Bank Secrecy Act

The Hidden Rule that Could Kill Bitcoin’s Irrevocability

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If federal anti-money laundering rules ‘killed’ Bitcoin’s anonymity, could consumer protection rules ‘kill’ its irrevocability?

Last March, the crypto-currency world was struck dumb when the Financial Crimes Enforcement Network (FinCEN), the United States federal agency responsible for enforcing anti-money laundering and anti-terrorist financing regulations, issued the now famous interpretive guidance equating exchangers and administrators of ‘convertible virtual currencies’ to money transmitters.

Although some of us saw it coming, crypto-preneurs are just now slowly waking up to the reality of what it really means to be this particular species of non-bank financial institution.  See the final section for a compendium of risks and obligations.

One set of regulations that I included in the laundry list of obligations last April but has yet to come to the fore are the federal consumer protection rules emanating from the Dodd-Frank Act and being enforced by the Continue reading →

Winklevii Warn Investors in Their ETF That Bitcoin May Become Illegal

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Apart from the cookie-cutter risks everyone is required by law to disclose, the Winklevoss Bitcoin Trust prospectus contains a series of unique risk factors that would make even Bernie Madoff cringe.  One of those risks, indicated as my favorite below, almost made this post qualify for my ‘Seriously?’ category, reserved for cases of utmost nonsense and near insanity.

All joking aside, the unique virtual currency-related risks listed in the Winklevoss twins’ new Bitcoin fund SEC filing hint at the number and complexity of roadblocks that the crypto-community will need to surmount if it aspires to take digital currencies to the mainstream.  On the positive side, this first (technically, second) Bitcoin fund marks Bitcoin’s official entry into the capital markets and could go a long way towards legitimizing it as a commodity.

Here are some of the more salient risks for your edification and enjoyment:

• The loss or destruction of a private key required to access a Bitcoin may be irreversible.  The Continue reading →

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

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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. Continue reading →

Is US Regulation the Single Biggest Threat to Bitcoin?

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On March 4, 2013 I gave a talk titled just like this post at the New York City Bitcoin Meetup.  The talk blurb read:

If you are a Bitcoin ecosystem participant (user, entrepreneur), you may be aware that there is a myriad of rules and regulations, at the federal, state and even international level, that may apply to you.  Why?  Because Bitcoin is technically a “value transfer” system, and such systems are heavily regulated to protect consumer rights and deter financial crime, including the financing of terrorism.  Join us for a lively discussion of potential obstacles to the growth of the Bitcoin ecosystem.

The rather hyperbolic title attracted a few dozen very smart (and gracious) entrepreneurs and geeks, most of whom, unsurprisingly, were not aware that the United States has a very convoluted and onerous regulatory regime that can potentially stifle innovation or, at a minimum, slow down the spread of virtual peer-to-peer value transfer systems like Bitcoin. Continue reading →