You're Reading...
Interviews, Virtual Currencies

“Most Bitcoiners Are Unaware or In A State of Deep Denial”

[Reading Time: 8 minutes]

Interview with David Landsman, Executive Director of the National Money Transmitters Association (NMTA) – PART ONE

In the past couple of weeks I have noticed in my conversations with cryto-preneurs a growing, yet begrudging acceptance of the inevitability of having to comply with United States regulation if their ventures are to be viable.  However, many remain unperturbed and some even defiant.

After writing extensively on America’s convoluted regulatory regime, and the challenges ahead for Bitcoin entrepreneurs, this week I thought I would seek the thoughts and opinions of someone I respect a lot, who knows the money transmitter industry inside out, and who has for decades advocated for regulatory rationality and fair play –David Landsman, head of the National Money Transmitters Association, a U.S. industry advocacy group for small and medium-sized operators who toil through some of the same issues as the Bitcoin community is facing today.

As generous as always, David poured his heart out into each answer.  So much so, that I had to leave a LOT of juicy stuff for a second part.  Read on.  You won’t regret it.  And stand by for Part Two; it will give you a lot of food for thought!


“I had read all of Ayn Rand’s books by the time I was 16, so I am biased in favor of libertarian values, but I am also in favor of rational regulation.”

JL: Describe briefly what your role is at the NMTA, and what the organization’s purpose is.

DL: I am the Executive Director of the NMTA. Our motto is: “Good Compliance, Good Government, Good Business, Good Works.”  Our main objective is to defend freedom and achieve a level-playing field for the licensed money transfer industry. In particular, we seek to restore the right of state-licensed US money transmitters to maintain bank accounts.  This right has been decimated as the result of an inconsistent and overly complicated regulatory system.  Our strategy is threefold: to improve our image, to reform the way we are regulated and to promote consistent and high standards of industry compliance.

JL: Last March, immediately after FinCEN issued the guidance equating exchangers and operators of virtual currencies to money transmitters, crypto-preneurs began to raise their voices against issues that we know too well, such as America’s patch-work licensing regime and the ongoing loss of bank accounts by industry operators. Can you please describe the efforts that you and the NMTA have been undertaking to address these issues over the past decade?

DL: Firstly, we believe the industry must recognize the public image challenges we face.  That type of PR work is perhaps the main mission of the NMTA.  Money transmitters are too often seen, generally, as money launderers and rip-off artists.  Those myths must be dispelled and disproved whenever they arise.  When needed, in cases where those allegations may have some substance, we work to bring our brethren into better compliance, by promoting the adoption of best practices, and standards of training and certification.  We seek to keep the public dialogue going by using the NMTA website, researching, writing and speaking at conferences.  We have looked into the possibility of bringing a lawsuit to get our bank accounts back and found that to be problematic.  We continue to work toward a legislative solution that would grant a narrow safe harbor to banks who wish to open accounts for us, and to establish a more centralized, federal coordination of money transmitter regulation.  The path toward legislative reform has proven a very steep hill to climb but, no matter, the fight goes on.

“Since we do not have a ‘rational’ state of affairs and since it is doubtful we ever will, the only thing left to us, is to deal with the state licensing system as it stands.”

JL: Do you think the time is ripe for a new debate on federal licensing?

DL: Yes, but for me the time has always been ripe. I am certainly hoping the Bitcoin community will now join the fray and help to re-vitalize that debate.  I had read all of Ayn Rand’s books by the time I was 16, so believe me when I tell you I am biased in favor of libertarian values.  But I also believe rational regulation can be good for the industry as well as for the government and consumers.  Since we do not have a ‘rational’ state of affairs and since it is unknown whether we ever will, the only thing left to us, is to deal with the fragmented state licensing system as it stands.

JL: Why can’t the US have a uniform, national regime for money transmitters as Europe does?  Will it ever be possible?

DL: The answer, of course, is yes, we can, but there are a lot of obstacles we must first overcome.  Although you and I may think there are obvious, common-sense things we can easily do to fix the system and that this topic is of the utmost importance, not only for us but for society at large, I can assure you that the general public finds this topic to be rather dry and arcane.  Furthermore, some large, politically powerful money transmitters have told me they are against centralized reform, because it would remove a barrier to entry.  Companies of a certain size are not feeling their bank accounts to be in jeopardy right now, so there is no real motive for them to support a federal license.  So, based on the lobbying information I have right now, a national license would be’ torpedoed’ by ‘the powers that be.’  I am happy to report, however, that there are a few large money transmitters who have a more enlightened view, and would love to see a rational regulatory system instituted in the US.  Consumers would benefit, too.  The lack of a state license not only prevents a company from doing business in that state, but robs that state’s residents of the right to do business with that company, even though it may have a license in another state.

JL: Your point about state licensing being an entry barrier makes complete sense.  Last March, at an innovation conference in Harvard University, someone asked for a show of hands during the lunch break whether money transmitter regulation was welcome, and 80% of the audience raised their hand.  Of course, most were highly-funded “elite” entrepreneurs like the Winklevosses.  So what options do virtual currency entrepreneurs have to operate legally in the US?

DL: Aside from partnering with banks,  credit unions, and other money transmitters, which some of the hard-core Bitcoin supporters might find purpose-defeating, my advice is simple: (1) On the federal level, since FinCEN’s March 18, 2013 Guidance came out, don’t be stupid: register with FinCEN –NOW– and maintain your registration as required.  Furthermore, put a good compliance program in place and learn all about the Bank Secrecy Act, OFAC requirements and the AML statutes. (2) On the state level, I do not know of any state that has taken a clear public position on Bitcoin licensure requirements, so Bitcoin operators must ask those states for a written opinion, wherever such companies may have customers residing. But do not take state licensing lightly; to be safe, there are a lot of state licenses you will need to get, or a lot of states you will have to block out, and not do business in. The lack of a state license where such license is required can –in and of itself– result in federal money laundering charges (see 18USC1960this and this).

“The lobbying information I have right now is that a national license will be ‘torpedoed’ by ‘the powers that be.’”

JL: I understand you have been in touch with Bitcoin industry members.  What have those discussions been like?  How do their approaches and strategies compare to yours or the NMTA’s?

DL: Most Bitcoiners I have spoken to are not aware of their legal environment, or in a state of deep denial. It is not only about the federal and state legalities I mentioned above. They lack awareness of the direct culpability society attaches to the Bitcoin dealer, if it later turns out that his Bitcoin customer dealt in drugs, terror, human smuggling, copyright infringement, hacking, or any type of criminal activity.  How could you have known, you say?  You are not responsible, you say?  Well, it is your responsibility, they say, to develop a credible ‘Know-Your-Customer’ program, one that is ‘reasonably designed’ to prevent, detect and report illegal money that moves through, or is in any way facilitated by, your company.

JL: Any other piece of advice to the crypto-crowd on how to approach the regulatory challenges facing them?

DL: See my answer above for the specifics, but in general, my advice for them would be –as the first step– to recognize and acknowledge the regulatory challenges they face.  Also, don’t forget to join the NMTA, and enroll for some of our compliance training courses!

[PART TWO includes David’s strong viewpoint on US banks, federal and state regulators.  Also, he provides more details about the legal and PR efforts in fighting the closing of accounts, including anti-trust, administrative and civil rights causes for action.  Don’t miss it.  You’ll learn a lot about what most probably will lie ahead for you and your crypto-venture!]

David can be reached at david@nmta.us

About Juan Llanos

Innovative compliance, operations and technology executive leveraging emerging technologies, management and leadership best practices (and, above all, common sense!) to empower businesses and compliance professionals for success.


8 thoughts on ““Most Bitcoiners Are Unaware or In A State of Deep Denial”

  1. All this apply to the United States, but bitcoins are used worldwide, should the bitcoiners pay a licence in each and every country ?

    Posted by Claire Boussard | 2013/06/20, 11:21 am
    • Hi, Claire,

      Thanks for your question. We need to differentiate Bitcoin the currency, from Bitcoin the payment medium. Just to clarify, I’m more interested in the latter, in Bitcoin, and how it may allow millions of people to access a highly efficient, and secure form of storing and transmitting value. The US has regulation in place that governs the EXCHANGE and ADMINISTRATION of virtual currencies, NOT THE USE. If you want to play that ‘game,’ in the US, you have to play by the rules. Every country is entitled to protect their citizens via their institutions as they please. The US happens does it this way. Other countries, may not have the same standards (Canada recently took a completely different stance from the US, for instance). If you want to create a sustainable business, you’ll need to comply with the rules and regs in force in each and every country. That’s have the world works (today, at least).

      Posted by Juan Llanos | 2013/06/20, 12:16 pm
  2. What about the fact that the constitution provides in Article I Section Congress ahall have the power to coin money and regulate it’s value? It’s seems to me that this is sayin no one but Congress has the right to do this, not the states or even THE Fed. The only people constitutionally able to make money is the congress. I looked at the amendments and could not find one that established the Fed. Perhaps I misread them, if so let me know.

    Posted by Nathan Myers | 2013/06/22, 4:51 pm
    • That’s another whole issue, Nathan. Bitcoin as a currency could face huge challenges in all jurisdictions that have the prerogative to issue legal tender, and decide to do something about it. So far, there have been no challenges. In a way, Bitcoin resembles the internet itself. Regulating Bitcoin the currency, rather than the payment mediumd (which is my primary interest), could be considered as some as an attempt to regulate the Internet. Let’s see what happens on that front…

      Posted by Juan Llanos | 2013/06/23, 2:55 pm
  3. Here’s how to improve image and rehabilitate bitcoin for cryptopreneurs (like that term!)
    bring the banks in on it:

    Posted by kiers | 2013/06/29, 9:25 am
    • I agree! Knowing how the world works, that has precisely been the main point I’ve been trying to make in this blog. You cannot in the current environment be too radical, revolutionary (it’s too threatening), but you can and should be evolutionary. How? By partnering with the existing infrastructures. The opposite can also happen, i.e., governments adopting digital currencies. It actually is happening -the Canadian Mint is testing a government-issued crypto-currency. Interesting times!

      Posted by Juan Llanos | 2013/06/29, 12:26 pm
      • Only question is finding a bank to try it out! In the end a credit card is all about

        1) a bank, and
        2) a point of sale / merchant.

        Bitcoin could easily bypass Visa/MC/Amex and connect the two parties, putting the balance on the customers tab.

        Posted by kiers | 2013/06/29, 7:02 pm


  1. Pingback: Quote of the day: Unaware of legal environment | Great Wall of Numbers - 2014/06/27

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: