Yea so what constitutes needing a license then? So imagine someone that daytrades on the exchanges or a regular person do say a few transactions a year selling btc for cash and do it for l000 dollars each... let say 6 transactions the entire year. That doesn't constitute a business right?
What about someone selling btc for cash like twice a year to someone but do it for l5,000 each time? Does that constitute as a business? What if they charged a percentage/vig... like imagine charging the person paying cash an extra few percentage, would that count as a money transmitter?
Now obviously if someone does like hundreds of btc for cash sales, that obviously would be a money transmitter. But what about those people who do it once a month or few times a year? Now if you do it once or twice a year but do a big amount, like 5 figures, would that count? It seems like constitute a business... but what does that even mean? That person only did a few transactions the entire year... so was it the fact that the amount was 5 figures for his transactions or he was openly advertising it? Also how hard and what is the cost to even get the license for this for money transmitter.
Topic: selling bitcoin for cash; FINCEN regulations (Read 226 times)
In America you need a license to braid hair...
What happened to land of the free
What happened to land of the free
Another great example of how smart they do in the United States. Apparently, it is not long left to wait when it will be possible, as in any currency exchanger, to change $ for bitcoin and vice versa. I am sure other currencies will be included in this list of pairs later. In my opinion, this is a great decision and the fact that it decriminalizes the topic of trade and the circulation of cash in this area - the news will support the market. Any such news with a + sign gives another positive on the market.
in the USA, you're allowed to sell bitcoins for cash without worrying about money transmission laws (AML/KYC)---up until the point that you are considered "a business":
does anyone know what frequency and volume thresholds might trigger FINCEN registration and reporting requirements? have there been any precedents set in the last few years? FINCEN's guidance is pretty vague.
take this case from 2017: https://www.justice.gov/usao-wdmo/pr/nixa-man-pleads-guilty-illegal-bitcoin-exchange
5 transactions over 1.5 years (for amounts as small as $1k) doesn't seem like very much. the press release highlights the fact that he advertised/represented himself as an exchanger---is that the more significant part?
going back to the quote from marco santori above, he says "you have to accept all comers". does that imply that if you are only contacting advertisers and not advertising yourself, and not representing yourself as an exchanger, that you won't be construed as a business?
Quote
"'As a business' is the qualifier that triggers the money transmission laws," Santori said over the phone. "If you come to me and ask to buy $100 worth of bitcoin and I sell that to you, in no state is that sole activity considered to be money transmission. It must occur in a sufficient frequency and volume and you have to accept all comers. It's a fact-based test."
https://www.vice.com/en/article/j5qa7y/people-keep-getting-charged-with-a-crime-for-selling-bitcoin
https://www.vice.com/en/article/j5qa7y/people-keep-getting-charged-with-a-crime-for-selling-bitcoin
does anyone know what frequency and volume thresholds might trigger FINCEN registration and reporting requirements? have there been any precedents set in the last few years? FINCEN's guidance is pretty vague.
take this case from 2017: https://www.justice.gov/usao-wdmo/pr/nixa-man-pleads-guilty-illegal-bitcoin-exchange
Quote
By pleading guilty today, Klein admitted that he represented himself on the Internet to be a bitcoin exchanger. However, Klein was not a licensed money transmitter with the state of Missouri or with the Financial Crimes Enforcement Network, as required by federal and state law.
An undercover federal agent responded to an online advertisement posted by Klein. Klein told the undercover agent that his rate included a 10 percent commission “for an in-person $1,000 cash exchange.”
Between Feb. 6, 2015, and July 27, 2016, Klein, acting with another, met with two undercover federal agents on numerous occasions to exchange bitcoin for cash. Today’s plea agreement cites five separate transactions in which money (ranging from $1,000 to $15,000) was exchanged in person for an electronic transfer of bitcoin.
An undercover federal agent responded to an online advertisement posted by Klein. Klein told the undercover agent that his rate included a 10 percent commission “for an in-person $1,000 cash exchange.”
Between Feb. 6, 2015, and July 27, 2016, Klein, acting with another, met with two undercover federal agents on numerous occasions to exchange bitcoin for cash. Today’s plea agreement cites five separate transactions in which money (ranging from $1,000 to $15,000) was exchanged in person for an electronic transfer of bitcoin.
