It's important to note that regardless of whether bitcoin is a currency or not, the specific question on money transmission was "Does your business accept funds from customers and send the funds based on customers' instructions".
This means it doesn't matter if bitcoin is a currency or not. If your taking money from one fiat currency account and moving it to another fiat currency account on customer instructions you can fall into the money transmitter classification.
It's also one of the (many) reasons that if you're running a marketplace startup you don't want to run an intermediately account that does pass-through for the transactions but instead use a service like Paypal X or Balanced which complies with relevant money transmission laws.
MtGox took the position, and legal argument that they where not trading a monetary instrument of any kind, and at least early on that was a plausible argument (although probably not a winning one) because they characterized bitcons as a product or commodity. I do not have to qualify as a money transmitter if I buy and sell bags of rice even though one could possibly use that as a mechanism to "send funds based on customers' instructions". In fact other then the merchant services I cannot send money to another Mt Gox user, but the bitcoin client provides that functionality and Mt. Gox does not control the client.
They shot themselves in the foot a bit when they started adding merchant services. Nevertheless I think they technically answered the questions correctly given the legal position they where taking that bitcoins are not a monetary device but a commodity. IANAL but I play one on TV, and they may still have some traction on that argument since bitcoin is only recognized as a currency by popular opinion not by legal decision.
Google the law around "liquid assets" (assets which are easily convertible to money without loss of value).
Money laundering laws have been around a long time and tend to be written to encompass a wide range of work arounds that criminals have used historically. Using near money or liquid assets for money laundering has been commonplace for decades, hence laws tend to be designed to handle it.
(that said I'm much more familiar with EU anti-money laundering laws than US ones as I used to work in currency trading in London)
Even moreso: After 9/11, the DC Circuit and the 4th Circuit (where Maryland is) broadened the intent requirements for 18 USC 1960 to general intent, meaning a defendant doesn't have to know they're breaking the law, just that they're transferring funds.
As a result, the statute is basically a sledgehammer for anything related to value transfer, broadly defined.
Agreed, but I was discussing their answers on the business description. If one must account for all uses of their products for money laundering, then we might as well simply all say that we are money transmitters in all businesses. Which would make that question on the form somewhat superfluous.
But if the form question is not considered superfluous, then indeed it is asking the business owner what the proper intended purpose of the businesses is, not the unintended/illegal purposes.
Funny, in the profile of Mt Gox in The Verge[1] they said:
> Mt. Gox estimates it costs $25 million in the first year to become fully compliant in the US. But considering a regulator could potentially swoop in and seize funds if a violation were found, it’s worth it.
I called bull[2] on that figure when that post was published.
The other reason i've stayed away from Mt Gox is despite their claims of compliance, they aren't listed on the Californian DFI website as a registered money agent[3]
When that article was posted I also emailed Mt Gox, since I couldn't find them in any registry as an authorized money transmitter, to ask them where that $25M was spent. The response I got was:
> Unfortunately, our financial statement is yet to be available. Once it is available and we have the permission to publish it from management, we will release this.
Money Transmitters have to post a $25 Million security bond in order to be licensed across the entire U.S. That is were the $25 Million would go. But MtGox never spent that money nor claimed to spend that money as of yet.
To my knowledge, they have never made any claims of compliance. They have only said that they plan to become compliant some time this year.
They don't need to have that full money, however. They pay another company a typical interest rate between 3 and 5% to post that bond on their behalf. So you probably need less than $1M per year to fund those bonds.
The bigger issue is that it takes lots of time and effort for back-and-forth with each state to get authorized. One person has maybe the bandwidth to obtain compliance with up to 3 states at a time, and this is for someone who knows the legal background very well. So you need to staff a pretty large compliance department off the bat to become compliant before engaging in money transmission (and thus before earning revenue). That's hugely expensive.
Oh. So, you don't have to part with $25mil for as long as you want to stay in business, you just need to pay $1mil in non-refundable interest every year until you want to go out of business. Sounds perfectly cromulent.
They imply in the article in The Verge that they have spent it, or are going to spend it. When I asked them straight up in an email they didn't say that they didn't spend it, only that they wouldn't disclose where[1].
Anybody reading that article in The Verge would conclude that they have spent the money. That whole article was about assuring people that Mt Gox was safe.
At best they were not straight forward and transparent, at worst they lied.
Not what I want from a company who is asking me to trust them with my money. Frankly I am shocked that their setup in the USA for Dwolla transfers was nothing more than an ordinary Wells Fargo business account.
[1] The email would have been the perfect time to respond with 'well, we haven't actually spent the money on compliance, but we plan to'
Just to clarify here: based on my not insignificant research on this issue, this $25 million bond is the approximate total cost of the bonds for each state that requires money transmitters to hold a license and a bond. It's not a federal requirement.
In fact, as far as I can tell, federal FINCEN compliance doesn't cost anything beyond the cost of the accounting tools to maintain that compliance (which can be very expensive to buy or develop, to be fair).
Disclaimer: I am not a lawyer and this is not legal advice, only a conversational comment on the Mt. Gox affair.
> Just to clarify here: based on my not insignificant research on this issue, this $25 million bond is the approximate total cost of the bonds for each state that requires money transmitters to hold a license and a bond. It's not a federal requirement.
As I understand it, it is federal requirement that they be licensed by each state into or out of which they will transmit money, but the actual licensing requirements are set state-by-state.
Wasn't the whole point of the CoinLab buyout to become compliant? Maybe they would have never had this problem if they finished the transition in March as planned.
Yeah, but those are just questions on paper! They after me lucky charms!
When you sign a legal form, especially tied to a business, you might want to consider the ramifications of how you complete the form. You probably should legal up prospectively if it deals with money and currencies.
This is not surprising for MtGox. Their platform, communications, and, now, essential business acumen all perform at the same unprofessional level. I guess it's back to trading cards then, eh?
It's worth noting that at least a couple of exchanges have gone through the appropriate hoops with the US Federal government. I think the Mt. Gox thought that they were immune because they are based in Japan.
Perhaps, except the questions they answered 'no' to are pretty much exactly what they do. I'm not sure what Mark was thinking they actually did when he answered those questions.
Its interesting to me that typically this would be a simple "hey you filled out the forms wrong" kind of thing and the officers would go down and change their paperwork and correct any missing licenses, pay whatever penalties etc. This however is blown up as a 'big deal' which suggests that at least some folks would rather have you believe that the concept of bitcoin is illegal.
Why do you think that 'typically this would be a simple "hey you filled out the forms wrong" kind of thing' ?
I'd guess that every single such violation is prosecuted if detected - money laundering is not that rare, and in accounting/financial/company tax matters pretty much all mistakes (unless detected in pre-signing validation) are treated as punishable/fineable violations, not "correct your paperwork" matters. And as a company officer, there quite a few papers that you are required to sign where you may face jail if they're not true.
Also, seizing/freezing any money-laundering or tax-evasion related funds is common practice - first ensure that the money isn't going away, and then release it when/if all the violations are cleared.
HSBC wasn't really prosecuted nor were the hundreds of billions of cash that they laundered seized, I think its very selective enforcement in many cases.
What he was thinking was probably that answering "yes" would cost tens of millions of dollars that he doesn't have, and thus would effectively put MtGox out of business immediately. This goes back to the FaceCash case; you can either ask to be regulated (in which case you go out of business immediately) or fly under the radar until you make enough money to become compliant.
IANAL, but from a practical standponit, I imagine if a WoW dealer both buys and sells WoW gold for a fiat currency, the government would want them to be equally as liable since that would also be an excellent way to launder or otherwise transfer money without oversight.
The same would be true for any bi-directional virtual curency, really. Since Blizzard does this in Diablo 3, I wonder if they've gone through this process.
I've got family members who work in the Justice system, my grandfather was a the US Attorney. It costs a lot of money to try and prosecute a case, the various enforcement agencies have budgets and there is incentive to not waste money on prosecutions that can be dealt with inexpensively.
So when something comes up, you see if you can "resolve" it simply. So in this case the forms get updated, the Mt. Gox guys become registered as an MSB and go through the paperwork to meet the necessary standards, and if they can't they shut down. The enforcement interests of the state are served. Similarly if you are accused of violating a law the prosecutor will often offer you a plea deal of some form. This is effectively saying "Ok, let's assume I can prove all of this and your guilty and you will be fined and possibly go to prison. I'm willing to forego that lengthy process if you simply admit wrongdoing to this set of charges and accept this sentence for it." Of course sometimes the prosecutor has a different agenda and they want to "send a message" to people who might consider a similar path. This ranges from the small, police officers citing seatbelt violations, to the absurd like telling Aaron Schwartz he would spend 30 years in prison.
A friend of mine who was registering his business as a consultant in Santa Clara county screwed up and put down his business as "consulate." He signed the document that said that was what he was trying to do, and not surprisingly it is illegal to represent yourself as a diplomat when you aren't one. But he didn't get a DHS agent throwing him down in the street, he got a call from the County clerk when the State Department returned the application saying essentially "wtf?" They had a laugh, he updated and amended the form and didn't serve any prison time. :-)
Generally, its been my experience that "the man" isn't really out to get you. And maximizing compliance with the existing laws of the land trumps prosecuting every single violation. So skipping the first step [1] of just calling up and getting clarification seems unusual to me, given my experience with folks who prosecute people for a living.
[1] This is an assumption on my part, for all I know they may have called and said "Did you really mean to say 'no' here? Looks like you should have said 'yes'." And he may said "I said 'no' and I meant it."
> So skipping the first step of just calling up and getting clarification seems unusual to me, given my experience with folks who prosecute people for a living.
I think you are looking at it from the perspective of the crime being misrepresentation on the form. That's not the crime at issue, though.
The crime at issue is actually operating the money transmitting business without the required licenses, the representation on the form that he was not operating a money transmitting business may be evidence that there was a deliberate attempt at concealment or something like that, but its not the fundamental prohibited act.
Saying "yes" on the form wouldn't have made things less criminal, just more easily detected.
Actually I was trying to look at it from the perspective of the state. One of the roles of the state is to ensure compliance with the laws of the land (to implement the rule of law). The state is also interested in economic activity, and the promotion of it.
So there are two outcomes:
1) Mt Gox gets shut down, its creators go to prison.
State enforces the rules which is good, but also cuts out some economic growth (people lose their jobs, retail space leases get broken, etc etc)
2) Mt Gox gets brought into compliance.
State enforces the rules (now they are in compliance when before they weren't) economic contribution remains intact so people still have their jobs Etc.
Universally governments prefer #2 over #1, for violations involving process compliance, because #2 costs less and doesn't impact tax revenues long term. They insure future compliance with fines and/or periodic audits.
All bets are off if innocent civilians are endangered or gross damage to the property occurs etc. Or, like in Enron's case, the tax payers are massively ripped off. So when Walmart creates rules that make their workers work overtime that isn't paid, the response is a fine and regular audits. Not shutting down Walmart or locking their stores where violations occurred.
The whole theory of government is predicated on ensuring compliance rather than locking everyone up. The latter isn't scalable and its not the best thing for the people being governed.
> The whole theory of government is predicated on ensuring compliance rather than locking everyone up.
Part of ensuring compliance is ensuring that people take reasonable care to comply before being caught not complying. That involves imposing consequences for people failing to comply when they have reasonable notice from which they should have known the requirements, whether or not they actually did know.
The United States Dollar, which the company in question accepted and transmitted based on customer instructions, was a currency at the time the forms were filled out.
Is there a person or business that does not exchange US Dollars for goods/services? Any reasonable person would understand it to mean exchanging for foreign currency. Mt.Gox does not transmit dollars (or euros, etc) from one person to another. Every transaction involves a trade of bitcoin for a currency, or returning the currency (of the original type) to the original account holder.
"Does your business
accept funds from customers
and
send the funds based on customers' instructions
(Money Transmitter)?"
Most businesses accept funds from customers, but few outside the financial services industry transmit the funds based on customers' instructions (assuming refunds and gift cards do not count).
yes but you only become a money transmitter when they confirm that bitcoin is money, prior to that it could easily be considered a commodity the same as any other good, thus people were sending $ to buy a commodity. After FinCen changed the playing field they should then have required businesses dealign with BTC to update forms or resubmit, not go crazy shutting things down. but that is how the US govt works, without sense, just blunders in. Much like the DefenceDistributed issue, they come blundering in and make things more difficult for themselves in the long run.
> The response of No only became incorrect after the release of the FinCen document, these forms were completed before the FinCen report was released.
