How to Get a Money Transmitter License | JW Surety Bonds
How to Get a Money Transmitter License | JW Surety Bonds
How to Obtain a Cryptocurrency Money Transmitter License
The Quick Guide To Money Transmitter Licenses
Everything You Need to Know About US Bitcoin Regulations
Money Transmitter Bonds for Cryptocurrency Underwrting
Playing with fire with FinCen and SEC, Binance may face a hefty penalty again after already losing 50 percent of its trading business
Owning and using Bitcoin is not a crime, but that is what FinCEN regulation is attempting to make it.
Bitcoin miner = money transmitter From FinCEN: "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" In other words, if you mine bitcoins, FinCEN is trying to make you a money transmitter and subject you to all the heavy handed regulations. Bitcoin exchange = money transmitter From FinCEN: "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" money transmitter = $25m bond and onerous regulation From Jeff Berwick's resignation: "Specifically, in the US and Europe, there are an incredible amount of banking, money and even telecommunications rules and regulations that would have to be adhered to if the company had any hope of survival. Not least of which was a $25 million "insurance bond" necessary as being deemed a "money transmitter" in the US." Don't be fooled. The FinCEN ruling is veiled attempt at making bitcoin use a crime via arbitrary rules and regulations. It is a natural right to exchange goods and services, and one does not need to beg for permission to engage in such activity. The real criminals in such exchanges would be the ones jailing people for victimless activities.
Reddit Block Erupter USB (ASICMiner USB miner) Group Buy!
DUE TO LACK OF INTEREST, I AM CANCELLING THIS EARLYDO NOT SEND FUNDSTHE TEXT IS BEING KEPT FOR ARCHIVAL PURPOSES With the announcement of new USB Mining Hardware from ASICMiner (https://bitcointalk.org/index.php?topic=195004.msg2025318#msg2025318), I'm sure a lot of people are yelling "SHUTUP AND TAKE MY MONEY" but can't quite afford the minimum purchase of "more than 300 devices." I therefor propose a Reddit group buy. Terms: My Responsibilities: Within one hour of making this post, I will send friedcat a private message expressing interest in purchasing a group of Block Erupters. I will keep an encrypted wallet on my computer, with an updated backup of the encrypted wallet.dat on the cloud at all times. Within 72 hours of receipt of confirmed orders for 301 Block Erupters, I will post on this subreddit that the minimum number of orders has been reached, and, if possible, give everyone 24 hours to get final orders in. I reserve the right to place the order immediately, without the above notice, if, in my judgment, delay would risk an inability to secure an order with ASICMiner. Upon receiving Block Erupters from ASICMiner, I will ship all units with tracking information within 72 hours. Upon request, I will provide any of the moderators of this subreddit with my personal information, including full name, address, telephone number, and a copy of state issued ID. If ASICMiner will not accept my order, or if by May 31, 2013, this groupbuy has not received 301 orders, then within 72 hours I will return all bitcoins sent, less transaction fees. ** Your Responsibilities ** To place an order for (a) Block Erupter(s):
Send 2.04 BTC (or 2.14 BTC if shipping outside the US) per Block Erupter ordered to
Post the transaction ID and bitcoin address to use to return coins to in the event that the group buy fails as a new reply in this thread.
Private message me with your shipping address.
** Other Terms ** All disputes under this agreement shall be governed by the laws of the State of California. Parties agree to submit to the personal and exclusive jurisdiction of the courts located within the county of Santa Clara, California. No party to this agreement shall be held liable for failure of ASICMiner to ship Block Erupters. Damages for breach shall be limited to return of bitcoins. In the event that not all orders by reddit users can be filled, Block Erupters will be sent out on a first ordered, first shipped basis. So, other stuff (not part of contract). Let me try to answer some of your likely concerns: This is a scam/Why should I trust you? Of course, you're welcome not to. That being said, here's a few reasons you might think I'm trustworthy:
I've been on Reddit over two years - this would be a very complicated way to scam someone.
I'll be sending mods my personal information so that they (and you) are free to sue me if this turns into a scam.
I'm a law student (see my posts on /lawschool) and currently applying for a moral character determination in California. Scamming you would really screw up my professional career.
I'm requiring that transactions be posted here to increase transparency. People will be able to tell if/when money has been sent, and (if necessary), if/when money has been refunded.
Why all the legalese? Like I just said, I'm a law student ;-) That being said, this is pretty straight forward. In the first section, I'm saying I'll keep the coins I receive safe, give the reddit community a last chance to get in on the order, place the order promptly, and ship the order. If I can't do that, I'll refund your bitcoins (none of the BFL bullshit where they take your bitcoins, wait for the market to explode, and refund you in cash). If you want to order, send me money, post here with proof that you did so, and PM me where to ship your order to. The other stuff: Don't sue me in timbuktu, don't sue me if ASICMiner does something wrong. If something does go wrong, don't expect anything more than getting your bitcoins back. I will ship out orders first made, first shipped. I don't have bitcoins - can I use paypal or something? Nope; that might make me a money transmitter under FinCEN regs, and I'm not bonded for that. For what it's worth though, I'm in the same boat as you! I'll be using localbitcoins to buy some tomorrow.
