Topic: Is "Money Laundering" with Bitcoin really "Money Laundering"? - page 2. (Read 5452 times)

Very simple answer:  No. 

Money laundering is concealing the source of money, or rather making the source look "clean".  For example, I could declare some cash as income from my restaurant, when in fact it was stolen.  Or, I could declare some cash as income from my bank, when in fact it is counterfeit.  Changing cash into other cash might make the serial numbers unrecognizable, but it is hardly "clean", it is still cash.  Bitcoins don't make money laundering any more easy than cash does.  A bitcoin is a bitcoin, in no way indicative of "clean" income.  In fact, it looks dirtier.  People who say bitcoins enable money laundering clearly have no idea what they are talking about.     


Slightly more complex answer: Yes, there is a new kind of laundering one can do with bitcoins, but it is not the same as what most people mean by money laundering. 

Because bitcoins have a public transaction history, one can trace them.  Because of this it becomes desireable to move them around and make this tracing more difficult.  This can be referred to as "bitcoin laundering", for example the bitcoin tumblr, moving from wallet to wallet a few times before sending them to a vendor, etc.  Keep in mind that at no stage in this process is the money disguised as a legal income stream, thus this is not laundering money in the conventional sense. 

Good question  

The ability to convert back to hard currency is not a a requirement for a product to be considered prepaid access according to FinCEN.  While the store selling you bananas is a purchase, the store issuing you a "banana card" is considered prepaid access and subject to MSB regulation.

The key thing is that in the case of "Banana card", it would most likely would be considered "closed loop" by FinCEN (my opinion and should not be taken as anything more than that). The requirements and regulatory requirements for a closed loop system are much less restrictive than open loop systems.   Obviously things like the hypothetical banana card and phonecards, wireless pins, etc clearly fall into the "closed loop" category while products like "reloadable debit card, greendot moneypaks, etc" clearly fall into the "open loop category".  Bitcoin kinda falls in the middle.

Our inquiry to FinCEN is on if a Bitcoin prepaid card would be considered closed loop or open loop as that radically changes the cost, regulatory, and information gathering requirements.  Our argument is that Bitcoin stored value card should be considered closed loop as the issuer provides no mechanism for conversion to fiat.  The counter argument is that Bitcoin ease at being converted to fiat makes it an open loop product even without issuer providing an explicit mechanism to convert back to fiat.  Hopefully we will have an answer soon.

You may find this interesting:
http://www.fincen.gov/news_room/nr/html/20111102.html

Their response will be interesting.   Because instead of acquiring bitcoin with the expectation that it has no value unless it is converted back to fiat, it really isn't a prepayment of value.  It is instead just a purchase, just like if I were buying bananas.  If I buy bananas at the store to trade them with you for whatever you are selling then there's no prepayment of value.  The seller of the bananas to me is not asserting that those bananas will have any value.

Once you convert the btc to fiat then the real launder begins. Anything worth buying right now (car, house, boat, ect) you need your countries currency rather than btc. When you cash out the btc then go buy those things you'll be setting off flags all over the place.

btc launder is a bit different. It's only really useful to separate the money from a crime. Like theft, extortion or ect. But I don't really think it's on the same level as fiat laundering, where you end paying taxes on the income to legitimize it. So you can deposit to your bank account big numbers, no questions asked. I guess you could use a btc business to launder the fait, but the end result is actually launder fiat, doesn't matter where the btc came from really.

A unique argument that I think complicates the question is, unlike regular currency- you can "mine" bitcoins. You can't Print your own money, but in Bitcoin you can (at least for now while there are still coins to mint). And because we are turning energy into 'coin' (electricity for miners) were are in essence saying we can 'create' money. This complicates the argument that Bitcoin can be a real currency for purposes of Money laundering because one could argue that the coins are in fact someone elses "made-up printed" money. As there is no central authority it would be a little bit like us hoarding self printed "monopoly money" bills and assigning them collectively value. Want more money? Go make some more. So it would be hard to say what money an individual "made" and what he/she "laundered".

I think we would all be very interested to see what they have to say about it.

It also seems that FinCEN is catching up with the times.

They have changed the wording of a lot of key terms.
"Stored Value" has gone away and is replaced with "Prepaid Access".
"Foreign Currency Exchanger" has been replaced "Foreign Exchanger".

I don't think FinCEN has produced any written declaration on Bitcoin but TangibleCryptography LLC has asked for an administrative ruling on the "Application of the Money Services Business Rule to a Company that Issues Prepaid Access to Digital Assets".

They are required to issue a response within 60 days and a redacted version will be available to the public.

The interesting thing is, the outcome of such a real-world-legal challenge would open up Bitcoin in so many ways. If you lose, IE: it is considered money laundering, then it essentially validates Bitocin as a currency. If you win IE: it's not a currency, then essentially Bitcoin wins freedom from government oversight and regulation. Either way it would be a considerable win for Bitcoin.

This is definitly somerhing worth chatting about...
I vote that it is Not leagally classifyable as money laundering, Altough thats pretty much what it is.
I think a lawer would just be like "Dude, This isnt money, Im basically lending someone 50000 WoW Gold with a intrest rate and payment plan for him to pay me back 55000, This isnt acutally Money. (but yet you can still sell WoW gold for real money)

The UK's Money Laundering requirements of businesses: http://www.hmrc.gov.uk/mlr/your-role/resposibilities.htm

That is a good point. Clean coins!

Perhaps the large pools could be engaged already in something like that?

There might be a market for freshly mined coins. Someone could sell them at a premium auction style....

Actually I am aware of what constitutes "Money Laundering", as it relates to real world currencies and financial transactions. My question is: if Bitcoin is considered a Virtual Commodity, and it is never converted to Fiat, is money laundering in Bitcoin really money laundering at all?

For example if the thief of Bitconica (no it's not me) were to say, "Hey Crazy Rabbit! Can I give you 18K of bitcoin and you give me 18K of clean bitcoins? Or Litecoin?" and I did it, would that be money laundering?

Or does money laundering and the associated regulations only come into force for the individual that converts the BTC or LTC into real currency? IE: the exchanges.

Is Bitcoin a virtual commodity, or is it a currency? As long as no government recognizes it as a currency, is it not our geeky version of trading baseball cards?

Also, just as cash has no owner (It can be in your possession however it can not be owned) are Bitcoins not ownerless? Certainly if you forget your private key, you lose "possession" of your coins, but the coins themselves do not disappear. Much like how if you loose cash, you lose possession (and thus the idea of 'ownership')


So! Is Money Laundering with Bitcoin's really Money Laundering?