No, while the FinCEN guidance on the application of money service bureau laws and regulations including those specific to money transmitting businesses to participants in various roles with regard to virtual currency systems summarized the FinCEN's understanding of application of existing law to that domain, the applicable statute requiring licensing for money transmitters, and defining what "money transmitting" means (which is the basis for the seizure warrant), existed for quite some time prior.
>I think the Mt. Gox thought that they were immune
Well, as we stand in May of 2013 perhaps it's obvious that Mt. Gox should have identified themselves as a Money Transmitter and Money Service Business. Let's agree on two things though:
1. There's a fuzzy line as to who should have to get a license for this. For instance, the person that sold me Roman denarii for U.S. dollars on EBay might have to get a Money Service Business license with a strict interpretation of the law.
2. Literally two years ago in May of 2011 when Mt Gox filled out the forms, Bitcoin was not considered by most people to be a "currency". When most people think of currency exchange, they're thinking of U.S. dollars, Euros, Swiss Francs, British Pounds, etc. Is Parker Brothers responsible for registering as a Money Service Bureau because they exchange U.S. Dollars for Monopoly Money?
There's a fuzzy line as to who should have to get a
license for this. For instance, the person that sold me
Roman denarii for U.S. dollars on EBay might have to get
a Money Service Business license with a strict
interpretation of the law.
No offense, but the slightest bit of research will remove any 'fuzziness' in most laws, especially in easily quantifiable fields like financial services.
From the FinCEN[1]:
"An activity threshold of greater than $1,000 per person per day in one or more transactions applies to the definitions of: currency dealer or exchanger; check casher; issuer of traveler's checks, money orders or stored value; and seller or redeemer of travelers' checks, money orders or stored value. The threshold applies separately to each activity -- if the threshold is not met for the specific activity, the person engaged in that activity is not an MSB on the basis of that activity."
Literally two years ago in May of 2011 when Mt Gox filled out the
forms, Bitcoin was not considered by most people to be a "currency".
The legal distinction has nothing to do with a 'currency', only a 'store of value'. It was fairly obvious from the beginning they were ignoring Federal statutes. You can't avoid taxes by claiming to be a sovereign individual and you can't use cleverly disguised money to avoid taxes and regulations, this has all been tried before.
So which of the 6 roles is Mt Gox fulfilling? They're not a currency dealer or exchanger. They don't cash checks. They don't issue traveler's checks, money orders or stored value. They don't sell or redeem traveler's checks, money orders or stored value.
This isn't even close to as cut and dry as you are trying to make it sound.
[Can] Corn be a "store of value". What about gold? Or oil?
It doesn't matter.
The whole point of the 'Money Services Business' designation which Bitcoin just ran into is to enforce standard regulations for all 'Financial Institutions'. The definition of 'Financial Institutions' already includes brokers, broker-dealers, exchanges, etc.[1]
So [is] a corn broker considered a money exchanger/transmitter?
No. They are considered brokers. Brokers and commodities exchanges are regulated separately by FINRA and the CFTC/NFA and therefore are not considered MSBs. From the regulation: The term “money services business” shall not include: .... A person registered with, and ... regulated by, the SEC or the CFTC. [2]
It's all there. The concept of a 'bitcoin' isn't actually very original, people have invented dozens of currencies and other schemes to launder money and avoid taxes. Whether or not that was Bitcoin's intent, it's going to have to play by the rules as if it were.
> Literally two years ago in May of 2011 when Mt Gox filled out the forms, Bitcoin was not considered by most people to be a "currency".
But the US dollar has been considered a currency for a long time (longer, in fact, that the "Money Transmitter" rules at issue in the warrant have been in place), and certainly before May 2011. And that's the currency whose transmission is at issue in the warrant.
Further, the issue is not incorrect forms filled out in 2011, but unlicensed money transmission business continuing to be conducted into 2013.
Don't forget the vouchers for traditional currencies that could be exchanged without any conversion into bitcoin. Those were often leveraged to get around the banking latency, but would just as easily been used as a (slow) way of paying for illicit goods or for obfuscating layering in an ML scheme.
Somehow I'm not surprised that Mt. Gox was completely unlicensed as a "money transmitter", and that they denied involvement in such on their bank account questionnaire.
For once this at least seems like a legitimate takedown.
If you use a loose definition of "legitimate" that includes all the laws the USG enacts, then sure.
Most of these laws are just a way to increase seizures so the USG can continue to grow, raiding the population. Just so happens this particular one is federal, instead of local cops and DAs.
I would also expect the same treatment towards paypal.
They are not licensed as a money transmitter in my state of Indiana, nor are they licensed in others. They also routinely hold funds past the 10 day statutory time allowed by most states they are licensed in.
My knowledge was a few months out of date, and I didn't check the license page for updates.
However, that still does not invalidate my claim that paypal grossly violates money transmission acts by regularly holding money past most statue times.
“Did you really think we want those laws observed?" said Dr. Ferris. "We want them to be broken. You'd better get it straight that it's not a bunch of boy scouts you're up against... We're after power and we mean it... There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What's there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced or objectively interpreted – and you create a nation of law-breakers – and then you cash in on guilt. Now that's the system, Mr. Reardon, that's the game, and once you understand it, you'll be much easier to deal with.” ― Ayn Rand, Atlas Shrugged
And when the evidence is presented in a stark, context-free, spin-managed manner, casual observers tend to agree with the charges. There was no question the feds would take an interest in Bitcoin with desire to take it down, and duly analyzed all paperwork from that perspective until they found an excuse to. Require enough paperwork, and somewhere a sufficient transgression will be found.
Yes, the government is the most evil thing in the history of evil, there is no such thing as a justified law, and this is just the parasites trying to leech off of and get power over the brilliant Galt-like geniuses whose intelligence was so inestimably massive that they apparently consciously filed a legal form that said "oh, that thing that we do and advertise that we do? Of course we don't do that".
Yes, the government is the most evil thing in the history of evil
Governments, in practice, do tend to be sources of substantial amounts of "evil" behavior. Probably the largest source, outside of religious institutions. So while your attempt at sarcasm is appreciated, it's pretty off base.
there is no such thing as a justified law
Nah, limit "law" to nothing more than a collective extension to our innate, individual right to self-defense[1], and you'd find very few arguments against it, even from radical libertarians.
I can't understand how you trash religions institutions in one paragraph, then veer off into the utterly supernatural by talking about "innate" individual rights in the next.
You can break down the argument for individual rights as follows.
(a) The best and moral thing for you (or anyone) to do is to act in your own self-interest, i.e., in the pursuit of your happiness
(b) The governmental system that best allows this is one in which each individual is sovereign as long as they don't impinge on another's sovereignty. i.e., _initiating_ force is diasllowed, but retaliatory force under objective control (i.e., the government) is allowed.
Of course, establishing (a) and (b) objectively requires many dissertations-worth of philosophy, but I think it can be and has been done. And fortunately, they are intuitively plausible.
I wouldn't call rights "innate," but some people do. More often, people arguing for "innate" rights are just making an assertion.
Perhaps "innate" wasn't the best choice of words. Certainly I did not intend to make any "supernatural" claim in what I said. The problem with any discussion of "rights" is that, ultimately, it reduces to a debate over metaphysics and epistemology. What is a "right" and what is the source of a "right", etc.
In this case, I am taking an intuitive approach, based on the idea that if I exist, I can choose to defend myself, and I can do so without initiating any forceful action against anyone else. And if I choose not to defend myself, I (presumably) stand to cease to be. IMO, that makes "self-defense" what one could reasonably refer to as an innate[1] right.
It seems like you're arguing that a right is something that you can choose to do, as long as it doesn't involve using force against someone. I agree with that, but it begs the question. Why _can_ you choose to do anything you want? And why _can't_ you initiate force against people? My earlier answer is a starting point that connects rights to ethics.
Speaking of which, you're wrong that the question reduces to metaphysics and epistemology. I mean, it does, but only indirectly. Actually, the hierarchy is:
Why _can_ you choose to do anything you want? And why _can't_ you initiate force against people? My earlier answer is a starting point that connects rights to ethics.
Right, that question is exactly why I say that it devolvees into an argument over metaphysics and epistemology. Also, I acknowledge what you say about including ethics, although my opinion on that is that ethical discussions also - at some level - devolve into discussions of epistemology and metaphysics.
"What is good in a social context" is a less important question to me. I don't believe in trying to "engineer" social good by manipulating our view of what is or isn't a "right" of an individual. Society, to me, is just an emergent aspect of the interactions of individuals. I believe you have to start with what individuals can or cannot rightly do, and accept whatever consequences that may entail.
> Right, that question is exactly why I say that it devolvees into an argument over metaphysics and epistemology. Also, I acknowledge what you say about including ethics, although my opinion on that is that ethical discussions also - at some level - devolve into discussions of epistemology and metaphysics.
Well, you need epistemology and metaphysics to reason about ethics. I mean, if you deny basic facts of reality and/or have no means to valid knowledge, you won't get very far.
Given those, though, ethics really hinges on looking at the nature of a human being. For a human being, is there any need or method to figure out what is "good" and what is "bad"? That is how you end up getting to my original point (a).
> "What is good in a social context" is a less important question to me. I don't believe in trying to "engineer" social good by manipulating our view of what is or isn't a "right" of an individual. Society, to me, is just an emergent aspect of the interactions of individuals. I believe you have to start with what individuals can or cannot rightly do, and accept whatever consequences that may entail.
I agree. But that's because of the implications of (a). And you still have to figure out how we're all going to get along. That's all I meant by, "What is good in a social context."
I have never understood why having my rights denied, trampled upon and generally treated as nonexistent is considered a great evil when done by "government", but a great and necessary moral victory when done by "the free market".
I also do not understand how anyone can look at, say, the first few stages of the industrial revolution -- when, for example, in the United States any attempt to protect the innate rights of workers was viciously struck down in service to the great "freedom" of contract -- and believe that markets will solve problems on their own, or that government has no place beyond a bare minimum of defense of property.
But then, people also don't read Thomas Hobbes anymore, because even though he was right about the state-of-nature thought experiment, his ideas on its consequences are no longer fashionable.
Do you care to back up your claim about religious institutions. I am not saying that you are wrong, but you have made a very serious claim sans any quantifiable evidence.
Do you care to back up your claim about religious institutions.
No, I do not. Anybody who has even a passing familiarity with history should be able to recognize the truth in my comment. Beyond that, this discussion isn't important enough to me to justify going out and treating it like a research project and providing citations and sources in meticulous detail.
Yeah, actually the evidence demonstrates that an order of magnitude (or more) of people have been killed by governments than by religion. And most of those governments were (officially) atheistic.
If you have a value system that includes rationality, then religious institutions are diametrically opposed due to their "turtles all the way down" reliance on irrationality, no matter how deep you go eventually you have to make a leap of faith off of the rationality train.
"then religious institutions are diametrically opposed due to their "turtles all the way down" reliance on irrationality"
That's a pretty broad statement.
"no matter how deep you go eventually you have to make a leap of faith off of the rationality train."
The same is true of mathematics. Eventually you need to make certain assumptions that cannot be proved, or else you would have circular logic (among other issues).
The real mark of irrationality is an unwillingness to resolve or even acknowledge inconsistencies. Some religions have this feature, usually dressed up in a "this tests your faith" argument. Other religions demand that inconsistencies be resolved by religious authorities or by practitioners willing to devote time and effort.
In the past century, a large number of religious leaders from various religious have adjusted their doctrines and teachings in the face of scientific results. Not every religion is based on denying reality or condemning people who question core beliefs. I know an ultra-Orthodox rabbi who acknowledges that it is possible to be an observant, orthodox Jew who does not believe in God.
1) Yes, it is a broad statement about institutions devoted to religion.
2) Mathematics is based on logic, which doesn't need phenomenal "facts", just logical consistency. Physics, which uses mathematics needs both phenomenal facts and logical consistency, and since the more phenomenal facts can be discovered, the physical models can change. Mathematics is a tool of rationality, not a replacement for it.
3) Somewhat agreed that irrationality is an unwillingness to accept models rationally created. If the model of a system isn't created by phenomenal facts and logical consistency, then it is irrational.
We assume it is due to a _lack_ of evidence saying that MtGox is _not_ "evil". MtGox has a much shorter track record than the US banking industry. Corruption is like a cancer; It does not happen over night.
> Yes, the government is the most evil thing in the history of evil, there is no such thing as a justified law,
I agree that the quote is overblown in this context, but your argument is a strawman. Ayn Rand made strong intellectual arguments in _support_ of government and the rule of law, in contrast to anarchists and various flavors of libertarians.
"There was no question the feds would take an interest in Bitcoin with desire to take it down"
Perhaps, but the only reason that is relevant to attacking a Bitcoin exchange is if Bitcoin cannot survive without exchanges. I personally agree with that view, as everything I have seen suggests that no standalone Bitcoin economy is possible. On the other hand, a large number of people in the Bitcoin community disagree and seem to think that a Bitcoin economy can be bootstrapped.
"Require enough paperwork, and somewhere a sufficient transgression will be found."
The paperwork in this case was not very complicated; it plainly asks if the business transfers money at the request of its customers, and MtGox simply answered "no." It is not as though MtGox is being investigated for not filling out paperwork or for a bad answer to an ambiguous or confusing question. MtGox was already engaged in exchanging Bitcoin for USD and was already performing transfers of money for its customers when those forms were filled out.
I agree with your general sentiment, but I seriously doubt that anyone in the government was sitting there saying, "Bitcoin is a threat, let's take it down! Start with this exchange!" More likely, some regulator somewhere saw that Bitcoin was becoming popular and said, "Let's make sure they are following the same laws that other financial companies are expected to follow." Those laws predate Bitcoin; they may have been set up to protect large banks from small competitors, or they may have been created to protect individual Americans from fraud and predatory companies, but that is an entirely separate issue.
There was no question the feds would take an interest in Bitcoin with desire to take it down, and duly analyzed all paperwork from that perspective until they found an excuse to. Require enough paperwork, and somewhere a sufficient transgression will be found.
BINGO. Give this man a cookie. This kind of thing was inevitable, and you'd have to be blind to think the US Government is OK with even the idea of an unregulated currency like Bitcoin... even though it's not actually "anonymous" in the sense that some people claim. The fact that, combined with Tor it can be used in a pretty-damn-close-to-anonymous manner, and that it could enable a completely separate side/underground economy if it ever become popular enough (even without the ability to convert in and out of USD) you have to figure the US Gov (and other world governments) are going to take efforts to hinder its adoption. Why? Because control of money == power. And governments don't like it when the little people take back a little bit of their power.
1) The US govt is ok with Bitcoin: the Department of Treasury's FinCEN published guidance tacitly approving Bitcoin. This legal action is purely about MtGox who unlawfully did not register as an MSB.
2) There is already a completely anonymous store-of-value allowing a underground economies: plain old face-to-face USD cash transactions. Ever seen drug lords busted with stacks of USD bills?
3) The US govt is ok with transactions in a currency they don't control: it is perfectly legal to pay, for example, in Iranian rial on the US territory, if the seller and buyer agree to use this currency.
You seem to be some sort of tinfoil-kind-of-guy who thinks the government is out there to "stop Bitcoin".
The US govt is ok with Bitcoin: the Department of Treasury's FinCEN published guidance tacitly approving Bitcoin. This legal action is purely about MtGox who unlawfully did not register as an MSB.
So you believe everything the government tells you? Because we all know that no government agency or agent has ever distorted or misrepresented the truth, ever.
There is already a completely anonymous store-of-value allowing a underground economies: plain old face-to-face USD cash transactions. Ever seen drug lords busted with stacks of USD bills?
True, but irrelevant in this context. Bitcoin and USD aren't the same thing. Try crossing the border carrying large sums of physical USD bills sometime. Bitcoins, OTOH, can be exchanged digitally. Not even close to being in the same ballpark.
The US govt is ok with transactions in a currency they don't control: it is perfectly legal to pay, for example, in Iranian rial on the US territory, if the seller and buyer agree to use this currency.
Again, this is irrelevant, as using Iranian rial is even less convenient than using USD, at least in the US.
You seem to be some sort of tinfoil-kind-of-guy who thinks the government is out there to "stop Bitcoin".
Please refrain from personal attacks, this is not Reddit. I trust our government about half as far as I can throw it, but that doesn't make me a "tinfoil guy". It makes me somebody who has at least a passing familiarity with history and who can use a little logic, reason and inference here and there. That's all.
I'm not claiming there's some big, grand, X-Files like conspiracy going on here... but to ignore the fact that the US Government has many reasons to try to quietly put the screws to bitcoins seems unreasonable to me.
If you used a "little logic" (as you say), you would recognize that the US govt would rather benefit economically from Bitcoin via sales taxes (trade) and income taxes (mining), rather than block it.
And yes, I do think you are ludicrous to see FinCEN's statement as not representing their true desires.
If the US govt was truly after Bitcoin you would see the Congress starting talking about laws against it, rather than a lawsuit about "so and so did not register as an MSB".
The feds have not taken bitcoin down, and they don't even seem to be trying to at this point.
Speaking as an Objectivist, the quote is becoming somewhat apt for the us financial industry, which is (and long has been) by far the most government-controlled industry. But its not yet apt for bitcoin in particular.
Interesting that the MTB/MSB laws where what they used to go after e-gold a decade or so ago.
E-Gold got used by customers even sketchier than anything I've seen BTC used for -- I used to think of it as the carder currency, but it was also heavily used in the CP world, I think. They really hated e-gold, but chose to use the MSB laws against it.
I know the e-gold guys tried to go out of their way to be as compliant as possible, too. They were fundamentally pro-liberty/pro-gold people, not involved in the "sketchy" business, and had been fully cooperating with authorities as much as they could (e-gold was not really about anonymity as much as "honest money"; they had bank-level KYC requirements for accounts at some point, although initially they had none.).
The interesting question is whether fully KYC/etc. compliant Bitcoin businesses will be allowed to register as MSBs, or if there will be artificial roadblocks put up. One issue is the global pseudonymous network that is Bitcoin once it leaves a KYC-compliant site, but that isn't too different from either a KYC-compliant bank that pays out physical cash or one which sends SWIFT wires to overseas banks with more lax KYC requirements (or issues prepaid debit cards).
Some carders used e-gold, but because most of the major fraud gangs operated out of Eastern Europe/Russia, the dominant carder currency was generally WebMoney.
e-gold was actually incredibly popular for online gambling and participating in HYIP(short term Ponzi schemes). Not exactly the most squeaky clean activities, but not exactly terrorism or whatever else the feds used to shut down e-gold.
Webmoney got big after e-gold, iirc. (I was a consultant to e gold and was working on a digital blinded token currency backed in egold at the time in Anguilla). My memory that far back is kind of hazy, though.
The HYIP stuff was amazing. I don't remember it being so popular for gambling. The other gold currencies which turned out to be scams (osgold, etc) were super lulzy too.
>As part of the account opening process, Wells Fargo required Karpeles and Mutum Sigillum LLC to complete a "Money Services Business (MSB) Accounts, Identification of an MSB Customer" form. That document was completed on May 20, 2011 and identified Mutum Sigillum LLC as a business not engaged in money services.
Were the FinCEN rules in effect on May 20, 2011? I see this on the "Guidance"[0] released in March (starting the "background" section):
>On July 21, 2011, FinCEN published a Final Rule amending definitions and other regulations relating to money services businesses ("MSBs").4 Among other things, the MSB Rule amends the definitions of dealers in foreign exchange (formerly referred to as "currency dealers and exchangers") and money transmitters.
Separately, since the guidance was issued, there seems to have been wide-spread confusion / misinterpretation. If they ignored it after this was issued, then they obviously were in violation, but before? How do ambiguous-interpretation cases get handled?
> Were the FinCEN rules in effect on May 20, 2011?
It doesn't really matter, because while the form is referenced, the alleged crime supporting the warrant isn't incorrectly filling out a form on May 20, 2011, it is conducting unlicensed money transmission business.
Currency trading laws and regulations seem to pretty clearly state what they were doing wrong. This seems to be a shortcoming of MTGOX itself, not a direct attack on bitcoin. MTGOX's claims of compliance in the US seem to be hogwash at this point.
I wonder if HN user thinkcomp had anything to do with this. It says that it was done based on information from an informant, and he's been harassing everyone touching money without a license. This has to be the first thread about money transmission that he hasn't posted in.
Aaron (aka thinkcomp) certainly has a issue with this stuff given his FaceCash experience. As to whether he was involved or not is sort of irrelevant though isn't it?
This means it doesn't matter if bitcoin is a currency or not. If your taking money from one fiat currency account and moving it to another fiat currency account on customer instructions you can fall into the money transmitter classification.
It's also one of the (many) reasons that if you're running a marketplace startup you don't want to run an intermediately account that does pass-through for the transactions but instead use a service like Paypal X or Balanced which complies with relevant money transmission laws.