guidance

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 →

Dwolla Account Seizure Reveals Mt Gox on Brink of US Indictment

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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 →

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 →