Topic: Would this be legal? Instant cash deposit in your bank account for BTC. (Read 7206 times)

Ahhhh got it!  Thought this was for USD -> BTC but I had it backwards.  Okay carry on

Have you actually run the numbers on what volume of transactions you'd need just to pay an employees to sit all day at a branch of say 4 major banks?  Let's assume minimum wage of $8 per hour.  That's $64 per day per employee, for a total of $256 per day in wages for those 4 employees. You'd need transactions of at least $25,600 per day to cover that alone even if that was your only expense.  But that's not going to be your only expense because you need to convert the BTC you acquire from your clients back to fiat, another cost which needs to be serviced before you start making a profit and you need to remember that exchanges process withdrawals on their timetable not yours.  Unless you want to be taking your service offline all the time, you're going to need to maintain significant cash reserves so that you can continue operating if there's any delay in selling your BTC or in your withdrawals from the exchanges hitting your bank account.

At the kind of volume you're talking about, you're going to have AML reports being filed left, right and centre by your bank because you're going to be receiving deposits of more than $10,000 all the time and making cash withdrawals of $10,000 all the time or you're going to be structuring to try to avoid that limit, which will get an AML report in its own right.

You'd need an account at each branch and a means for your employees to withdraw cash from that account so that they don't run out of money to make deposits.  Either that or you'd have to limit the amount of instant conversions each day to a set $ amount for each bank which would further limit the utility of your service given that it can already only operate during one time zone's banking hours.

Cash seems like an extremely cumbersome way to do this given that you can usually transfer funds instantly to anyone with an account at the same bank through online banking.

My thoughts for the reason behind this concept would be a way to allow for a POS transaction by transferring BTC to a bank account where you have a debit card and putting only enough money into the account to  cover the transaction.

For example, you are at a restaurant and get your tab, you figure out your tip and pull out your phone and transfer BTC to cash to cover the meal. By the time the waitress comes to pick up the check the cash has been deposited and your meal gets paid for.

If more time is needed you could transfer a larger amount before the meal to guarantee the transaction goes through by the time you need it.

I think you'd be better off getting the thousands of "CASH FOR GOLD" places that are popping up everywhere to add "Cash for Bitcoins" on their menu.

Customer A has 5 BTC and wants cash for it (assume a $10/BTC current rate). He goes to Company B's website and puts in his information and which account he wants filled then sends 5BTC.

Company B employee at Wells Fargo sees that a transaction has gone through for 5 BTC. He takes $50 minus a 1% fee of 50 cents depositing $49.50 in Customer A's Wells Fargo account.

No I meant literally how are customers paying this hypothetical company?

Your describing that the company buys coins on customers' behalf by depositing cash in a bank. But how does the customer pay the company?

Like I said, the commission could be small if volume is high enough and you were just paying one employee per bank.

Or even if needed, have a monthly membership fee for the use with maximum amount of transactions. That way you can have customer information as needed.

They are paying you bitcoins, you then have cash reserves on hand for deposit. You would settle up end of day with an exchanger like Gox by selling all your coins and receiving ACH or other transfer, replenishing cash reserves, or sell the coins as you get them, holding it in goxusd and waiting for an end of night transfer or however they send it.

If you're an American you'd need the dreaded MSB license for one, you'd also have to keep enough cash reserves on hand to make this work. Could also run into some problems if let's say, you had 50 orders to deposit cash into one bank, they may start charging you more fees. They're already charging fees in some banks just for using the teller let alone showing up with $30k and instructions for dumping it into god knows how many accounts.

Another method is instant wire transfer. You have a physical office somewhere, and become a WU agent, a RIA agent, a Contact agent, every single money agent you can find in the world (if their bullshit anti competitor policies allow this) and then can use your online banking and money transfer terminals to send transfers immediately after receiving bitcoins. So you get money for both exchanging the bitcoins, and whatever commissions you make from the money transfer companies.  Can also sell bitcoins this way, though unsure of regulations. Offer your services also as a bank deposit for some local merchants and end of the day on your way home deposit cash to their accounts or send it via online banking.

The office you set up could also become a walk in currency exchange or bitcoin exchange for the public, and a walk in money transfer place for outside the bitcoin world. I guess at this point with a physical insured location and legit business might as well just start your own online exchange as well

I'm confused on this one thing - how does this "company" get paid by its customers? I could have someone sit in a bank to make cash deposits, but who is paying the company, and by what method?

All good information.

If this could be done with high enough volume, a company could set up an API for other companies to sell their services and charge for instant BTC to bank cash.

I do see the difficulties with it though.

Yep legal if you conform to all BS id regulations, or the transfers are not over a certain limit. There's a financial district in Vancouver, Canada and in Burnaby where you can sit at a coffee shop patio and within 10 minute walking distance there's like 20 different banks, a few of them international branches where you could easily do this all day. There's also a walk in gold, silver, platinum and currency exchange if you wanted to mail precious metals for BTC and at least a dozen different money transfer places like Western Union, RIA and Korean money transfer systems. Sit at that coffee shop with a laptop doing trades, walk across the street to deposit money or withdraw.

I'm assuming that's what you meant, taking Bitcoins and cashing them out for people. This would be preferred to sitting in front of online banking sending transfers. I know some of the Canadian bitcoin exchangers max out with their Interac transfers and branch to branch online payments quickly but no max for wandering in and dropping cash all day.

You'd also be a permanent guy to go to and exchange in person with, so since you'd always have bitcoins on hand for cashing people out locals could buy off you in person.  This would be easy to do in any large city with a financial district and would be awesome to have. Cash bank drop within 30 mins

You might be misunderstanding the question.  The OP was describing a method that someone can sell bitcoins and be paid with a cash deposit into their own bank account.    Bitcoins Direct is instead what you might use if you are looking to buy bitcoins.

The banks are likely going to think that you're laundering money if you're frequently making cash deposits to different accounts even if those individual deposits are under the reporting threshold.  You'd also need to convert the Bitcoins you acquire to fiat money frequently in order to have cash available at all times, and if you were doing a significant amount of business then you'd be making a lot of cash withdrawals which would trigger mandatory reports by your bank. 

The OP's idea might not be illegal, but there are a whole lot of issues which might make it impractical including the amount of red tape involved.

I can't imagine that any bank manager would want someone not employed at their branch to be in their bank all day. Drive through might work, but still you would need someone at each bank to pull that off. You could have an office and have specific times that the person made bank runs. And then you run into an occasional bank that will not let you make a deposit unless you are the account holder and have id (probably would be dependent on the deposit amount).

Bitpay kind of does this already. AFAIK, you can be any sort of (legal) business you want and they'll still convert bitcoins into cash directed to your bank account for you.

Call yourself "Elwar's Businesses," explain you occasionally mow lawns and such, and you're all set.

Something like this?

Bitcoin to Cash LLC (USPS, WF & BofA account transfer, or cash deposit)


That's a question specific to each legal jurisdiction.   So, using the U.S. as an example, ... in the U.S. is it legal to do so?  Most likely it is.  Just register as a money service business and if necessary become a licensed money transmitter and follow full AML/KYC just like a bank does and there likely is not even a hint of there being a problem in doing that.

What you probably are asking though is ... would this be legal to do without registering as an MSB, without becoming a licensed money transmitter and without following AML and performing full KYC on each customer (e.g., accept bitcoins sent anonymously).

So that makes it a very good question.

There are really two parts of that transaction.

The first part is where the business is purchasing bitcoins from its customers and paying cash.    The second part is delivering the proceeds of that purchase to a location and in a manner of the customer's choosing.

The first part is still undetermined.  Are bitcoins money, or are they a commodity / digital good?  If I buy bananas from you I certainly should be able to pay you cash for them without having to register as an MSB, or become a licensed money transmitter, or even know who you are.  But bitcoins are different from bananas.  So far though, there has been nobody that has reported (at least not publicly) any action from any regulator or other government agency regarding the purchase of bitcoins for cash.  That still doesn't mean there's no problem with doing so, just that if it is a problem there is no enforcement on it to-date.

The second part, delivering the cash, might already be decided:

- http://www.fincen.gov/news_room/rp/rulings/html/fincenruling2003-7.html

In other words, if the armored car picks up cash from Alice and deposits that cash into Bob's account at the bank the service is likely going to need to register as a money transmitter.  If instead it deposits Alice's cash into Alice's account, then it is likely not a money transmitter.

So essentially it comes down to ... is this to be offered anonymously or is this to be offered where full AML/KYC is employed?

From what I have seen, electronic transfers and such take time and are reversible and sometimes come with fees. This makes it difficult to get a quick transfer from BTC to cash.

What if someone formed a company where they just had an employee sitting at the bank all day, someone requests BTC for cash in their bank account. The employee goes to the teller with a stack of cash and deposits it into the account once the BTC has gone through. The customer gets the funds instantly into their account because it was cash, and no reverse can take place.

This could be done initially at a few major banks used by the most customers.

The company's main cost would be paying the employee an hourly wage which, if volume is high enough, would come out to a small portion of the day's transactions allowing for low exchange rates.

Sure, you could only get instant transactions during business hours but some people may like such a service.

But would this be legal. Someone hanging out at the bank making cash deposits to several different accounts throughout the day...