Tuesday, March 26, 2013

The Feds Don't Seem to Understand Bitcoin

The Feds Don't Seem to Understand Bitcoin:
Bitcoin meets big brother
Last week, the Treasury Department's Financial Crimes
Enforcement Network (FinCEN) made waves in the
Bitcoin
community by releasing a statement
of guidance
 that paid special attention to virtual
currencies. Patrick Murck, who provides legal council to
Bitcoin.org and contributes to the foundation's blog, expressed concerns
about the implementation of the suggestions, which are being made
to the
Bank Secrecy Act
.
Murck said he “was happy to see FinCEN issue some clarity around
the overly-broad pre-paid access rules and definitively state that
they do not apply in the context of bitcoin,” but he was also
pretty worried about the ill-fitting definitions FinCEN came up
with:
Left unsaid are any specifics around the facts and circumstances
that would constitute “engaging as a business.” [In reference to
the definitions of “User”, “Administrator” and
“Exchanger”] 
FinCEN’s guidance implies that every person who has ever had any
virtual currency and has ever exchanged that virtual currency for
real currency may now be considered a money transmitter under the
Bank Secrecy Act. That is, of course, an untenable
position. 
What is crystal-clear is that once a person sells a single
Satoshi for real currency that person is no longer a “User” and
therefore not categorically exempted from MSB registration.
Murck summarized the FinCEN guidance as follows:
  • A person may spend money to purchase bitcoin or mine bitcoin
    and then exchange the currency for goods and/or services without
    having to register with FinCEN as an MSB.
  • If a person receives real money in exchange for their bitcoin
    they MAY have to register with FinCEN.
  • If a miner exchanges their mined bitcoin for real money they
    MUST register with FinCEN.
  • Anyone transacting bitcoin on someone else’s behalf MUST
    register with FinCEN. 
Murck also tried to calm businesses and individuals working
with the currency, noting that "under the Administrative Procedures
Act (APA), FinCEN can’t promulgate new rules without going through
a notice and comment proceeding whereby the public may have their
voices heard.”