're staring down the wrong end of a gun.

I would not be at all surprised to find out that some of these collapsed exchanges and bank seizures we have been seeing lately are the result of the company failing to register as an MSB.  Any company which takes money for money and deals with people in the USA should probably register as an MSB prior to taking on their first customer.

Hope that's helpful.  Best thing to do is stay current with this link http://www.fincen.gov/financial_institutions/msb/msb.registration.html
Enjoy!

You need to be registered to exchange currencies too, but if I gave you some dollars for some euros I sincerely doubt anyone would have an issue with it.

Also, aren't Bitcoins money like objects?

MSB registration is only required if money and money like objects are a regular feature of your business.
But yes if you regularly do it face to face then you need MSB registration.

I think the short answer is that it is not explicitly illegal.

One could probably argue his way into telling you that breathing is illegal in certain circumstances...

In US you need to be registered as MSB to exchange between BTC and  USD? Does this apply to in face trading?

How about other countries?