Prediction: Coinbase will be shut-down...Do not keep coins or funds in Coinbase (or any other exchange or startup) .
I predict that at some point unless something changes, Coinbase (And many, many other Bitcoin related businesses) will eventually be shut down/investigated just like Mutum Sigillum LLC currently is. The reason is simple: Almost all of the current wave of bitcoin -related startups (even well-funded ones) seem to be simply ignoring the plain-english wording in the FinCEN and State guidelines for the regulatory environment. For example: From Coinbase's FAQ:
Coinbase is not a money transmitter. Coinbase assists its users in Bitcoin transactions.
By contrast, 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. 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.
What does coinbase DO if not *accept virtual currency from one person (itself or sellers) and transmit it to others in exchange for USD? Even if there was no USD involved, EVER, (which it clearly is), then we have
The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA. 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 strongly implies that even if you simply assist users to transfer BTC, or hold BTC, or manage online wallets (like blockchain.info), then you are operating as a money transmitter under the law. So what do money transmitters have to do to comply? 1) they have to be licenced, in EVERY state which they do business in. 2) They have to register with FinCEN and are subject to FinCEN regulations. 3) In particular, among other things, they must:
Before concluding any transaction with respect to which a report is required under § 1010.311, § 1010.313, § 1020.315, § 1021.311 or § 1021.313 of this chapter, a financial institution shall verify and record the name and address of the individual presenting a transaction, as well as record the identity, account number, and the social security or taxpayer identification number, if any, of any person or entity on whose behalf such transaction is to be effected. Verification of the identity of an individual who indicates that he or she is an alien or is not a resident of the United States must be made by passport, alien identification card, or other official document evidencing nationality or residence ( e.g., a Provincial driver's license with indication of home address). Verification of identity in any other case shall be made by examination of a document, other than a bank signature card, that is normally acceptable within the banking community as a means of identification when cashing checks for nondepositors ( e.g., a driver's license or credit card).
When was the last time you supplied a drivers licence and Photo ID to buy bitcoin? Hell coinbase even says EXPLICITLY that they don't intend on obeying this regulation:
We do not guarantee the identity of any user or other party or ensure that a buyer will complete a transaction.
And this doesn't even cover the dozens of different STATE laws, all of which are significantly more complex and onerous, including minimum-asset requirements and surety bond requirements. Of course, all of this is absolutely asinine. Its totally useless and causes extreme regulation that stifles innovation. HOWEVER, unless the bitcoin community and bitcoin startups start lobbying to get some of these rules changed, then you have two options if you want to operate a bitcoin-related business in the US: 1) comply with the (idiotic) regulatory environment of legitimate businesses in the united states. 2) Run a black-market business until you get caught and your assets are seized and your customers get shafted by the Fed. Since all of the current Bitcoin-related enterprises seem to be aiming for option 2), I strongly recommend that anyone in the community avoid storing or holding any kind of long-term value in these systems until a startup shows up that has an interest in actual regulatory compliance or the asinine laws are changed.
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. 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 moneylaunderingscandals as well as the fact that criminals continue to use of plain old cash. The effectiveness of anti-money laundering regulations is increasinglyquestioned. 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 civilassetforfeitures 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:
Possession of large amounts of cash is suspicious, because mostly only criminals (terrorists and money launderers) do this;
Banks can be entrusted with all your money, distrust of banks is no justification to keep more than $10,000 outside of the banking system;
The government acts in your best interest and can be trusted not to misuse the fact your funds can be frozen and seized.
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  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)).
Coinbase Responds To New York's Recently Proposed BitLicense (from the Coinbase blog)
Coinbase has now completed its formal response to the New York Department of Financial Services on their recently proposed BitLicense Draft. You can download our formal response here. [PDF] To summarize the main points of our response:
We feel the BitLicense is duplicative of the current money transmitter regulations which are a more appropriate form of regulation for the future of digital currency.
Certain aspects of the proposed recordkeeping and anti-money laundering requirements would eliminate the core utility of Bitcoin and cryptocurrencies, substantially hindering the innovation which all of us including, purportedly the NYDFS, find so promising.
Any regulation of virtual currencies at this stage should take care to exclude non-financial use cases and companies who are not storing Bitcoin on behalf of customers.