5 transactions over 1.5 years (for amounts as small as $1k) doesn't seem like very much. the press release highlights the fact that he advertised/represented himself as an exchanger---is that the more significant part?
going back to the quote from marco santori above, he says "you have to accept all comers". does that imply that if you are only contacting advertisers and not advertising yourself, and not representing yourself as an exchanger, that you won't be construed as a business?
I have taken the time to read some federal appellate cases on this matter and can tell you there is no exact number that qualifies as a business but most of the appellate decisions in the various federal circuit's do state that the purpose of a business is to turn a profit (if it in fact does or does not is not pertinent) therefore charging a fee for the service will always qualify as a business. The cases also specifically say that single transactions can never qualify. So if you are doing infrequent transactions and not charging a fee then you could never be convicted of 18 USC 1960 - the unlicensed MSB statute.
I believe that it also has been stated that advertising indicates that a person is acting as a business.
it appears to be a rather crucial factor, if the case of @BurtW says anything.
If I had never advertised on localbitcoins they would have never been able to claim what I was doing was a business and they would not have been able to arrest me for running a business without the proper license.
prior to today, i had only skimmed that thread. i knew they were stinging localbitcoins advertisers for unlicensed MSB, but i didn't realize federal agents are taking control of highly reputed accounts and using them to sting customers!
After I was arrested by homeland security the justice department was very interested in taking over my localbitcoins account. As part of the plea deals they offered me they wanted the account so they could use it for undercover operations.
At least some localbitcoins account are run by federal agents, cooperating witnesses or undercover agents in local jurisdictions. That is a fact.
At least some localbitcoins account are run by federal agents, cooperating witnesses or undercover agents in local jurisdictions. That is a fact.
so even if you are careful not to trigger FINCEN's MSB requirements, you still need to be very careful not to agree to anything illegal. if a trader ever mentions the need to conceal illegal proceeds, you're looking at something like this:
Quote
Rockcoons is accused of accepting $14,500 from an undercover officer in exchange for $9,200 worth of bitcoin in a bid to conceal profits from the illegal sale of hash oil.
https://www.nbcsandiego.com/news/local/vegas-man-accused-of-using-bitcoin-to-launder-drug-money/164709/
https://www.nbcsandiego.com/news/local/vegas-man-accused-of-using-bitcoin-to-launder-drug-money/164709/
if anyone ever remotely suggests they are using you to launder money, don't just walk away. run! no legit criminal is announcing stuff like that to strangers off the internet. it's a cop.
I believe that it also has been stated that advertising indicates that a person is acting as a business.
I used to be a big trader on LocalBitcoins a long time ago. I felt that it was an excellent way to help people get started with Bitcoin because many buyers were newbies and I would help them get set up. However, after traders started getting arrested, I had to stop. I was charging a fee for my time and risk, which along with my listing on LocalBitcoins could justify classifying me as a business by the people that were looking for someone to arrest.
I believe the statute of limitations has passed, so I am now safe from prosecution.
https://localbitcoins.com/accounts/profile/odolvlobo/
I used to be a big trader on LocalBitcoins a long time ago. I felt that it was an excellent way to help people get started with Bitcoin because many buyers were newbies and I would help them get set up. However, after traders started getting arrested, I had to stop. I was charging a fee for my time and risk, which along with my listing on LocalBitcoins could justify classifying me as a business by the people that were looking for someone to arrest.
I believe the statute of limitations has passed, so I am now safe from prosecution.
https://localbitcoins.com/accounts/profile/odolvlobo/
i've been perusing the regulations for clues and found a couple more nuggets of info in their 2019 guidance. https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf
so this sets 2 standards. one can engage in money transmission without being considered an MSB by FINCEN if you do so 1. infrequently and 2. not for profit.
this second point brings me back to klein's case cited in the OP. from the DOJ press release:
so it would appear there is a clear distinction between just cashing out some bitcoins, and exchanging as an ongoing for-profit activity. that's the good news.
however, that still leaves the frequency standard. i'm still tripping on how the feds took him down for 5 transactions over a 1.5 year period. that's 1 trade every 3.5 months. how does that constitute money transmission on a "frequent" basis? that makes me wonder if the charges would have held up in court. he plead out so we'll never know....
Quote
The term “money services business” does not include:
(c) a natural person who engages in certain identified MSB activity (i.e., dealing in foreign exchange, check cashing, issuing or selling traveler’s checks or money orders, providing prepaid access, or money transmission) but does so on an infrequent basis and not for gain or profit.
(c) a natural person who engages in certain identified MSB activity (i.e., dealing in foreign exchange, check cashing, issuing or selling traveler’s checks or money orders, providing prepaid access, or money transmission) but does so on an infrequent basis and not for gain or profit.
so this sets 2 standards. one can engage in money transmission without being considered an MSB by FINCEN if you do so 1. infrequently and 2. not for profit.
this second point brings me back to klein's case cited in the OP. from the DOJ press release:
Quote
Klein told the undercover agent that his rate included a 10 percent commission “for an in-person $1,000 cash exchange.”
Quote
Each of the transactions included a fee that Klein or another person charged the undercover agents, for a total of $2,122 in fees.
so it would appear there is a clear distinction between just cashing out some bitcoins, and exchanging as an ongoing for-profit activity. that's the good news.
however, that still leaves the frequency standard. i'm still tripping on how the feds took him down for 5 transactions over a 1.5 year period. that's 1 trade every 3.5 months. how does that constitute money transmission on a "frequent" basis? that makes me wonder if the charges would have held up in court. he plead out so we'll never know....
in the USA, you're allowed to sell bitcoins for cash without worrying about money transmission laws (AML/KYC)---up until the point that you are considered "a business":
does anyone know what frequency and volume thresholds might trigger FINCEN registration and reporting requirements? have there been any precedents set in the last few years? FINCEN's guidance is pretty vague.
take this case from 2017: https://www.justice.gov/usao-wdmo/pr/nixa-man-pleads-guilty-illegal-bitcoin-exchange
5 transactions over 1.5 years (for amounts as small as $1k) doesn't seem like very much. the press release highlights the fact that he advertised/represented himself as an exchanger---is that the more significant part?
going back to the quote from marco santori above, he says "you have to accept all comers". does that imply that if you are only contacting advertisers and not advertising yourself, and not representing yourself as an exchanger, that you won't be construed as a business?
Quote
"'As a business' is the qualifier that triggers the money transmission laws," Santori said over the phone. "If you come to me and ask to buy $100 worth of bitcoin and I sell that to you, in no state is that sole activity considered to be money transmission. It must occur in a sufficient frequency and volume and you have to accept all comers. It's a fact-based test."
https://www.vice.com/en/article/j5qa7y/people-keep-getting-charged-with-a-crime-for-selling-bitcoin
https://www.vice.com/en/article/j5qa7y/people-keep-getting-charged-with-a-crime-for-selling-bitcoin
does anyone know what frequency and volume thresholds might trigger FINCEN registration and reporting requirements? have there been any precedents set in the last few years? FINCEN's guidance is pretty vague.
take this case from 2017: https://www.justice.gov/usao-wdmo/pr/nixa-man-pleads-guilty-illegal-bitcoin-exchange
Quote
By pleading guilty today, Klein admitted that he represented himself on the Internet to be a bitcoin exchanger. However, Klein was not a licensed money transmitter with the state of Missouri or with the Financial Crimes Enforcement Network, as required by federal and state law.
An undercover federal agent responded to an online advertisement posted by Klein. Klein told the undercover agent that his rate included a 10 percent commission “for an in-person $1,000 cash exchange.”
Between Feb. 6, 2015, and July 27, 2016, Klein, acting with another, met with two undercover federal agents on numerous occasions to exchange bitcoin for cash. Today’s plea agreement cites five separate transactions in which money (ranging from $1,000 to $15,000) was exchanged in person for an electronic transfer of bitcoin.
An undercover federal agent responded to an online advertisement posted by Klein. Klein told the undercover agent that his rate included a 10 percent commission “for an in-person $1,000 cash exchange.”
Between Feb. 6, 2015, and July 27, 2016, Klein, acting with another, met with two undercover federal agents on numerous occasions to exchange bitcoin for cash. Today’s plea agreement cites five separate transactions in which money (ranging from $1,000 to $15,000) was exchanged in person for an electronic transfer of bitcoin.
5 transactions over 1.5 years (for amounts as small as $1k) doesn't seem like very much. the press release highlights the fact that he advertised/represented himself as an exchanger---is that the more significant part?
going back to the quote from marco santori above, he says "you have to accept all comers". does that imply that if you are only contacting advertisers and not advertising yourself, and not representing yourself as an exchanger, that you won't be construed as a business?
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