Tuesday, June 25, 2013

California Sends Bitcoin Foundation Cease and Desist Order

California Sends Bitcoin Foundation Cease and Desist Order:
California's message to Bitcoin
supporters: if you "may be" doing the crime, we'll tell you what
you'll do in hard time.
The California Department of Financial Institutions' cease and
desist order dated
May 30
wasn't as explicit in implicating the Bitcoin
Foundation, a nonprofit with a mission to standardize and promote
the Bitcoin technology, of any legal wrongdoing as it was in
outlining punitive consequences if the electronic currency
advocacy group was to be transmitting money without licenses
or the state's authorization. Jon Matonis, who sits on the Board of
Directors for Bitcoin
Foundation
, brought California's order to attention in a column
for Forbes published
yesterday
.
It has come to the attention of the Commissioner that BitCoin
Foundation may be engaged in the business of money transmission
without having obtained the license or proper authorization
required by the California Financial Code.
YOU ARE HEREBY WARNED TO CEASE AND DESIST FROM CONDUCTING THE
BUSINESS OF MONEY TRANSMISSION IN THIS STATE. FAILURE TO DO SO WILL
RESULT IN APPROPRIATE ACTION BEING TAKEN.
Any person who violates Financial Code § 2030 is subject to
civil money penalties of $1,000 for each violation or $1,000 per
day under Financial Code § 2151 and/or criminal prosecution under
Financial Code § 2152. Conviction under Financial Code § 2152 could
result in a fine and/or imprisonment. The California Attorney
General may also institute suit pursuant to Business and
Professions Code §§ 17200, 17205 and 17206, which can result in
imposition of penalties of up to $2,500 per violation of statutory
law (that is, per day or per transaction).
In addition, under § 1960 of Title 18 of the U.S. Code, it is a
felony violation of federal law to own, control, or conduct the
business of money transmission which is operated without the
appropriate State license, or which fails to register with the U.S.
Treasury Department... Violations of § 1960 are punishable by up to
5 years in prison and a $250,000 fine. 
The DFI's allegations that the Bitcoin Foundation "may be"
engaging in money transmission has supporters of the stateless
currency skeptical about
the ability for businesses' ability to comply with state and
federal regulations. The Bitcoin Foundation, like other
private interests, does not transmit Bitcoins as a business as
that "would be against the original charter of the foundation,"
wrote Jon Matonis in his column. Regulators' aggressive
enforcement has cost businesses money and some have given
up
 as a result, Patrick Murck, general counsel for the
Foundation has said.
Check our extensive coverage of the Bitcoin protocol here and read
the DFI's cease and desist letter in full below: