Major FinCEN Guidances For Cryptocurrency ... - Bitcoin AML

Playing with fire with FinCen and SEC, Binance may face a hefty penalty again after already losing 50 percent of its trading business

On 14 June, Binance announced that it “constantly reviews user accounts to improve (their) platform security and to comply with global compliance requirements”, mentioning that “Binance is unable to provide services to any U.S. person” in the latest “Binance Terms of Use” attached within the announcement.
According to the data from a third-party traffic statistics website, Alexa, users in the U.S. form the biggest user group of Binance, accounting for about 25% of the total visitor traffic.
In the forecast of Binance’s user scale compiled by The Block, the largest traffic is dominated by users in the U.S., surpassing the total of the ones from the second place to the fifth place.
Also, considering that the scale of digital asset trading for the users in the U.S. far exceeds that of the users of many other countries, it could mean that Binance may have already lost 50 % of the business income by losing users in the U.S. Apparently, such an announcement by Binance to stop providing services to users in the U.S. means Binance has no other alternative but “seek to live on.”
So, what are the specific requirements of the U.S. for digital asset exchanges and which of the regulatory red lines of the U.S. did Binance cross?
Compliance issues relating to operation permission of digital asset exchanges
In the U.S., the entry barrier for obtaining a business license to operate a digital asset exchange is not high. Apart from the special licencing requirements of individual states such as New York, most of the states generally grant licences to digital asset exchanges through the issuance of a “Money Transmitter License” (MTL).
Each state has different requirements for MTL applications. Some of the main common requirements are:
Filling out the application form, including business address, tax identification number, social security number and statement of net assets of the owneproprietor Paying the relevant fees for the licence application Meeting the minimum net assets requirements stipulated by the state Completing a background check Providing a form of guarantee, such as security bonds
It is worth noting that not all states are explicitly using MTL to handle the issues around operation permission of digital asset exchanges. For instance, New Hampshire passed a new law on 12 March 2017, announcing that trading parties of digital assets in that state would not be bound by MTL. Also, Montana has not yet set up MTL, keeping an open attitude towards the currency trading business.
On top of obtaining the MTL in each state, enterprises are also required to complete the registration of “Money Services Business” (MSB) on the federal level FinCEN (Financial Crimes Enforcement Network of the U.S. Treasury Department) issued the “Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies” on 18 March 2013. On the federal level, the guideline requires any enterprise involved in virtual currency services to complete the MSB registration and perform the corresponding compliance responsibilities. The main responsibility of a registered enterprise is to establish anti-money laundering procedures and reporting systems.
However, California is an exception. Enterprises in California would only need to complete the MSB registration on the federal level and they do not need to apply for the MTL in California.
Any enterprise operating in New York must obtain a virtual currency business license, Bitlicense, issued in New York
Early in July 2014, the New York State Department of Financial Services (NYSDFS) has specially designed and launched the BitLicense, stipulating that any institutions participating in a business relevant to virtual currency (virtual currency transfer, virtual currency trust, provision of virtual currency trading services, issuance or management of virtual currencies) must obtain a BitLicense.
To date, the NYSDFS has issued 19 Bitlicenses. Among them includes exchanges such as Coinbase (January 2017), BitFlyer (July 2017), Genesis Global Trading (May 2018) and Bitstamp (April 2019).
Solely from the perspective of operation permission, Binance has yet to complete the MSB registration of FinCEN (its partner, BAM Trading, has completed the MSB registration). This means that Binance is not eligible to operate a digital asset exchange in the U.S. FinCEN has the rights to prosecute Binance based on its failure to fulfil the relevant ‘anti-money laundering’ regulatory requirements.
Compliance issues relating to online assets
With the further development of the digital asset market, ICO has released loads of “digital assets” that have characteristics of a “security” into the trading markets. The Securities and Exchange Commission (SEC) has proposed more comprehensive compliance requirements for digital asset exchanges. The core of the requirements is reflected in the restrictions of offering digital assets trading service.
In the last two years, the SEC has reiterated on many occasions that digital assets that have characteristics of a security should not be traded on a digital asset exchange
In August 2017, when the development of ICO was at its peak, the SEC issued an investor bulletin “Investor Bulletin: Initial Coin Offerings” on its website and published an investigation report of the DAO. It determined that the DAO tokens were considered ‘marketable securities’, stressing that all digital assets considered ‘marketable securities’ would be incorporated into the SEC regulatory system, bound by the U.S. federal securities law. Soon after, the SEC also declared and stressed that “(if) a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.”
On 16 November 2018, the SEC issued a “Statement on Digital Asset Securities Issuance and Trading,” in which the SEC used five real case studies to conduct exemplary penalty rulings on the initial offers and sales of digital asset securities, including those issued in ICOs, relevant cryptocurrency exchanges, investment management tools, ICO platforms and so on. The statement further reiterates that exchanges cannot provide trading services for digital assets that have characteristics of a security.
On 3 April 2019, the SEC issued the “Framework for ‘Investment Contract’ Analysis of Digital Assets” to further elucidate the evaluation criteria for determining whether a digital asset is a security and providing guiding opinions on the compliance of the issuance, sales, holding procedures of digital assets.
As of now, only a small number of digital assets, such as BTC, ETH, etc. meet the SEC’s requirement of “non-securities assets.” The potentially “compliant” digital assets are less than 20.
Early in March 2014, the Inland Revenue Service (IRS) has stated that Bitcoin will be treated as a legal property and will be subject to taxes. In September 2015, the U.S. Commodity Futures Trading Commission (CFTC) stated that Bitcoin is a commodity and will be treated as a “property” by the IRS for tax purposes.
On 15 June 2018, William Hinman, Director of the Corporate Finance Division of the SEC, said at the Cryptocurrency Summit held in San Francisco that BTC and ETH are not securities. Nevertheless, many ICO tokens fall under the securities category.
So far, only BTC and ETH have received approval and recognition of the U.S. regulatory authority as a “non-securities asset.”
Since July 2018, the SEC has investigated more than ten types of digital assets, one after another, and ruled that they were securities and had to be incorporated into the SEC regulatory system. It prosecuted and punished those who had contravened the issuance and trading requirements of the securities laws.
Although there are still many digital assets that have yet to be characterised as “securities”, it is extremely difficult to be characterised as a “non-securities asset” based on the evaluation criteria announced by the SEC. As the SEC’s spokesperson has reiterated many times, they believe the majority of ICO tokens are securities.
Under the stipulated requirements of the SEC, Coinbase, a leading U.S. exchange, has withdrawn a batch of digital assets. The assets withdrawn included digital assets that had been characterised as “securities” as well as those that have high risks of being characterised as “securities.” However, it is worth noting that although the risk to be characterised as “securities” for more than ten types of digital assets, which have not been explicitly required by SEC to be withdrawn, is relatively small, they are not entirely safe. With the further escalation of the SEC’s investigations, they could still be characterised as securities and be held accountable for violating their responsibilities. However, this requires further guidance from the SEC.
*Coinbase’s 14 types of digital assets that have yet to be requested for withdrawal
Poloniex announced on 16 May that it would stop providing services for nine digital assets, including Ardor (ARDR), Bytecoin (BCN), etc. under the compliance guidelines of the SEC. On 7 June, Bittrex also announced that it would stop providing trading services to U.S. users for 32 digital assets. The action of the SEC on its regulatory guidance was further reinforced apparently.
In fact, it is not the first time that these two exchanges have withdrawn digital assets under regulatory requirements. Since the rapid development of digital assets driven by ICO in 2017, Poloniex and Bittrex were once leading exchanges for ICO tokens, providing comprehensive trading services for digital assets. However, after the SEC reiterated its compliance requirements, Poloniex and Bittrex have withdrawn a considerable amount of assets in the past year to meet the compliance requirements.
In conclusion, the takeaways that we have got are as follows: Under the existing U.S. regulatory requirements of digital assets, after obtaining the basic entry licences (MSB, MTL), exchanges could either choose the “compliant asset” solution of Coinbase and only list a small number of digital assets that do not have apparent characteristics of a security, and at all times prepare to withdraw any asset later characterised as “securities” by the SECs; or choose to be like OKEx and Huobi and make it clear they would “not provide services to any U.S. users” at the start.
Binance has been providing a large number of digital assets that have characteristics of a security to U.S users without a U.S. securities exchange licence, so it has already contravened the SEC regulatory requirements.
On top of that, it is also worth noting that the rapid development of Binance has been achieved precisely through the behaviours of “contrary to regulations” and “committing crimes.” Amid the blocking of several pioneering exchanges, such as OKCoin, Huobi, etc. providing services to Chinese users in the Chinese market under new laws from the regulatory authorities, Binance leapfrogged the competition and began to dominate the Chinese market. Similarly, Binance’s rapid growth in the U.S. market is mainly due to its domination of the traffic of digital assets withdrawn by Poloniex and Bittrex. One can say that Binance not only has weak awareness of compliance issues, but it is also indeed “playing with fire” with the U.S. regulators.
In April 2018, the New York State Office of Attorney General (OAG) requested 13 digital asset exchanges, including Binance, to prepare for investigations, indicating it would initiate an investigation in relations to company ownership, leadership, operating conditions, service terms, trading volume, relationships with financial institutions, etc. Many exchanges, including Gemini, Bittrex, Poloniex, BitFlyer, Bitfinex, and so on, proactively acknowledged and replied in the first instance upon receipt of the investigation notice. However, Binance had hardly any action.
Binance has been illegally operating in the U.S. for almost two years. It has not yet fulfilled the FinCEN and MSB registration requirements. Moreover, it has also neglected the SEC announcements and OAG investigation summons on several occasions. The ultimate announcement of exiting the U.S. market may be due to the tremendous pressure imposed by the U.S. regulators.
In fact, the SEC executives have recently stressed that “exchanges of IEO in the U.S. market are facing legal risks and the SEC would soon crack down on these illegal activities” on numerous occasions. These were clear indications of imposing pressure on Binance.
Regarding the SEC’s rulings on illegal digital asset exchanges, EtherDelta and investment management platform, Crypto Asset Management, it may not be easy for Binance to “fully exit” from the U.S. market. It may be faced with a hefty penalty. Once there are any compensation claims by the U.S. users for losses incurred in the trading of assets at Binance, it would be dragged into a difficult compensation dilemma. It would undoubtedly be a double blow for Binance that has just been held accountable for the losses incurred in a theft of 7,000 BTC.
Coincidentally, Binance was tossed out of Japan because of compliance issues. In March 2018, the Financial Services Agency of Japan officially issued a stern warning to Binance, which was boldly providing services to Japanese users without registering for a digital asset exchange licence in Japan. Binance was forced to relocate to Malta instead. Binance may have to bear hefty penalties arising from challenging the compliance requirements after it had lost important markets due to consecutive compliance issues.
The rise of Binance was attributed to its bold and valiant style, grasping the opportunity created in the vacuum period of government regulation, breaking compliance requirements and rapidly dominating the market to obtain user traffic. For a while, it gained considerable advantages in the early, barbaric growth stage of the industry. Nonetheless, under the increasingly comprehensive regulatory compliance system for global digital asset markets, Binance, which has constantly been “evading regulation” and “resisting supervision” would undoubtedly face enormous survival challenges, notwithstanding that it would lose far more than 50 per cent of the market share.
https://www.asiacryptotoday.com/playing-with-fire-with-fincen-and-sec-binance-may-face-a-hefty-penalty-again-after-already-losing-50-percent-of-its-trading-business/
submitted by Fun_Judgment to CryptoCurrencyTrading [link] [comments]

