FinCEN provided similar ruling 5 years ago it would seem to be inconsistent with the guidance on virtual currencies or at the very least the guidance on virtual currencies is overly broad or vague.
http://www.fincen.gov/statutes_regs/guidance/pdf/fin-2008-r004.pdf
http://www.fincen.gov/statutes_regs/guidance/pdf/fin-2008-r002.pdf
Topic: U.S. Judge determines bitcoin is a currency - page 2. (Read 6088 times)
I guess this paves the way for more regulations and other B/S as well. Then again with all the trouble Mt. Gox was having maybe we're already at that point.
True. If a regulated broker tried to "defer withdrawals", they'd be shut down within days. 
Well sadly FinCEN guidance doesn't just stop at third party funds they include second party as well (but only for Bitcoin) so that was not entirely expected.
Example: you send money to BCB by WU.
you ----> WU -----> BCB
Obviously a Money Transmitter.
Example: you exchange USD for Euros with a currency exchanger at the airport.
USD: You ----> Broker
EUR: Broker ---> You
Not a Money Transmiter. It is a MSB (dealer in foreign currency) but the rules at the state level are negligible compared to a money transmitter
Example: you exchange USD for BTC with a BTC dealer/broker (coinbase)
USD: You ----> Coinbase
BTC: Coinbase ----> You
Between the three scenarios, the later two have far more in common then the first one. The last two only involve two parties (a business and its customer) while the "classic" MT example Western Union involves three parties (sender, MoneyTransmitter, receiver). However FinCEN ruled that an exchanger of virtual currency is a money transmitter while an exchanger of real currency (under MSB regs of BSA) is NOT a MT but a different class of MSB.
This is the result of FinCEN trying to force a round peg into a square hole.
this is interesting and you have a good point. but if you take MtGox for example there are no You << >> MtGox exchanges, there are You authorizing MtGox to handle your funds and orders on your behalf with other parties - clearly a transmitter, such as paypal btw.
I agree although ironically again Forex companies are not MT they are broker dealers. Still if FinCEN articulated third party that would at least be consistent with existing classification. However FinCEN didn't leave the line there. They went with ANY exchange (unless exempt) of real currency for virtual currency or virtual currency for another virtual currency they felt the need to include virtual to virtual yet real to real is not consider a MT by existing law.
The funny (if it wasn't costing me a small fortune) part is that means it works like this (unless an exemption applies):
Exchange Virtual Currency for Virtual Currency = Money Transmitter
Exchange Virtual Currency for Real Currency = Money Transmitter
Exchange Real Currency for Virtual Currency = Money Transmitter
Exchange Real Currency for Real Currency = Not a Money Transmitter
In the Bitcoin Foundation answer to the cease and desist from the State Of California DFI they also made the Forex argument:
"This conclusion is confirmed by the DFI's December 6, 2011 opinion letter entitled "Foreign
Currency Exchange Services - Not Subject to money Transmission Act."21 In that opinion, the
DFI determined that the receipt of dollars and the delivery of pesos for a fee did not constitute
money transmission."
http://www.scribd.com/doc/151346841/Bitcoin-Foundation-Response-to-California-DFI
I guess this paves the way for more regulations and other B/S as well. Then again with all the trouble Mt. Gox was having maybe we're already at that point.
Not necessarily more regulation but hopefully more clarity. That is how this process works in the US.
the precedent with this particular case is that
- snip -
- snip -
This case isn't over yet. There is plenty of time for both defense and plaintiff to make a variety of arguments about what bitcoin is or isn't. How bitcoin is defined, how its value is determined, and how ownership is determined could all play a part in this case. There is no way to know for certain what precedent will be set by this case until after it is over.
Trendon Shavers is currently defending himself. He's slick but obviously not that smart. This will not end well for him.
I guess this paves the way for more regulations and other B/S as well. Then again with all the trouble Mt. Gox was having maybe we're already at that point.
If he used toothpicks instead of bitcoins, Judge would rule investment securities either way.
Right. The judge's opinion is simply that "Bitcoin investments met the requirements of an investment contract and thus constituted “securities” under federal securities laws." This is based on a Supreme Court decision: "An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party." That's Bitcoin. Deal with it.This has some implications. One is that anyone operating a "Bitcoin exchange" in the US will have to meet the SEC requirements for being a broker/dealer.