While we applaud the NYDFS for being forward thinking on virtual currencies, we feel the proposed BitLicense falls short of its stated goal of balancing customer protection and rooting out illegal activity while encouraging innovation. We remain cautiously optimistic that the NYDFS will work to reach a more appropriate balance that recognizes Bitcoin as a rapidly evolving technology. We dive into each point in a bit more detail below. The BitLicense Would Be Redundant Given Current Money Transmitter Regulation A separate BitLicense would create unnecessary inefficiency and expense for both the NYDFS and licensees without reducing risk to consumers or risk of illegal activity. There is a surprising amount of overlap between the proposed BitLicense and Money Transmitter Licenses. The current money transmitter licensing system already has a great deal of overlap between each state, requiring companies to go through the same processes up to 48 times, including fingerprinting, surety bonds, capital requirements, costly on-site examinations, and reporting obligations. Adding a BitLicense would further duplicate this effort. This is especially true for Bitcoin business that wish to engage in other forms of money transmission (i.e. stored value). Furthermore, we believe FinCEN put a clear and strong AML policy stake in the ground with their Bitcoin guidance in March of last year. We believe it would be in the best interest of New York residents, the NYDFS, the law enforcement community, and the Bitcoin community if we were all working with a uniform set of AML obligations. We believe the Department could broaden its interpretation of “money” to include virtual currencies and regulate virtual currency businesses under current money transmitter rules. The BitLicense As Proposed Could Eliminate The Core Utility Of Bitcoin: An Open Payment Network Perhaps the greatest feature of Bitcoin, as well as other cryptocurrencies, is the fact that it is an open protocol that anyone can use. As such, it is possible for a wide range of individuals to develop and utilize different solutions—such as near instantaneous and free remittances, micro-transactions, or other distributed ledger uses—that are capable of worldwide interoperability so long as they are based on the same open protocol. However, by requiring the collection of information not supported by the protocol (such as the names, account numbers, and physical address of all parties to a transaction), the proposed rule would force licensees to operate closed, proprietary payment networks (similar to Visa or PayPal), effectively eliminating the utility of this feature and stifling innovation. Regulation Should Apply Only To Companies Holding Customers’ Bitcoin Finally, the scope of activity captured by the definition of “Virtual Currency Business Activity” in the proposed regulation could include a host of non-financial services businesses. The distributed ledger at the core of many virtual currencies allows for inexpensive, reliable, and public recordkeeping which can be utilized in myriad of innovative ways that are unrelated to money. These uses should not be governed by statutes established to regulate money transmission. In addition, we feel that only companies who store Bitcoin on behalf of customers should be considered for regulation now or in the future. Coinbase is an example of such a company, and luckily has the resources to work diligently with regulators. But many Bitcoin companies do not store Bitcoin on behalf of their customers or are startups incapable of bearing the cost at their current stage. Regulation that is more targeted would go a long way to benefiting innovation while accomplishing the same goals of consumer protection and rooting out illegal activity. Specifically, it would be highly beneficial to allow companies to operate below certain thresholds before needing a license, with a reasonable onramp to licensure should the business grow. This would greatly reduce the barrier to innovation while maintaining safety for the average consumer. Conclusion In closing, we understand the difficulty faced by the Department in developing a framework for the regulation of Virtual Currencies in a manner which takes into account the various participants, complexities and concerns involved, and respectfully request that the Department consider the points discussed above in its development of its final rule. Coinbase remains firmly committed to collaborating with the Department and other regulatory bodies, as we have since inception. For more details, our full response to the NYDFS can be downloaded here. [PDF]
Secure a Money Transmitter Bond. Finally, obtaining a money transmitter license may also require posting a security, often in the form of a surety bond. A surety bond for cryptocurrency money transmitter businesses works as a safeguard against fraudulent or illegal business practices, but for the public and the state, not the business itself. The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has penalized what it terms a “peer-to-peer cryptocurrency exchanger” in a historic case of Anti-Money Laundering (AML) violation by a Bitcoin trader.. California resident and Bitcoin seller/buyer Eric Powers was adjudged to have failed to comply with the Bank Secrecy Act (BSA) registration and requirements during a two-year California native Jacob Burrell-Campos, 21 years old, has been arrested without bail for dealing on Bitcoin without a money transmitter license. Through Cryptocurrency Exchanges he had an "illegal money transmitting business," the United States Department of Justice stated Friday, August 17th. A Money Transmitter Bond is a type of surety bond required by the individual states. The federal government, forty-seven states, and the District of Columbia all require licenses for money transmitter businesses. (FinCEN), of the United States Treasury Department determined that ” bitcoin exchanges may be money transmitters, even if they In 2014, FinCEN ruled that bitcoin exchanges and payment processors are money transmitters under U.S. law. Bitcoin exchanges involve matching buyers and sellers, while processors facilitate purchases between consumers and merchants. This ruling is worrying to some, as there may be few limits to the scope of the MSB (specifically money
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