Lightning Network Will Likely Fail Due To Several Possible Reasons

ECONOMIC CASE IS ABSENT FOR MANY TRANSACTIONS
The median Bitcoin (BTC) fee is $14.41 currently. This has gone parabolic in the past few days. So, let’s use a number before this parabolic rise, which was $3.80. Using this number, opening and closing a Lightning Network (LN) channel means that you will pay $7.60 in fees. Most likely, the fee will be much higher for two reasons:
  1. BTC fees have been trending higher all year and will be higher by the time LN is ready
  2. When you are in the shoe store or restaurant, you will likely pay a higher fee so that you are not waiting there for one or more hours for confirmation.
Let’s say hypothetically that Visa or Paypal charges $1 per transaction. This means that Alice and Carol would need to do 8 or more LN transactions, otherwise it would be cheaper to use Visa or Paypal.
But it gets worse. Visa doesn’t charge the customer. To you, Visa and Cash are free. You would have no economic incentive to use BTC and LN.
Also, Visa does not charge $1 per transaction. They charge 3%, which is 60 cents on a $20 widget. Let’s say that merchants discount their widgets by 60 cents for non-Visa purchases, to pass the savings onto the customer. Nevertheless, no one is going to use BTC and LN to buy the widget unless 2 things happen:
  1. they buy more than 13 widgets from the same store ($7.60 divided by 60 cents)
  2. they know ahead of time that they will do this with that same store
This means that if you’re traveling, or want to tip content producers on the internet, you will likely not use BTC and LN. If you and your spouse want to try out a new restaurant, you will not use BTC and LN. If you buy shoes, you will not use BTC and LN.
ROAD BLOCKS FROM INSUFFICIENT FUNDS
Some argue that you do not need to open a channel to everyone, if there’s a route to that merchant. This article explains that if LN is a like a distributed mesh network, then another problem exists:
"third party needs to possess the necessary capital to process the transaction. If Alice and Bob do not have an open channel, and Alice wants to send Bob .5 BTC, they'll both need to be connected to a third party (or a series of 3rd parties). Say if Charles (the third party) only possesses .4 BTC in his respective payment channels with the other users, the transaction will not be able to go through that route. The longer the route, the more likely that a third party does not possess the requisite amount of BTC, thereby making it a useless connection.”
CENTRALIZATION
According to this visualization of LN on testnet, LN will be centralized around major hubs. It might be even more centralized than this visualization if the following are true:
  1. Users will want to connect to large hubs to minimize the number of times they need to open/close channels, which incur fees
  2. LN’s security and usability relies on 100% uptime of relaying parties
  3. Only large hubs with a lot of liquidity will be able to make money
  4. Hubs or intermediary nodes will need to be licensed as money transmitters, centralizing LN to exchanges and banks as large hubs
What will the impact be on censorship-resistance, trust-less and permission-less?
NEED TO BE LICENSED AS MONEY TRANSMITTER
Advocates for LN seem to talk a lot about the technology, but ignore the legalities.
FinCEN defines money transmitters. LN hubs and intermediary nodes seem to satisfy this definition.
Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
“…applicability of the regulations … to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies.”
“…an administrator or exchanger is an MSB under FinCEN's regulations, specifically, a money transmitter…”
"An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations…”
"FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.””
"The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies.”
FinCEN’s regulations for IVTS:
"An “informal value transfer system” refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.”
“…IVTS… must comply with all BSA registration, recordkeeping, reporting and AML program requirements.
“Money transmitting” occurs when funds are transferred on behalf of the public by any and all means including, but not limited to, transfers within the United States or to locations abroad…regulations require all money transmitting businesses…to register with FinCEN."
Mike Caldwell used to accept and mail bitcoins. Customers sent him bitcoins and he mailed physical bitcoins back or to a designated recipient. There is no exchange from one type of currency to another. FinCEN told him that he needed to be licensed as money transmitter, after which Caldwell stopped mailing out bitcoins.
ARGUMENTS AGAINST NEED FOR LICENSING
Some have argued that LN does not transfer BTC until the channel is closed on the blockchain. This is not a defence, since channels will close on the blockchain.
Some have argued that LN nodes do not take ownership of funds. Is this really true? Is this argument based on a technicality or hoping for a loophole? It seems intuitive that a good prosecutor can easily defeat this argument. Even if this loophole exists, can we count on the government to never close this loophole?
So, will LN hubs and intermediary nodes need to be licensed as money transmitters? If so, then Bob, who is the intermediary between Alice and Carol, will need a license. But Bob won’t have the money nor qualifications. Money transmitters need to pay $25,000 to $1 million, maintain capital levels and are subject to KYC/AML regulations1. In which case, LN will have mainly large hubs, run by financial firms, such as banks and exchanges.
Will the banks want this? Likely. Will they lobby the government to get it? Likely.
Some may be wondering about miners. FinCEN has declared that miners are not money transmitters:
https://coincenter.org/entry/aml-kyc-tokens :
"Subsequent administrative rulings clarified several remaining ambiguities: miners are not money transmitters…"
FinCEN Declares Bitcoin Miners, Investors Aren't Money Transmitters
Some argue that LN nodes will go through Tor and be anonymous. For this to work, will all of the nodes connecting to it, need to run Tor? If so, then how likely will this happen and will all of these people need to run Tor on every device (laptop, phone and tablet)? Furthermore, everyone of these people will be need to be sufficiently tech savvy to download, install and set up Tor. Will the common person be able to do this? Also, will law-abiding nodes, such as retailers or banks, risk their own livelihood by connecting to an illegal node? What is the likelihood of this?
Some argue that unlicensed LN hubs can run in foreign countries. Not true. According to FinCEN: "“Money transmitting” occurs when funds are…transfers within the United States or to locations abroad…” Also, foreign companies are not immune from the laws of other countries which have extradition agreements. The U.S. government has sued European banks over the LIBOR scandal. The U.S. government has charged foreign banks for money laundering and two of those banks pleaded guilty. Furthermore, most countries have similar laws. It is no coincidence that European exchanges comply with KYC/AML.
Will licensed, regulated LN hubs connect to LN nodes behind Tor or in foreign countries? Unlikely. Will Amazon or eBay connect to LN nodes behind Tor or in foreign countries? Unlikely. If you want to buy from Amazon, you’ll likely need to register yourself at a licensed, regulated LN hub, which means you’ll need to provide your identification photo.
Say goodbye to a censorship-resistant, trust-less and permission-less coin.
For a preview of what LN will probably look like, look at Coinbase or other large exchanges. It’s a centralized, regulated and censored hub. Coinbase allows users to send to each other off-chain. Coinbase provides user data to the IRS and disallows users from certain countries to sell BTC. You need to trust that no rogue employee in the exchange will steal your funds, or that a bank will not confiscate your funds as banks did in Cyprus. What if the government provides a list of users, who are late with their tax returns, to Coinbase and tells Coinbase to block those users from making transactions? You need Coinbase’s permission.
This would be the antithesis of why Satoshi created Bitcoin.
NEED TO REPORT TO IRS
The IRS has a definition for “third party settlement organization” and these need to report transactions to the IRS.
Though we do not know for sure yet, it can be argued that LN hubs satisfies this definition. If this is the case, who will be willing to be LN hubs, other than banks and exchanges?
To read about the discussion, go to:
Lightning Hubs Will Need To Report To IRS
COMPLEXITY
All cryptocurrencies are complicated for the common person. You may be tech savvy enough to find a secure wallet and use cryptocurrencies, but the masses are not as tech savvy as you.
LN adds a very complicated and convoluted layer to cryptocurrencies. It is bound to have bugs for years to come and it’s complicated to use. This article provides a good explanation of the complexity. Just from the screenshot of the app, the user now needs to learn additional terms and commands:
“On Chain”
“In Channels”
“In Limbo”
“Your Channel”
“Create Channel”
“CID”
“OPENING”
“PENDING-OPEN”
“Available to Receive”
“PENDING-FORCE-CLOSE”
There are also other things to learn, such as how funds need to be allocated to channels and time locks. Compare this to using your current wallet.
Recently, LN became even more complicated and convoluted. It needs a 3rd layer as well:
Scaling Bitcoin Might Require A Whole 'Nother Layer
How many additional steps does a user need to learn?
ALL COINS PLANNING OFF-CHAIN SCALING ARE AT RISK
Bitcoin Segwit, Litecoin, Vertcoin and possibly others (including Bitcoin Cash) are planning to implement LN or layer 2 scaling. Ethereum is planning to use Raiden Network, which is very similar to LN. If the above is true about LN, then the scaling roadmap for these coins is questionable at best, nullified at worst.
BLOCKSTREAM'S GAME PLAN IS ON TRACK
Blockstream employs several of the lead Bitcoin Core developers. Blockstream has said repeatedly that they want high fees. Quotes and source links can be found here.
Why is Blockstream so adamant on small blocks, high fees and off-chain scaling?
Small blocks, high fees and slow confirmations create demand for off-chain solutions, such as Liquid. Blockstream sells Liquid to exchanges to move Bitcoin quickly on a side-chain. LN will create liquidity hubs, such as exchanges, which will generate traffic and fees for exchanges. With this, exchanges will have a higher need for Liquid. This will be the main way that Blockstream will generate revenue for its investors, who invested $76 million. Otherwise, they can go bankrupt and die.
One of Blockstream’s investors/owners is AXA. AXA’s CEO and Chairman until 2016 was also the Chairman of Bilderberg Group. The Bilderberg Group is run by bankers and politicians (former prime ministers and nation leaders). According to GlobalResearch, Bilderberg Group wants “a One World Government (World Company) with a single, global marketplace…and financially regulated by one ‘World (Central) Bank’ using one global currency.” LN helps Bilderberg Group get one step closer to its goal.
Luke-Jr is one of the lead BTC developers in Core/Blockstream. Regulation of BTC is in-line with his beliefs. He is a big believer in the government, as he believes that the government should tax you and the “State has authority from God”. In fact, he has other radical beliefs as well:
So, having only large, regulated LN hubs is not a failure for Blockstream/Bilderberg. It’s a success. The title of this article should be changed to: "Lightning Will Fail Or Succeed, Depending On Whether You Are Satoshi Or Blockstream/Bilderberg".
SIGNIFICANT ADVANCEMENTS WITH ON-CHAIN SCALING
Meanwhile, some coins such as Ethereum and Bitcoin Cash are pushing ahead with on-chain scaling. Both are looking at Sharding.
Visa handles 2,000 transactions per second on average. Blockstream said that on-chain scaling will not work. The development teams for Bitcoin Cash have shown significant on-chain scaling:
1 GB block running on testnet demonstrates over 10,000 transactions per second:
"we are not going from 1MB to 1GB tomorrow — The purpose of going so high is to prove that it can be done — no second layer is necessary”
"Preliminary Findings Demonstrate Over 10,000 Transactions Per Second"
"Gigablock testnet initiative will likely be implemented first on Bitcoin Cash”
Peter Rizun, Andrew Stone -- 1 GB Block Tests -- Scaling Bitcoin Stanford At 13:55 in this video, Rizun said that he thinks that Visa level can be achieved with a 4-core/16GB machine with better implementations (modifying the code to take advantage of parallelization.)
Bitcoin Cash plans to fix malleability and enable layer 2 solutions:
The Future of “Bitcoin Cash:” An Interview with Bitcoin ABC lead developer Amaury Séchet:
"fixing malleability and enabling Layer 2 solutions will happen”
However, it is questionable if layer 2 will work or is needed.
GOING FORWARD
The four year scaling debate and in-fighting is what caused small blockers (Blockstream) to fork Bitcoin by adding Segwit and big blockers to fork Bitcoin into Bitcoin Cash. Read:
Bitcoin Divorce - Bitcoin [Legacy] vs Bitcoin Cash Explained
It will be interesting to see how they scale going forward.
Scaling will be instrumental in getting network effect and to be widely adopted as a currency. Whichever Coin Has The Most Network Effect Will Take All (Or Most) (BTC has little network effect, and it's shrinking.)
The ability to scale will be key to the long term success of any coin.
submitted by curt00 to btc [link] [comments]

Lightning Network Will Likely Fail Due To Several Possible Reasons

ECONOMIC CASE IS ABSENT FOR MANY TRANSACTIONS
The median Bitcoin (BTC) fee is $14.41 currently. This has gone parabolic in the past few days. So, let’s use a number before this parabolic rise, which was $3.80. Using this number, opening and closing a Lightning Network (LN) channel means that you will pay $7.60 in fees. Most likely, the fee will be much higher for two reasons:
  1. BTC fees have been trending higher all year and will be higher by the time LN is ready
  2. When you are in the shoe store or restaurant, you will likely pay a higher fee so that you are not waiting there for one or more hours for confirmation.
Let’s say hypothetically that Visa or Paypal charges $1 per transaction. This means that Alice and Carol would need to do 8 or more LN transactions, otherwise it would be cheaper to use Visa or Paypal.
But it gets worse. Visa doesn’t charge the customer. To you, Visa and Cash are free. You would have no economic incentive to use BTC and LN.
Also, Visa does not charge $1 per transaction. They charge 3%, which is 60 cents on a $20 widget. Let’s say that merchants discount their widgets by 60 cents for non-Visa purchases, to pass the savings onto the customer. Nevertheless, no one is going to use BTC and LN to buy the widget unless 2 things happen:
  1. they buy more than 13 widgets from the same store ($7.60 divided by 60 cents)
  2. they know ahead of time that they will do this with that same store
This means that if you’re traveling, or want to tip content producers on the internet, you will likely not use BTC and LN. If you and your spouse want to try out a new restaurant, you will not use BTC and LN. If you buy shoes, you will not use BTC and LN.
ROAD BLOCKS FROM INSUFFICIENT FUNDS
Some argue that you do not need to open a channel to everyone, if there’s a route to that merchant. This article explains that if LN is like a distributed mesh network, then another problem exists:
"third party needs to possess the necessary capital to process the transaction. If Alice and Bob do not have an open channel, and Alice wants to send Bob .5 BTC, they'll both need to be connected to a third party (or a series of 3rd parties). Say if Charles (the third party) only possesses .4 BTC in his respective payment channels with the other users, the transaction will not be able to go through that route. The longer the route, the more likely that a third party does not possess the requisite amount of BTC, thereby making it a useless connection.”
CENTRALIZATION
According to this visualization of LN on testnet, LN will be centralized around major hubs. It might be even more centralized than this visualization if the following are true:
  1. Users will want to connect to large hubs to minimize the number of times they need to open/close channels, which incur fees
  2. LN’s security and usability relies on 100% uptime of relaying parties
  3. Only large hubs with a lot of liquidity will be able to make money
  4. Hubs or intermediary nodes will need to be licensed as money transmitters, centralizing LN to exchanges and banks as large hubs
What will the impact be on censorship-resistance, trust-less and permission-less?
NEED TO BE LICENSED AS MONEY TRANSMITTER
Advocates for LN seem to talk a lot about the technology, but ignore the legalities.
FinCEN defines money transmitters. LN hubs and intermediary nodes seem to satisfy this definition.
Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
“…applicability of the regulations … to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies.”
“…an administrator or exchanger is an MSB under FinCEN's regulations, specifically, a money transmitter…”
"An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations…”
"FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.””
"The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies.”
FinCEN’s regulations for IVTS:
"An “informal value transfer system” refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.”
“…IVTS… must comply with all BSA registration, recordkeeping, reporting and AML program requirements.
“Money transmitting” occurs when funds are transferred on behalf of the public by any and all means including, but not limited to, transfers within the United States or to locations abroad…regulations require all money transmitting businesses…to register with FinCEN."
Mike Caldwell used to accept and mail bitcoins. Customers sent him bitcoins and he mailed physical bitcoins back or to a designated recipient. There is no exchange from one type of currency to another. FinCEN told him that he needed to be licensed as money transmitter, after which Caldwell stopped mailing out bitcoins.
ARGUMENTS AGAINST NEED FOR LICENSING
Some have argued that LN does not transfer BTC until the channel is closed on the blockchain. This is not a defence, since channels will close on the blockchain.
Some have argued that LN nodes do not take ownership of funds. Is this really true? Is this argument based on a technicality or hoping for a loophole? It seems intuitive that a good prosecutor can easily defeat this argument. Even if this loophole exists, can we count on the government to never close this loophole?
So, will LN hubs and intermediary nodes need to be licensed as money transmitters? If so, then Bob, who is the intermediary between Alice and Carol, will need a license. But Bob won’t have the money nor qualifications. Money transmitters need to pay $25,000 to $1 million, maintain capital levels and are subject to KYC/AML regulations1. In which case, LN will have mainly large hubs, run by financial firms, such as banks and exchanges.
Will the banks want this? Likely. Will they lobby the government to get it? Likely.
Some may be wondering about miners. FinCEN has declared that miners are not money transmitters:
https://coincenter.org/entry/aml-kyc-tokens :
"Subsequent administrative rulings clarified several remaining ambiguities: miners are not money transmitters…"
FinCEN Declares Bitcoin Miners, Investors Aren't Money Transmitters
Some argue that LN nodes will go through Tor and be anonymous. For this to work, will all of the nodes connecting to it, need to run Tor? If so, then how likely will this happen and will all of these people need to run Tor on every device (laptop, phone and tablet)? Furthermore, everyone of these people will be need to be sufficiently tech savvy to download, install and set up Tor. Will the common person be able to do this? Also, will law-abiding nodes, such as retailers or banks, risk their own livelihood by connecting to an illegal node? What is the likelihood of this?
Some argue that unlicensed LN hubs can run in foreign countries. Not true. According to FinCEN: "“Money transmitting” occurs when funds are…transfers within the United States or to locations abroad…” Also, foreign companies are not immune from the laws of other countries which have extradition agreements. The U.S. government has sued European banks over the LIBOR scandal. The U.S. government has charged foreign banks for money laundering and two of those banks pleaded guilty. Furthermore, most countries have similar laws. It is no coincidence that European exchanges comply with KYC/AML.
Will licensed, regulated LN hubs connect to LN nodes behind Tor or in foreign countries? Unlikely. Will Amazon or eBay connect to LN nodes behind Tor or in foreign countries? Unlikely. If you want to buy from Amazon, you’ll likely need to register yourself at a licensed, regulated LN hub, which means you’ll need to provide your identification photo.
Say goodbye to a censorship-resistant, trust-less and permission-less coin.
For a preview of what LN will probably look like, look at Coinbase or other large exchanges. It’s a centralized, regulated and censored hub. Coinbase allows users to send to each other off-chain. Coinbase provides user data to the IRS and disallows users from certain countries to sell BTC. You need to trust that no rogue employee in the exchange will steal your funds, or that a bank will not confiscate your funds as banks did in Cyprus. What if the government provides a list of users, who are late with their tax returns, to Coinbase and tells Coinbase to block those users from making transactions? You need Coinbase’s permission.
This would be the antithesis of why Satoshi created Bitcoin.
NEED TO REPORT TO IRS
The IRS has a definition for “third party settlement organization” and these need to report transactions to the IRS.
Though we do not know for sure yet, it can be argued that LN hubs satisfies this definition. If this is the case, who will be willing to be LN hubs, other than banks and exchanges?
To read about the discussion, go to:
Lightning Hubs Will Need To Report To IRS
COMPLEXITY
All cryptocurrencies are complicated for the common person. You may be tech savvy enough to find a secure wallet and use cryptocurrencies, but the masses are not as tech savvy as you.
LN adds a very complicated and convoluted layer to cryptocurrencies. It is bound to have bugs for years to come and it’s complicated to use. This article provides a good explanation of the complexity. Just from the screenshot of the app, the user now needs to learn additional terms and commands:
“On Chain”
“In Channels”
“In Limbo”
“Your Channel”
“Create Channel”
“CID”
“OPENING”
“PENDING-OPEN”
“Available to Receive”
“PENDING-FORCE-CLOSE”
There are also other things to learn, such as how funds need to be allocated to channels and time locks. Compare this to using your current wallet.
Recently, LN became even more complicated and convoluted. It needs a 3rd layer as well:
Scaling Bitcoin Might Require A Whole 'Nother Layer
How many additional steps does a user need to learn?
ALL COINS PLANNING OFF-CHAIN SCALING ARE AT RISK
Bitcoin Segwit, Litecoin, Vertcoin and possibly others (including Bitcoin Cash) are planning to implement LN or layer 2 scaling. Ethereum is planning to use Raiden Network, which is very similar to LN. If the above is true about LN, then the scaling roadmap for these coins is questionable at best, nullified at worst.
BLOCKSTREAM'S GAME PLAN IS ON TRACK
Blockstream employs several of the lead Bitcoin Core developers. Blockstream has said repeatedly that they want high fees. Quotes and source links can be found here.
Why is Blockstream so adamant on small blocks, high fees and off-chain scaling?
Small blocks, high fees and slow confirmations create demand for off-chain solutions, such as Liquid. Blockstream sells Liquid to exchanges to move Bitcoin quickly on a side-chain. LN will create liquidity hubs, such as exchanges, which will generate traffic and fees for exchanges. With this, exchanges will have a higher need for Liquid. This will be the main way that Blockstream will generate revenue for its investors, who invested $76 million. Otherwise, they can go bankrupt and die.
One of Blockstream’s investors/owners is AXA. AXA’s CEO and Chairman until 2016 was also the Chairman of Bilderberg Group. The Bilderberg Group is run by bankers and politicians (former prime ministers and nation leaders). According to GlobalResearch, Bilderberg Group wants “a One World Government (World Company) with a single, global marketplace…and financially regulated by one ‘World (Central) Bank’ using one global currency.” LN helps Bilderberg Group get one step closer to its goal.
Luke-Jr is one of the lead BTC developers in Core/Blockstream. Regulation of BTC is in-line with his beliefs. He is a big believer in the government, as he believes that the government should tax you and the “State has authority from God”. In fact, he has other radical beliefs as well:
So, having only large, regulated LN hubs is not a failure for Blockstream/Bilderberg. It’s a success. The title of this article should be changed to: "Lightning Will Fail Or Succeed, Depending On Whether You Are Satoshi Or Blockstream/Bilderberg".
SIGNIFICANT ADVANCEMENTS WITH ON-CHAIN SCALING
Meanwhile, some coins such as Ethereum and Bitcoin Cash are pushing ahead with on-chain scaling. Both are looking at Sharding.
Visa handles 2,000 transactions per second on average. Blockstream said that on-chain scaling will not work. The development teams for Bitcoin Cash have shown significant on-chain scaling:
1 GB block running on testnet demonstrates over 10,000 transactions per second:
"we are not going from 1MB to 1GB tomorrow — The purpose of going so high is to prove that it can be done — no second layer is necessary”
"Preliminary Findings Demonstrate Over 10,000 Transactions Per Second"
"Gigablock testnet initiative will likely be implemented first on Bitcoin Cash”
Peter Rizun, Andrew Stone -- 1 GB Block Tests -- Scaling Bitcoin Stanford At 13:55 in this video, Rizun said that he thinks that Visa level can be achieved with a 4-core/16GB machine with better implementations (modifying the code to take advantage of parallelization.)
Bitcoin Cash plans to fix malleability and enable layer 2 solutions:
The Future of “Bitcoin Cash:” An Interview with Bitcoin ABC lead developer Amaury Séchet:
"fixing malleability and enabling Layer 2 solutions will happen”
However, it is questionable if layer 2 will work or is needed.
GOING FORWARD
The four year scaling debate and in-fighting is what caused small blockers (Blockstream) to fork Bitcoin by adding Segwit and big blockers to fork Bitcoin into Bitcoin Cash. Read:
Bitcoin Divorce - Bitcoin [Legacy] vs Bitcoin Cash Explained
It will be interesting to see how they scale going forward.
Scaling will be instrumental in getting network effect and to be widely adopted as a currency. Whichever Coin Has The Most Network Effect Will Take All (Or Most) (BTC has little network effect, and it's shrinking.)
The ability to scale will be key to the long term success of any coin.
submitted by curt00 to Bitcoincash [link] [comments]

How do we comply with FinCEN and Title 31 laws/ regulations?

I would like to begin trading on LocalBitcoins and similar fiat-to-crypto peer-to-peer exchanges. I am trying to find all the rules I have to follow to do this legally but from the articles I've read about people being arrested for trading on LBC, it doesn't appear to be black and white. While some of these guys were clearly breaking the law, there are some instances where a trader is arrested for "running an unlicensed money transmission business" with not much detail on exactly why or what specifically what rules were broken.
Here are just a few:
I'm sure there are plenty more.
So far, I've summed up to morals of these stories up to the following:
Currently I'm attempting to read through the FinCEN website and Title 31 itself but they're not exactly written for laymen. Does anyone have any insight there can share on this topic? Any help or guidance at all is appreciated.
submitted by cohen5250 to BitcoinMarkets [link] [comments]

US Bitcoin traders who identify as users are under siege. Do you have the same issue in your country?

As a bitcoin trader myself, I follow all the news of us trader arrests. These fall into two categories. First, the user did something otherwise unlawful such as trafficking drugs or committing money laundering and was charged with "operating an unlicensed money servicing business" and "conspiracy for agreeing to distribute controlled dangerous substances". In these types of cases I agree that the user should be punished for conspiracy to distribute drugs and money laundering. The second type of case that is becoming far more prevalent now is where the bitcoin user has simply made sales and purchases of bitcoin for his or her own account. These users are still charged with "Operating an unlicensed money services business."
This I do not agree with at all because FIN-2008-G008 declared that "When a broker or dealer in currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of currency or other commodities for or with a customer, such person is not engaged as a business in the transfer of funds, and is not acting as a money transmitter as that term is defined in our regulations.8 In such circumstances, the transmission of funds is a fundamental element of the actual transaction necessary to execute the contract for the purchase or sale of the currency or the other commodity. The transmission of funds is not a separate and discrete service provided in addition to the underlying transaction. It is a necessary and integral part of the transaction."
This determination was reiterated in subsequent guidance FIN-2013-G001 & response FIN-2014-R002. Simply put a bitcoin user who only purchases or sells bitcoin of his own account to or from a customer is not a money transmitter.
Most simple bitcoin traders operate under this guidance and are simply flabbergasted when confronted with charges for operating an "unlicensed money services business" or "operating an unlicensed bitcoin exchange". When the government makes their case the conveniently only quote the portion of the rule that states " An exchanger is a person engaged as a business in theexchange of virtual currency for real currency, funds, or other virtual currency". [FIN-2013-G001] Except that it is clearly explained in FIN-2008-G008 that "When a broker or dealer in currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of currency or other commodities for or with a customer, such person is not engaged as a business in the transfer of funds, and is not acting as a money transmitter as that term is defined in our regulations." This is carried forward and reiterated in FIN-2013-G001 where it states "In 2008, FinCEN issued guidance stating that as long as a broker or dealer in real currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of the real currency or other commodities for or with a customer, such person is not acting as a money transmitter under the regulations. However, if the broker or dealer transfers funds between a customer and a third party that is not part of the currency or commodity transaction, such transmission of funds is no longer a fundamental element of the actual transaction necessary to execute the contract for the purchase or sale of the currency or the other commodity. This scenario is, therefore, money transmission. Examples include, in part, (1) the transfer of funds between a customer and a third party by permitting a third party to fund a customer’s account; (2) the transfer of value from a customer’s currency or commodity position to the account of another customer; or (3) the closing out of a customer’s currency or commodity position, with a transfer of proceeds to a third party. Since the definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies, the same rules apply to brokers and dealers of e-currency and e-precious metals.
A simple way to think about the definition of a money transmitter is that a money transmitter typically collects funds from one customer and transmits those funds to another customer via its agents in a remote location. So A western Union agent for example collects $100 from Bob Smith in Iowa and deposits this money into its Bank of America Account. Peggy Sue in Ohio goes to a western union agent where the agent prints out a check from western union or gets an ach credit into its business checking account from Bank of America and pays out a portion of the received funds to Peggy Sue. Western Union is transmitting money by accepting it from agent A and transmitting it to agent B for further credit to Peggy Sue. So let's think about this in terms of bitcoin. Bitcoin is a centralized ledger of funds for each public key or "account". If I have 0.05 bitcoin in account 1001 and I want to pay my landlord 0.05 bitcoin rent,I send the bitcoin to account 1002. All this does is make a notation on the blockchain that account 1001 now has 0 bitcoin and account 1002 now has 0.05 bitcoin. This is simplified a bit so you programmers out there don't cringe over the details of constructing a bitcoin transaction, inputs, and outputs. Suffice it to say, that sending my landlord who is standing next to me, 0.05 bitcoin, does not make me a money transmitter any more than paying him with my VISA card. In fact in both cases we could consider VISA or bitcoin a money transmitter since they take funds from person A and transmit them to person B via their agents. In VISA's case the party's banks are the agents, while in bitcoin's example the agents could be the wallet program on each phone or computer that reads the person's wallet or account balance.
Circle back to our friendly traders under siege. No, not the criminals slinging drugs, they knowingly committed their actions. I'm speaking about the bitcoin users, only selling or purchasing bitcoins from their own account to or from a customer. These traders haven't committed an offenses at all according to fincen's directions. What does the government do? Do they engage in a public information campaign to inform these traders of their rights and responsibilities? Do they create a new MSB category for digital currency and define rules and responsibilities for a virtual currency trader? No, instead they try to mislead traders in these cases where a secondary offense such as drug trafficking hasn't been committed. "You have got to be kidding me. Right?" No, I'm really not. If you start reading into these cases you'll find literally hundreds of examples of agents encouraging traders to send bitcoin to a trader in Africa for example so that trader can disburse local currency to a friend. Agents buying bitcoin for less than $10,000 USD without ID and considering this illegal behavior in the indictment! Remember a user doesn't need to report any transaction unless it exceeds $10,000 USD if it is part of his trade or business. If an auto worker who is a casual user that only trades bitcoin 3 times a year sold his for Christmas money to a friend, he wouldn't even need to report the $15,000 sale. But most traders who trade on a daily basis or do it for a living will need to file either an IRS 8300 or a Fincen CTR. Such agents who approach these casual traders entice them with inflated rates and use such phrases as "I'm going to make you rich!'". And they often ask questions about limits and regulations that don't apply to the bitcoin user. They consider all responses as violations of the money transmitter regulations that aren't supposed to apply.
So what is a trader to do? You have two choices. You can follow the law literally as most have done and have countless agents come and test you...and then worry about being arrested on charges that don't even apply to you except when acting unlawfully when strongly encouraged or even elicited under duress in some cases by government agents. Or you can falsely claim you are a money transmitter and follow those rules.
On my own personal journey I decided in October of 2014 to register with Fincen because I saw that one of my suppliers had done so on his website. I asked him about it and he said it was a precautionary measure. I asked around and I was told by many that I had to select money transmitter and other and write in bitcoin trader because there was no selection for bitcoin trader. This in spite of not being a money transmitter. After I had registered I received a call from a man in "Internal Revenue" in Boston about my registration. He asked me about my bitcoin trading and then he said he had to consult with a supervisor. About 15 minutes later he returned my call and told me, "You are not a money transmitter, so I don't need anything from you." A couple months after that, I received a call from Key Bank's compliance office in Cleveland. They had detected my registration as a money transmitter with Fincen and wanted to ask me a few questions. After questioning me, the lady told me that she previously worked for fincen and that I was not an MSB. Key bank had me sign an affidavit that I wouldn't perform any money services businesses activities such as cashing checks for profit, transmitting money, issue money orders, or create gift cards. This compliance officer understood that I was not an exchange in any way and that I only purchased and sold bitcoin of my own account. She understood I didn't hold funds for customers to trade with each other of their own accord like Bitstamp, Kraken, or Gemini.
In the years that would follow, I would have many bank accounts shut down due to this registration as a money transmitter. Most banks simply looked and said, you are a money transmitter. After all, you registered as one. I called Ficen and asked if I could un-register. "No, you cannot". The banks wouldn't even listen to the facts and make a decision. The only other business to actually study my investment model and grant me user status was Gemini. They also agreed I was a user. I think years later they came under pressure to terminate all localbitcoins accounts because many were terminated and at the end of those, mine was too. Was it a coincidence? Or could one of my customers have sabotaged me? It is possible for a user to lie about his wallet address and give out one belonging to a site such as Alphabay. I had one customer do this to me when I was selling him coin from Alphabay. Coinbase questioned me about the transaction and I informed them that someone I was sending money give that wallet out as his own. They reinstated my account since I had years of history with them and it was only one transaction. After that I was careful not to send to customer wallets directly from coinbase. I guess my point is here, if you don't register as a money transmitter they want to harass and prosecute you; but if you do register as a money transmitter they still want to harass and shut down your business. I have recently been engaged in conversations with Fincen by email and by phone and other traders. I haven't been able to speak with many compliance people who are knowledgeable about bitcoin. When I do, for example I've spoken with BitAML on this subject, they agree with me about being a user as a trader. Other compliance people won't even answer my emails or call me back. Now I'm on the verge of either retiring or going the whole money transmitter route and even following the $3,000 ID requirement that only applies to money orders, traveler's checks, and money transfers, but not virtual currency. So my question to you is, do you have the same kinds of problems in your country? Is it better, or worse where you are? Tell me your stories. From my perspective now at least, it seems like the USA has the most malfeasance and harassment of the simple bitcoin traders, excluding those who commit crimes.
Thanks for reading
submitted by scottemick to Bitcoin [link] [comments]

The ticking time bomb of crypto exchanges and compliance

I believe the next "black swan" event for bitcoin is when the US comes down hard on almost all the exchanges out there which are brazenly flouting the regulations.
Some common fallacies:
Fallacy 1: Exchange is based in [some remote country], so they don't have to worry about US laws.
Fact 1. Most people don't realise, it's not sufficient to be based outside of the US to be free of their jurisdiction. If an exchange is serving US citizens they must comply with the regulations, regardless of which country their exchange is based in.
Fallacy 2: Exchange XYZ doesn't accept fiat and it's crypto to crypto only. Therefore it doesn't need a money transmission license.
Fact 2. Fincen has issued multiple statements very clearly stating that a business which exchanges a virtual currency in exchange for another virtual currency is a money transmitter and thus requires a money transmission licence. Similarly for fiat to crypto. Some sources: (http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://globalcryptonews.com/fincen-ruling-on-cryptocurrency-exchanges-explained-part-1-definition-of-money-transmitter-and-msb/). Here fincen publishes a redacted letter to a crypto exchange telling them they are a money transmitter: http://www.fincen.gov/news_room/rp/rulings/pdf/FIN-2014-R011.pdf
Fallacy 3: Exchange XYZ is a money service business and is therefore compliant
Fact 3. It's actually a piece of piss to get registered as a money service business and I wish people wouldn't look at it as a symbol of authenticity. If the exchange doesn't have the money transmission licenses and is serving customers in most states of america it's only a matter of time until they get a knock on the door.
Fallacy 4: Most other exchanges aren't compliant so we have safety in numbers.
Fact 4. That is not a robust legal defense.
Exchanges which aren't compliant and therefore are NOT safe places to leave your money at:
And probably almost all of the others! I've listed the above as they are exchanges which qualify as money transmitters and are operating without the correct licenses. An exchange I am fairly certain has no licenses is:
If someone can prove me wrong, let me know.
Exchanges that are doing things by the book:
tldr: Use Coinbase or Kraken if you don't want to run the risk of an exchanges funds being seized.
submitted by blackcoinprophet to Bitcoin [link] [comments]

How do we comply with FinCEN and Title 31 laws/ regulations?

I would like to begin trading on LocalBitcoins, LocalEthereum and similar fiat-to-crypto peer-to-peer exchanges. I am trying to find all the rules I have to follow to do this legally but from the articles I've read about people being arrested for trading on LBC, it doesn't appear to be black and white. While some of these guys were clearly breaking the law, there are some instances where a trader is arrested for "running an unlicensed money transmission business" with not much detail on exactly why or what specifically what rules were broken.
Here are just a few:
I'm sure there are plenty more.
So far, I've summed the morals of these stories up to the following:
Currently I'm attempting to read through the FinCEN website and Title 31 itself but they're not exactly written for laymen. Does anyone have any insight there can share on this topic? Any help or guidance at all is appreciated.
submitted by cohen5250 to ethereum [link] [comments]

How do we comply with FinCEN and Title 31 laws/ regulations?

I would like to begin trading on LocalBitcoins and similar fiat-to-crypto peer-to-peer exchanges. I am trying to find all the rules I have to follow to do this legally but from the articles I've read about people being arrested for trading on LBC, it doesn't appear to be black and white. While some of these guys were clearly breaking the law, there are some instances where a trader is arrested for "running an unlicensed money transmission business" with not much detail on exactly why or what specifically what rules were broken.
Here are just a few:
I'm sure there are plenty more.
So far, I've summed up the morals of these stories to the following:
Currently I'm attempting to read through the FinCEN website and Title 31 itself but they're not exactly written for laymen. Does anyone have any insight there can share on this topic? Any help or guidance at all is appreciated.
submitted by cohen5250 to CryptoCurrency [link] [comments]

How do we comply with FinCEN and Title 31 laws/ regulations?

I would like to begin trading on LocalBitcoins and similar fiat-to-crypto peer-to-peer exchanges. I am trying to find all the rules I have to follow to do this legally but from the articles I've read about people being arrested for trading on LBC, it doesn't appear to be black and white. While some of these guys were clearly breaking the law, there are some instances where a trader is arrested for "running an unlicensed money transmission business" with not much detail on exactly why or what specifically what rules were broken.
Here are just a few:
I'm sure there are plenty more.
So far, I've summed up to morals of these stories up to the following:
Currently I'm attempting to read through the FinCEN website and Title 31 itself but they're not exactly written for laymen. Does anyone have any insight there can share on this topic? Any help or guidance at all is appreciated.
submitted by cohen5250 to CryptoMarkets [link] [comments]

Understanding USA Crypto/Cash Exchanges

Let this post serve to inform those who buy/sell Dogecoin [from other individuals], in order to protect yourselves as well as others.
Update: Title says USA, but someone asked about UK. I don't live there, but laws are meant to be read. Added UK section.
USA Section
The USA has been very helpful in regards to understanding the rising Crypto currency markets, and has provided updated guidances in regards to money exchanges, as well as mining. It's tough to cover all the points, but I'll try to make a few.
Common Questions:
What happens if I'm not "trading", but "gifting" my "friend" $10,0000?
Nothing. And everything. You see, when it comes to the "guidance", it really is just that: A guidance. Where it comes to hurt you is when the FBI knocks on your door, asking you why you transmitted $10,000 to a known terrorist. Ok, that example is a bit extreme, but the fact stays that the guidance is there to protect you until subsequent formal laws are put in place.
So I can trade $999.99 worth of Dogecoin in a day?
You can trade up to $1000 in a 24 hour period. This mean $1000, not a penny more. You'll give yourself a headache trying to keep it at exactly "$999.99".
How does this guidance and current law effect Dogecoin?
All virtual currencies are effected by this law, and does not "nail down" or target any one specific virtual currency.
What if I don't mine Dogecoin, but have bought some and want to use them for goods/services, what then?
You are then a "user" of Dogecoin, and are subject to all regular laws and limitations. Essentially, you can use the coin for all goods/services that are of a legal nature. Use it to buy coffee, hire someone to mow your lawn, or give out freely as you like.
What's the deal with USA taxes?
As it stands, no clear precedents have been set, and though the IRS is aware of the massive amount of earnings many Bitcoin'ers have, this is the first year that users are making a substantial sum of money from crytpo-currencies. Because of this, dealing with taxes has been a much heated debate. Link 1Link 2
More then likely, we'll be getting guidances later in the year in order better understand what to claim and how to claim it. From what I've seen (do NOT take this as legal advice), many users are claiming any gains as Short-term gains on their taxes. Link #2 above is a link to a user claiming to be a tax attorney, and is worth a read (it's LOOONG).
So the people buying $1k+ for doge are actually breaking the law?
No. The buyer is considered a "user" as part of the guidance: "A user is a person that obtains virtual currency to purchase goods or services.". A seller is listed in the guidance as "An exchanger is a person engaged as a business in the exchange of virtual currency for real currency...[etc]".
A good example of this is when you go to an international airport, and go to the currency exchange station. The station must be licensed in order to perform the transaction, but the "buyer" (you) does not need to be licensed.
UK Section
Note that all the requirements below must be met in order to NOT have to register as a Money Service Business; It's not that you are not allowed to perform services if you do not meet all the requirements, but that you must register if you want to perform such actions legally. Since I do not live in the UK and additionally am not aware of any guidances as related to virtual currency, I cannot faithfully interpret the laws as they pertain to Dogecoin.
  • You cannot make more then £64,000 a year total in exchange services
  • Turnover (anything you gain after losses are calculated) cannot be more then 5% of your total annual turnover
  • Currency exchange worth more than 1,000 euros must be limited to one per customer - This is both for one single large transaction and multiple small transactions to a single individual
  • Your primary business cannot be solely performing monetary transactions, it must be secondary to your main business. This is hard to interpret, so let's put it this way: You can't just exchange money as a business. You would need to sell lemons at your lemon stand, and do money exchange on the side. It's very hard to do this without seeming like a front for a money laundering service though.
  • You cannot perform an exchange for just anyone: They have to be your customer. For example, if you go to a private bank, they cannot exchange money for you unless you open an account with them (just an example). (Note: This is a very weird portion of the law.)
After reading and interpreting the current UK laws to the best of my understanding, all I can say is that until the UK provides guidance for cryptocurrency, be VERY CAUTIOUS about performing ANY transactions, to the point where if I was living in the UK, I would not try selling any crypto with a 10ft (3M) pole. Buying seems fine though.
Common questions:
Note: Please check the USA section prior to asking a question. Since many countries have not pushed official laws, many of the general principles are the same between countries when it comes to money exchange services.
No questions at this time
I'll try to answer more questions as they come along, as well as glean any better answers from comments below.
submitted by GuideZ to dogecoin [link] [comments]

How do we comply with FinCEN and Title 31 laws/ regulations?

I would like to begin trading on LocalBitcoins and similar fiat-to-crypto peer-to-peer exchanges. I am trying to find all the rules I have to follow to do this legally but from the articles I've read about people being arrested for trading on LBC, it doesn't appear to be black and white. While some of these guys were clearly breaking the law, there are some instances where a trader is arrested for "running an unlicensed money transmission business" with not much detail on exactly why or what specifically what rules were broken.
Here are just a few:
I'm sure there are plenty more.
So far, I've summed up to morals of these stories up to the following:
Currently I'm attempting to read through the FinCEN website and Title 31 itself but they're not exactly written for laymen. Does anyone have any insight there can share on this topic? Any help or guidance at all is appreciated.
submitted by cohen5250 to Bitcoin [link] [comments]

MtGox summary of events, March 2013 - Feb 2014.

If anyone gives a damn about my opinion, here's what I've pieced together in this MtGox saga. The following is speculation and all info I've gathered from public sources and reddit speculation.
Early 2013 and prior, MtGox was solvent and 'above the law'.
March 2013, FinCEN issued guidance stating Bitcoin Exchanges, such as Mt Gox, who had business with customers in the US had to register as a "money services business" (MSB), lest they be subject to law enforcement.
On 15 May 2013, Mt Gox, had their US bank accounts seized for failing to register as MSB in the US.
We've learned that this seizure was ALSO due to investigations into links with Silk Road (SR). Lack of MSB license made FBI's job much easier.
Added: http://thegenesisblock.com/mt-gox-seizures-linked-silk-road-fed-testimonies/
After May 2013, it's my opinion that MtGox was running a fractional reserve exchange. Why? Because the FBI seizure included, not JUST their bank account, but also assets containing the cold storage private keys for MtGox customer's deposits (744,000+ bitcoins).
At this point, we can presume FBI was monitoring ALL MtGox internal trades, and external deposits and withdrawals. The FBI would also be receiving ALL MtGox customer verification information. Without exception. Including me (grrrr)
MtGox were likely told to continue operating normally so that the FBI had an opportunity to catch SR-related and money laundering activity. FBI issues a gag-order against Mark Karpeles/MtGox. Utter a word about this and go to jail. This in itself is the reason for recent horrible Psilence.
MtGox could continue operating because the FBI didn't confiscate the hot wallet running on the servers, since this would prevent them from operating 'as normal'.
October 2013, U.S. law enforcement officials from the FBI shut down Silk Road, following the arrest of Ross William Ulbricht, the site's alleged proprietor.
MtGox were likely told to continue operating so the FBI can continue to monitor and catch SR users, or those of SR2.0
The run up in Bitcoin price and increased deposits from October to December 2013 resulted in MtGox returning to some kind of solvency. Mark possibly saw light at the end of the tunnel.
December 2013, alleged top moderators of Silk Road 2 forums are arrested in Ireland.
Jan 2014, seeing the light at the end of the tunnel, MtGox create the 27 page business plan. http://www.scribd.com/doc/209535200/Business-Plan-MtGox-2014-2017
Jan - Feb 2014, Transaction Malleability/incompetence begin to drain MtGox hot wallet.
The hot wallet, as we have learned in the leaked 'Crisis Strategy' doc, contains around 2000 BTC by the time MtGox stop BTC withdrawals in Feb 2014.
http://www.scribd.com/doc/209050732/MtGox-Situation-Crisis-Strategy-Draft
Now, instead of seeing the light at the end of the tunnel, Mark sees the writing on the wall. MtGox cannot operate 'as normal' as instructed by the FBI. Mark is desperate and needs a BTC injection.
What happens next is possibly illegal and certainly immoral.
This is speculation, although it's alluded to in the Crisis Strategy doc. Mark uses the lower MtGox BTC price for arbitrage, (ie, market manipulation), buying cheap coins on MtGox and selling on other exchanges for higher price. Bringing the $ back to MtGox to buy more cheap bitcoins, rinse and repeat.
At the same time, Mark puts the feelers out for a buyer, someone, anyone to bail out or take over MtGox. Potential Buyer (dont know who) does their due diligence and starts deep investigation. They stumble across the Crisis Strategy doc and immediately notify the authorities and their colleagues in the industry (ie, dont bail out Gox, here's why, authorities notified)
EDIT added: 24 Feb 2014, several businesses issue the joint statement regarding MtGox solvency and 'tragic violation of the trust'. They likely had seen the Crisis Strategy doc before ‏@twobitidiot released it publicly.
http://blog.coinbase.com/post/77766809700/joint-statement-regarding-mtgox
end edit
Now MtGox is closed. The FBI have seized fiat dollars AND cold storage private keys containing the supposed 744,000 BTC.
Those 744,000 BTC could be argued by the FBI to be the proceeds of crime.
submitted by bitpotluck to Bitcoin [link] [comments]

How do we comply with FinCEN and Title 31 laws/ regulations?

I would like to begin trading on LocalBitcoins and similar fiat-to-crypto peer-to-peer exchanges. I am trying to find all the rules I have to follow to do this legally but from the articles I've read about people being arrested for trading on LBC, it doesn't appear to be black and white. While some of these guys were clearly breaking the law, there are some instances where a trader is arrested for "running an unlicensed money transmission business" with not much detail on exactly why or what specifically what rules were broken.
Here are just a few:
I'm sure there are plenty more.
So far, I've summed up to morals of these stories up to the following:
Currently I'm attempting to read through the FinCEN website and Title 31 itself but they're not exactly written for laymen. Does anyone have any insight there can share on this topic? Any help or guidance at all is appreciated.
submitted by cohen5250 to ethtrader [link] [comments]

Question on FinCEN Regulation

I can't find a clear answer for this online so hopefully you guys can clear this up for me.
According to the FinCEN Virtual Currency Guidance,
"An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations, unless a limitation to or exemption from the definition applies to the person. FinCEN’s regulations define the term “money transmitter” as a person that provides money transmission services, or any other person engaged in the transfer of funds. The term “money transmission services” means “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”"
This might be a silly question, but when I trade bitcoins and altcoins on an exchange like Bittrex, am I therefore considered a money transmitter and obligated to register as an MSB? Or is the exchange site I'm using considered to be a money transmission service since they're the ones who actually transfer my virtual currency to someone else, and I'm just considered as user paying and selling them my virtual currency for their service?
submitted by levihixx to CryptoCurrency [link] [comments]

Why are bitcoin exchanges Money Services Businesses?

I'm not trying to be a smartass here -- I'm curious to know what the actual line is between an MSB and any other business.
IRS guidance says that bitcoin is property for tax purposes. MSB guidelines seem vague.
What's the line? Why would, say, a tire salesman not have to register as an MSB, even though his business buys and sells property for money? If a bitcoin exchange had smaller volume, or didn't offer users a wallet, could that impact their MSB status?
submitted by joeydekoning to Bitcoin [link] [comments]

Effects of regulation and some observations (warning: long)

The stiff regulatory headwind which manifestated itself in the SEC investigation letters and FinCEN guidelines FIN-2013-G001 (published in March 2013) followed by this weeks Rulings FIN-2014-R011 and FIN-2014-R012 make it obvious that Bitcoin is fundamentally incompatible with the current financial system at large. It is clear now that FinCEN regards any business which engages in Bitcoin as a money services business (MSB), which means that such business will have to implement an elaborate anti-money laundering program and comply with recordkeeping, reporting and transaction monitoring requirements as set forth by FinCEN[1].
In and of itself, these rulings cannot come as a surprise as it is extending existing legislation to the Bitcoin domain and treats bitcoin as just another asset which can be used to transfer value between entities. In the narrow view of the FinCEN, any value transferred has to use the closed circuit of the current financial system and must play by its rules, and Bitcoin can be no exception.
For Bitcoin to remain viable as a payment option, Bitcoin payment processors such as Bitpay and Vaurum have now started to spend money on compliance - money that will have to be recouped by only small margins on processed bitcoin payments. Current volumes in bitcoin payments likely don't justify these costs, so investing money in compliance therefore speculates on the viability and growth of Bitcoin as a payments system within the USA in the future.
Bitcoin is by design able to operate outside of the current financial system as a fully automated, frictionless and efficient payment system. The FinCEN rulings state that companies engaging in Bitcoin are unsurprisingly subject to existing regulations - and compliance incurs cost and removes at least some of the efficiencies which Bitcoin enjoyed over traditional payment systems. Bitcoin is no longer frictionless - processing bitcoin payments now incurs significant upfront and ongoing costs. Needless to say, this will hurt - perhaps even reverse - its adoption.
Let's speculate a bit on what this might mean for the near and long-term future. It is save to say that a lot will depend on whether payment processors and exchanges will have the resources to survive, comply to MSB regulations and recoup the investments. If so, Bitcoin will likely continue to be gradually adopted by more and more businesses. If not, and if for instance BitPay and other payment processors throw the towel, this would largely reverse merchant adoption and pushes Bitcoin outside the existing closed, legal financial circuit. The third option would be "neither of the above" - new legislation might create exemptions for Bitcoin, for instance.
The cost of compliance clearly acts as a giant hurdle for Bitcoin processors and exchanges. FinCEN regulations seemingly seek to create a closed circuit in which money circulates, and in which every transfer can be tracked. That this has failed miserably has been illustrated by the recent money laundering scandals as well as the fact that criminals continue to use of plain old cash. The effectiveness of anti-money laundering regulations is increasingly questioned. Considering the questionable effectiveness of these regulations, the net effect of these regulations comes down to protecting the established finance industry and make life hard for new contenders such as BitPay, that have nowhere near the resources as for instance a giant such as VISA, for which the cost of compliance can be much smaller because of economies of scale. There is no level playing field and the regulations are benefitting the establishment, while hurting new entrants.
The bigger picture
Financial scandals, crises, as well as perceived terrorist threats fan ever more stringent rules and regulations that have questionable effectiveness but do increase cost, hurt privacy and diminish autonomy over ones own funds. Recent civil asset forfeitures by the IRS under the Civil Asset Forfeiture Reform Act of 2000 are a manifestation of the latter. Cash amounts of over $10,000 are suspicious by default and have to be reported using form 8300 - the justification might be that the pervasive presence of banking does not require the use of large sums of cash, which are therefore suspicious by default. Obviously, this discourages the use of cash and makes it very difficult to do large transactions outside of the closed financial circuit.
The presumptions here are:
It needs no arguing here that each of these presumptions are false.
For the first time in history, Bitcoin offers a way to store value privately, anonymously (if done properly) and such that it is impossible to confiscate. Now this is something new, and it profound. On the shallow practical side, doing a transaction valued more than $10,000 is trivial. Money stored as bitcoin can be accessed anywhere and at all times. Although rules and regulations apply, the ability to fully anonymously access and transfer value (if the proper precautions are taken) make them unenforceable.
The resistance against confiscation gives Bitcoin additional utility. For this to work, Bitcoin must offer a way to be used completely anonymously. Because if a government knows you own bitcoin which they cannot seize, they can seize your car, house or ultimately you yourself instead (as in, put you in jail), until you give up your bitcoin. Full anonymity is therefore not a nice-to-have, it is essential in offering protection against confiscation of wealth.
Another well known avenue to confiscate wealth of an entire nation is by monetary inflation. Simply printing or creating money enriches those close to where the money surfaces first - at the expense of those who receive the money last. In quantitative easing, banks sold illiquid bonds to the Fed, and receive cash in return which they used to prop up their balances or to buy assets. Since bank lending has not much improved, the overall effect on the economy has been low. However, bank stocks are doing great - clearly showing banks gained most from QE, outperforming the Dow Jones industrial average as well as the S&P500 by a margin, a rebound that kicked off in earnest a mere 4 months after the start of QE in November 2008. Since wealth can not be created by the QE magic wand, left or right this gain has been at the expense of everyone else owning dollars.
More extremely, history is full of countries defaulting on their debt - often rendering their currency worthless with obviously devastating effects on most of the population. Another profoundly new property of Bitcoin is the predictability of the rate in which it is created, and the hard limit which is set at 24 million bitcoins ever to be created. This offers owners of bitcoin the peace of mind that the value of bitcoin can not be stolen insidiously by means of inflation - as it can and is done today with fiat.
Clearly, in its design, Bitcoin offers resistance against inflation and confiscation, two privileges misused by governments all over the world and throughout history. This can be one of the reasons why Bitcoin appeals to many as a way to store value safely - the irony here being of course the many Bitcoin related scams and people losing their coins through theft. Nevertheless, Bitcoin is still immature technology but rapidly improving - it is only a matter of time before stolen coins are mostly a thing of the past. No regulation required.
In the mean time, there although economic improvement is reported, this growth is not experienced by consumers. Burdensome regulations, combined with the uncharted territory of QE as well as USA debt being higher than ever except during WW2 will make some people reason to be skeptical towards the current economical and political state of affairs, and this may be an additional factor in the attraction towards bitcoin as an alternative store of value.
So far the focus was on the USA, where Bitcoin adoption is the largest. However the world is a big place and the global nature of Bitcoin as well as the regulatory harassment in the USA might well mean that Bitcoin will prosper elsewhere first. The global nature of Bitcoin and the fact that anyone without a bank account or credit card can now also participate in global commerce was previously impossible and very exciting in itself. Who knows what derivatives built on top of Bitcoin may hold in the future.
In the long term, Bitcoin will just not go away, it will prevail, and grow. Either gradually, or in the event of a new economic crisis or a period of high (USD or EUR) price-inflation, perhaps in a big way.
Note [1] Quoting FIN-2014-R011: When engaging in convertible virtual currency transactions as an exchanger, a person must register with FinCEN as a money transmitter, assess the money laundering risk involved in its non-exempt transactions, and implement an anti-money laundering program to mitigate such risk. In addition, the Company must comply with the recordkeeping, reporting, and transaction monitoring requirements under FinCEN regulations. Examples of such requirements include the filing of Currency Transaction Reports (31 CFR § 1022.310) and Suspicious Activity Reports (31 CFR § 1022.320), whenever applicable, general recordkeeping maintenance (31 CFR § 1010.410), and recordkeeping related to the sale of negotiable instruments (31 CFR § 1010.415). Furthermore, to the extent that any of the Company’s transactions constitute a “transmittal of funds” (31 CFR § 1010.100(ddd)) under FinCEN’s regulations, then the Company must also comply with the “Funds Transfer Rule” (31 CFR § 1010.410(e)) and the “Funds Travel Rule” (31 CFR § 1010.410(f)).
submitted by trilli0nn to Bitcoin [link] [comments]

A solution for the US money-laundering problem.

You'll have to bear with me as this is US-centric. I apologize in advance.
One thing that has been bothering me for the longest time is this idea that every Bitcoiner is supposed to register as a MSB (Money Service Business). I have been helping various locals with remittance payments via Bitcoin since mid-2011. I've seen a lot of people come and go, mostly go as they learn how to use Bitcoin themselves and cut me, the middleman, out. I consider this a "good thing"TM.
That said, it is impossible, with the present FinCEN standards, to not be in violation of the AML at various steps along the way to giving them financial independence. And this bugs me, it bugs me a LOT, because I don't think what I'm doing should be illegal, and I don't think our representatives or senators think what we are doing should be illegal either. Everyone talks about helping the unbanked or underbanked, but AML laws very clearly stand in opposition to helping these same individuals.
So I got to looking around on FinCEN's website about how Western Union works and why they are able to do what they do, and what other solutions there may be out there to get around these silly laws. I found this.
It seems to me that we have a few options here. One is to request that Congress get off its butt and start making Bitcoin-related exemptions to AML laws and FinCEN guidance, or we start putting pressure on exchanges to open up "agency" whereby those of us with the coin can provide remittance services of under $1k/day to individuals as agents with Coinbase, LocalBitcoins, etc. We'll have to provide this service solely on their behalf and not on our own, but we could be paid a percentage of their profits accordingly.
Is this a bad idea or not? Where should we start?
submitted by Yorn2 to Bitcoin [link] [comments]

Financial Crimes Enforcement Network - New Regulations for BTC Exchanges

I thought this belonged here. Copied and Pasted from Wikipedia. This could be the easiest way for regulators to begin to crack the anonymity.
March 18, 2013 TL:DR - In summary, FinCEN's decision would require Bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, comply with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do.[45][46]
-Actual Wikipedia Article-
On 18 March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized "virtual currencies" and their legal status within "money services business" (MSB) and Bank Secrecy Act regulations.[36] It classified digital currencies and other digital payment systems such as bitcoin as "virtual currencies" because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations by saying, "A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations." However, it held that American entities who generate "virtual currency" such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: "...a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter." This specifically extends to "miners" of the bitcoin network who may have to register as an MSB and abide by the respective requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States.[34]
Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: "In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency."[35][36]
In summary, FinCEN's decision would require Bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, comply with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do.[45][46]
Patrick Murck of the Bitcoin Foundation criticized FinCEN's testament as an "overreach" and claimed that FinCEN "cannot rely on this guidance in any enforcement action".[47]
submitted by Throwawaytoday660 to SilkRoad [link] [comments]

Adam S. Tracy Breaks Down FinCEN's Regulation of Cryptocurrency Bitcoin Foundation is Wrong! BitcoinLaw - FinCEN Director Notes Improved Oversight of Cryptocurrency Industry FinCEN Registration & Money Transmitter Licenses HODLCast Ep. 113 - Who do you want as your regulator, the CFTC or FinCEN?

Click HERE to find out ⭐ FinCEN Targets Bitcoin Mixer with $60 Million Penalty Pertaining to Money Laundering. Crowdfund Insider: Global Fintech News, including Crowdfunding, Blockchain and more. The next major FinCEN guidance on cryptocurrency was issued on May 9, 2019. This comprehensive statement was designed to answer many of the questions that had come up in the years since 2013, and to address recent developments in the crypto markets. No New Regulations. The recent statement explicitly stated that the guidance did not contain new regulations. Instead, it was intended to answer ... identified MSB activity (i.e., dealing in foreign exchange, check cashing, issuing or selling traveler’s checks or money orders, providing prepaid access, or money . FINCEN GUIDANCE 5. transmission) but does so on an infrequent basis and not for gain or profit. 12. 12. 31 CFR § 1010.100(ff)(8). In the case of 1010.100(ff)(8)(ii), the exemption applies only if the person . itself. is ... In the Guidance, FinCEN established that Users are not MSBs since they are not engaged in money transmission services (i.e., “accepting” and “transmitting” currency, funds or other value). In its first Administrative Ruling, FinCEN ruled that a Bitcoin miner does not constitute an MSB to the extent that it uses the Bitcoins it mines solely for its own purposes and not for the benefit ... The guidance considers the use of virtual currencies from the perspective of several categories within FinCEN's definition of MSBs. FinCEN's mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.

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Adam S. Tracy Breaks Down FinCEN's Regulation of Cryptocurrency

FinCEN released Guidance on March 18, 2013 regarding BSA Regulations to Virtual Currencies. The Bitcoin Foundation issued guidance on March 19, 2013 to the Bitcoin community in s response to ... On December 3, 2019, EXcoin obtained the US MSB (money service business license) financial license. This type of license is supervised and issued by Fincen, ... This video is unavailable. Watch Queue Queue Cryptocurrency attorney Adam S. Tracy discusses FinCEN's regulation of cryptocurrency and the impact on traders, cryptocurrency exchanges, and OTC bitcoin dealers. --- A former competitive rugby ... In May, FinCEN published guidance for crypto businesses that clarified how its regulations relating to money services businesses (MSBs) apply to certain business models in the crypto industry and ...

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