Bitcoin

Bitcoiners In Denial + Compliance Just the Beginning (Redux)

[Reading Time: 4 minutes] 

For the benefit of those whose low tolerance for verbosity may have caused them to miss my insights-laden interview with David Landsman, Executive Director of the National Money Transmitters Association, the industry’s leading advocate for the rights of state-licensed US money transmitters, I have abridged it considerably and converted it into a more digestible format.

In PART ONE of the interview, David talked about the image problems that all money transmitters have in the United States, the fragmented regulatory regime and the likelihood of a federal license, now that the Bitcoin community has begun to join the fray.

In PART TWO David offered his strong viewpoint on US banks, federal and state regulators.  Also, he provided more details about the legal and PR efforts in fighting the closing of accounts, including anti-trust, administrative and civil rights causes of action.

On the fragmented US regulatory regime and the likelihood of a federal license Continue reading →

“Bitcoiners Must Understand that Compliance is Just the Beginning”

[Reading Time: 15 minutes] 

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

Longer post than usual, I’m aware, but well worth it –the closing of bank accounts, the Bitcoin Foundation Cease & Desist Order from California…  David comments on it all and gives links to valuable resources!

In PART ONE, David talked about the image problems that all money transmitters have in the United States, the fragmented regulatory regime and the likelihood of a federal license, now that the Bitcoin community has joined the fray.

Read on for David’s strong viewpoint on US banks –very timely, given the increasing closing of Bitcoin operator accounts in the US–, and the reasons why many legal and PR efforts in fighting the closing of accounts have so far been fruitless.

PART TWO Continue reading →

The End of Bitcoin as We Know It

[Reading Time: 7 minutes]

(Or as hard-core Bitcoiners want it, I should say.)

“U.S. crypto-preneurs who don’t factor in regulation could under-budget their ventures by, at a minimum, a quarter of a million dollars annually.”

Rocky week for the crypto-currency world this past one!  All of the following happened over the course of the last seven to ten days:

• Liberty Reserve (LR) was shut down, and its management indicted and arrested, in what is being described as “the largest money laundering case in U.S. history.”  A short video at the bottom explains how the case went down.
• FinCEN designated LR as entity “of primary money laundering concern,” and proposed a rule to order that all large financial institutions freeze any and all of LR’s assets. Continue reading →

Dwolla Account Seizure Reveals Mt Gox on Brink of US Indictment

[Reading Time: 8 minutes]

The US District of Maryland seizure warrant that stopped Dwolla in its tracks this week reveals in good detail that the Department of Homeland Security, the US federal agency charged with not only protecting the US borders but also deterring cybercrime, has been investigating Mt Gox for a while now, and has found a criminal violation to the US federal prohibition to operate an unlicensed money transmission business.

This warrant, which was published yesterday by multiple blogs, officially confirms that the FinCEN guidance of March 18, in which this federal government agency equates virtual currency exchanges and administrators to money transmitters, is already being enforced.  To my knowledge, no charges have been made at this point, but the fact that two bank accounts were seized (see below) seems to indicate that an indictment may be imminent.

What exactly is the “Dwolla Account” seizure warrant that stopped its operations this week?  Why was it issued?  What’s going on here!? Continue reading →

The Criminal Precedent that Could Curb Bitcoin’s Enthusiasm

[Reading Time: 10 minutes]

In July of 2008, after months of wrangling with the Department of Justice (DOJ), E-Gold, Ltd.’s senior management and directors pleaded guilty to the following charges:

• Conspiracy to Launder Monetary Instruments (federal)
• Conspiracy to Commit an Offense Against the United States (federal)
• Operating of Unlicensed Money Transmitting Business (federal)
• Transmitting Money Without a License (District of Columbia)

What does E-Gold have to do with Bitcoin?

Well, as soon as I describe what E-Gold was and did, you’ll see that the parallels with Bitcoin and its crypto-brethren are remarkably similar.  I will be quoting from the indictment itself, underlining Bitcoin-relevant language, and adding comments in brackets:

1. E-Gold was an issuer of “digital currency,” defined as a medium of exchange offered over the Internet Continue reading →

It’s Official: Foreign Bitcoin Operators Servicing Texas Residents Must Obtain a Texas Money Transmitter License

[Reading Time: 3 minutes]

As of May 1, the state of Texas became the second US state to explicitly require foreign-located money transmitters (including Bitcoin exchangers and administrators) to obtain a state money transmitter license if their customers are residents of Texas.  The state of New York had taken a similar stance back in March of 2011.

In no ambiguous terms, the Texas Banking Department ruling, states that:

” […] it is the Department’s position that any money transmitter who allows Texas consumers to initiate transactions through its website is subject to the licensing requirements of the Money Services Act, regardless of where the transmitter is physically located.”

Equally clear had been the state of New York Banking Department in 2011 when ruling that:

” […] there is no doubt that businesses located out-of-state are subject to the jurisdiction of the state in which they do business.  […] Likewise, it is clear that businesses located out-of-state that do business Continue reading →

Is US Regulation the Single Biggest Threat to Bitcoin?

[Reading time: 6 minutes]

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 →