Would this apply to those that exchange Bitcoin<->USD and vice versa out in the open (Satoshi Square)? I'm thinkin of starting an open exchange where I live but don't want to get in trouble for it.
well, if you make a business out of it instead of an occasional swap here and there you probably would want to cover your bases with your State and FinCEN
Nagle, these implications were understood well in advance to this 'precedent', well before FinCEN/GAO guidelines released earlier this year. I remember saying it here on this forum back in 2011, if a business is in handling and processing 3rd party USD here in States, first-most thing such business needs is to become licensed for money transmitting and money business service and fully AML compliant in every state it's going to operate. I just don't see how current case relates to or affects any of this.
it's called Precedent
http://en.wikipedia.org/wiki/Precedent
the precedent with this particular case is that if you operate bitcoin securities business here in states you fall under SEC jurisdiction, that is all, no other precedent had been ruled and established with it.
Right but I expect other precedents to be set by this case.
This is the result of FinCEN trying to force a round peg into a square hole.
The SEC, though, is merely faced with putting a round peg in a round hole. Bitcoin exchanges are exchanges, and Bitcoin brokers are brokers. This makes sense. Bitcoin exchanges/brokers look and act like exchanges/brokers. Time to start registering as brokers. Amateur hour is over.
the precedent with this particular case is that
- snip -
- snip -
This case isn't over yet. There is plenty of time for both defense and plaintiff to make a variety of arguments about what bitcoin is or isn't. How bitcoin is defined, how its value is determined, and how ownership is determined could all play a part in this case. There is no way to know for certain what precedent will be set by this case until after it is over.
On this we can all agree. except i don't think it's important in this case how bitcoin is defined to be honest.
It is in the prosecution's best interest to keep this as simple as possible so I see them attempting to block any testimony which goes into the nuances of what Bitcoin is, how it works, etc. The judge ruled Bitcoin is "money" for the purposes of meeting the requirements of a security. The prosecution will now try to keep the case limited to the other material elements of what makes something an illegal security and what makes something a ponzi (regardless of what medium it is paid in). So I think you are right the rest of the case may have very little to do with Bitcoin or more to do with run of the mill securities fraud.
Well sadly FinCEN guidance doesn't just stop at third party funds they include second party as well (but only for Bitcoin) so that was not entirely expected.
Example: you send money to BCB by WU.
you ----> WU -----> BCB
Obviously a Money Transmitter.
Example: you exchange USD for Euros with a currency exchanger at the airport.
USD: You ----> Broker
EUR: Broker ---> You
Not a Money Transmiter. It is a MSB (dealer in foreign currency) but the rules at the state level are negligible compared to a money transmitter
Example: you exchange USD for BTC with a BTC dealer/broker (coinbase)
USD: You ----> Coinbase
BTC: Coinbase ----> You
Between the three scenarios, the later two have far more in common then the first one. The last two only involve two parties (a business and its customer) while the "classic" MT example Western Union involves three parties (sender, MoneyTransmitter, receiver). However FinCEN ruled that an exchanger of virtual currency is a money transmitter while an exchanger of real currency (under MSB regs of BSA) is NOT a MT but a different class of MSB.
This is the result of FinCEN trying to force a round peg into a square hole.
this is interesting and you have a good point. but if you take MtGox for example there are no You << >> MtGox exchanges, there are You authorizing MtGox to handle your funds and orders on your behalf with other parties - clearly a transmitter, such as paypal btw.
I agree although ironically again Forex companies are not MT they are broker dealers. Still if FinCEN articulated third party that would at least be consistent with existing classification. However FinCEN didn't leave the line there. They went with ANY exchange (unless exempt) of real currency for virtual currency or virtual currency for another virtual currency they felt the need to include virtual to virtual yet real to real is not consider a MT by existing law.
The funny (if it wasn't costing me a small fortune) part is that means it works like this (unless an exemption applies):
Exchange Virtual Currency for Virtual Currency = Money Transmitter
Exchange Virtual Currency for Real Currency = Money Transmitter
Exchange Real Currency for Virtual Currency = Money Transmitter
Exchange Real Currency for Real Currency = Not a Money Transmitter
the precedent with this particular case is that
- snip -
- snip -
This case isn't over yet. There is plenty of time for both defense and plaintiff to make a variety of arguments about what bitcoin is or isn't. How bitcoin is defined, how its value is determined, and how ownership is determined could all play a part in this case. There is no way to know for certain what precedent will be set by this case until after it is over.
On this we can all agree. except i don't think it's important in this case how bitcoin is defined to be honest.
Well sadly FinCEN guidance doesn't just stop at third party funds they include second party as well (but only for Bitcoin) so that was not entirely expected.
Example: you send money to BCB by WU.
you ----> WU -----> BCB
Obviously a Money Transmitter.
Example: you exchange USD for Euros with a currency exchanger at the airport.
USD: You ----> Broker
EUR: Broker ---> You
Not a Money Transmiter. It is a MSB (dealer in foreign currency) but the rules at the state level are negligible compared to a money transmitter
Example: you exchange USD for BTC with a BTC dealer/broker (coinbase)
USD: You ----> Coinbase
BTC: Coinbase ----> You
Between the three scenarios, the later two have far more in common then the first one. The last two only involve two parties (a business and its customer) while the "classic" MT example Western Union involves three parties (sender, MoneyTransmitter, receiver). However FinCEN ruled that an exchanger of virtual currency is a money transmitter while an exchanger of real currency (under MSB regs of BSA) is NOT a MT but a different class of MSB.
This is the result of FinCEN trying to force a round peg into a square hole.
this is interesting and you have a good point. but if you take MtGox for example there are no You << >> MtGox exchanges, there are You authorizing MtGox to handle your funds and matching orders on your behalf with other party's orders - clearly a transmitter, such as paypal btw.
the precedent with this particular case is that
- snip -
- snip -
This case isn't over yet. There is plenty of time for both defense and plaintiff to make a variety of arguments about what bitcoin is or isn't. How bitcoin is defined, how its value is determined, and how ownership is determined could all play a part in this case. There is no way to know for certain what precedent will be set by this case until after it is over.
If he used toothpicks instead of bitcoins, Judge would rule investment securities either way.
Right. The judge's opinion is simply that "Bitcoin investments met the requirements of an investment contract and thus constituted “securities” under federal securities laws." This is based on a Supreme Court decision: "An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party." That's Bitcoin. Deal with it.This has some implications. One is that anyone operating a "Bitcoin exchange" in the US will have to meet the SEC requirements for being a broker/dealer.
Would this apply to those that exchange Bitcoin<->USD and vice versa out in the open (Satoshi Square)? I'm thinkin of starting an open exchange where I live but don't want to get in trouble for it.
well, if you make a business out of it instead of an occasional swap here and there you probably would want to cover your bases with your State and FinCEN
Nagle, these implications were understood well in advance to this 'precedent', well before FinCEN/GAO guidelines released earlier this year. I remember saying it here on this forum back in 2011, if a business is in handling and processing 3rd party USD here in States, first-most thing such business needs is to become licensed for money transmitting and money business service and fully AML compliant in every state it's going to operate. I just don't see how current case relates to or affects any of this.
Well sadly FinCEN guidance doesn't just stop at third party funds they include second party as well (but only for Bitcoin) so that was not entirely expected.
Example: you send money to BCB by WU.
you ----> WU -----> BCB
Obviously a Money Transmitter.
Example: you exchange USD for Euros with a currency exchanger at the airport.
USD: You ----> Broker
EUR: Broker ---> You
Not a Money Transmiter. It is a MSB (dealer in foreign currency) but the rules at the state level are negligible compared to a money transmitter
Example: you exchange USD for BTC with a BTC dealer/broker (coinbase)
USD: You ----> Coinbase
BTC: Coinbase ----> You
Between the three scenarios, the later two have far more in common then the first one. The last two only involve two parties (a business and its customer) while the "classic" MT example Western Union involves three parties (sender, MoneyTransmitter, receiver). However FinCEN ruled that an exchanger of virtual currency is a money transmitter while an exchanger of real currency (under MSB regs of BSA) is NOT a MT but a different class of MSB.
This is the result of FinCEN trying to force a round peg into a square hole.
If he used toothpicks instead of bitcoins, Judge would rule investment securities either way.
Right. The judge's opinion is simply that "Bitcoin investments met the requirements of an investment contract and thus constituted “securities” under federal securities laws." This is based on a Supreme Court decision: "An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party." That's Bitcoin. Deal with it.This has some implications. One is that anyone operating a "Bitcoin exchange" in the US will have to meet the SEC requirements for being a broker/dealer.
Would this apply to those that exchange Bitcoin<->USD and vice versa out in the open (Satoshi Square)? I'm thinkin of starting an open exchange where I live but don't want to get in trouble for it.
well, if you make a business out of it instead of an occasional swap here and there you probably would want to cover your bases with your State and FinCEN
Nagle, these implications were understood well in advance to this 'precedent', well before FinCEN/GAO guidelines released earlier this year. I remember saying it here on this forum back in 2011, if a business is in handling and processing 3rd party USD here in States, first-most thing such business needs is to become licensed for money transmitting and money business service and fully AML compliant in every state it's going to operate. I just don't see how current case relates to or affects any of this.
it's called Precedent
http://en.wikipedia.org/wiki/Precedent
the precedent with this particular case is that if you operate bitcoin securities business here in states you fall under SEC jurisdiction, that is all, no other precedent had been ruled and established with it.
Would this apply to those that exchange Bitcoin<->USD and vice versa out in the open (Satoshi Square)? I'm thinkin of starting an open exchange where I live but don't want to get in trouble for it.
The MSB regulations do provide an exemption for infrequent and not for profit activity. Of course infrequent isn't defined and FinCEN says they look at the entire entirety of the facts (which is a legalese way of saying we aren't going to give you a cutoff so you can exploit the letter of the law). IIRC someone found a cite on a MSB related case (not Bitcoin but MSB in general) where the "infrequent" exemption was tested and the entity had done 6 tx in the prior 12 months and was ruled that it wasn't an MSB.
Note none of this is legal advice but generally speaking you know if you are a business. If you are operating for profit FinCEN doesn't really care if you don't have a business card, and are just using your personal checking account. On the other hand if you really are just making the occasional tx well I would hope that FinCEN has bigger fish to try then to try and harass you.
If he used toothpicks instead of bitcoins, Judge would rule investment securities either way.
Right. The judge's opinion is simply that "Bitcoin investments met the requirements of an investment contract and thus constituted “securities” under federal securities laws." This is based on a Supreme Court decision: "An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party." That's Bitcoin. Deal with it.This has some implications. One is that anyone operating a "Bitcoin exchange" in the US will have to meet the SEC requirements for being a broker/dealer.
Would this apply to those that exchange Bitcoin<->USD and vice versa out in the open (Satoshi Square)? I'm thinkin of starting an open exchange where I live but don't want to get in trouble for it.
well, if you make a business out of it instead of an occasional swap here and there you probably would want to cover your bases with your State and FinCEN
Nagle, these implications were understood well in advance to this 'precedent', well before FinCEN/GAO guidelines released earlier this year. I remember saying it here on this forum back in 2011, if a business is in handling and processing 3rd party USD here in States, first-most thing such business needs is to become licensed for money transmitting and money business service and fully AML compliant in every state it's going to operate. I just don't see how current case relates to or affects any of this.
it's called Precedent
http://en.wikipedia.org/wiki/Precedent
If he used toothpicks instead of bitcoins, Judge would rule investment securities either way.
Right. The judge's opinion is simply that "Bitcoin investments met the requirements of an investment contract and thus constituted “securities” under federal securities laws." This is based on a Supreme Court decision: "An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party." That's Bitcoin. Deal with it.This has some implications. One is that anyone operating a "Bitcoin exchange" in the US will have to meet the SEC requirements for being a broker/dealer.
Would this apply to those that exchange Bitcoin<->USD and vice versa out in the open (Satoshi Square)? I'm thinkin of starting an open exchange where I live but don't want to get in trouble for it.
well, if you make a business out of it instead of an occasional swap here and there you probably would want to cover your bases with your State and FinCEN
Nagle, these implications were understood well in advance to this 'precedent', well before FinCEN/GAO guidelines released earlier this year. I remember saying it here on this forum back in 2011, if a business is in handling and processing 3rd party USD here in States, first-most thing such business needs is to become licensed for money transmitting and money business service and fully AML compliant in every state it's going to operate. I just don't see how current case relates to or affects any of this.
Bitcoin can be both a currency and a commodity.
Regulators have yet to figure that out.
Or that have figured it out and they have NO idea what to do with it.
They can't allow it cause it will over take the current fiat currency and end their ability to take advantage of seiniorage.
They can't ban it cause it will just continue to thrive underground.
I don't think they know what to do.
Any anyone smart enough in the current legacy fiat financial system knows they will be about as useful newspaper publishers are today in another 10 year.
Jeff Bezos is buying The Washington Post
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/06/jeff-bezos-is-buying-the-washington-post-heres-what-you-need-to-know-about-the-sale/
I can see the headline now.
"Charlie Schrem to Buy HSBC"
Regulators have yet to figure that out.
Or that have figured it out and they have NO idea what to do with it.
They can't allow it cause it will over take the current fiat currency and end their ability to take advantage of seiniorage.
They can't ban it cause it will just continue to thrive underground.
I don't think they know what to do.
Any anyone smart enough in the current legacy fiat financial system knows they will be about as useful newspaper publishers are today in another 10 year.
Jeff Bezos is buying The Washington Post
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/06/jeff-bezos-is-buying-the-washington-post-heres-what-you-need-to-know-about-the-sale/
I can see the headline now.
"Charlie Schrem to Buy HSBC"
Now my question is: is gold considered "currency" for USA?
Create a gold based Ponzi scheme and I guess we'll find out.
We probably should.
Then we should create an oil Ponzi scheme, and broccoli Ponzi scheme, and keep going until everyone realizes that you can Ponzi scheme anything. Ponzi schemes have plagued the dollar for years, on scales vastly greater than what Bitcoin had, and nobody said that reflects poorly on the dollar. Looking at it that way, a BTC Ponzi scheme should make Bitcoin seem more legitimate! I doubt the media would spin it that way, of course. Jump to: