Silk Road forums
Discussion => Security => Topic started by: StExo on May 23, 2013, 06:14 pm
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I've received a mail from a new user who has asked me to post the following on his behalf. Some parts have been censored or removed entirely to protect the identity of individuals. I feel some of the information below is known to the bitcoin community but still, I guess a little more can't hurt.
Dear StExo,
Given your quality posts within SR forums please may you post this relevant commentary regarding a recent subpoena effecting the exchange of Bitcoins within the US;
Quote
BITCOIN CASE MEANS THAT DEALERS ARE CONSIDERED UNLICENSED MONEY TRANSMITTERS
A supboena, issued by a US District Court Judge in Maryland, requiring the seizure, at a local credit union, of an account used to trade the digital currency known as Bitcoin, has demonstrated the position of the United States on digital currency exchanges. Bitcoin traders, which are not regulated by a financial institution or governmental body, must register as money transmitters, with both the financial Crimes Enforcement Network, and the state where they operate, according to a recently FinCEN Guidance on digital currency.
The United States has a take-no-prisoners attitude towards unlicensed money service businesses, as we learnt to our dismay in the <removed> case. If Bitcoin traders, and other digital currency exchange houses, where the digital items are redeemed for dollars, fail to register with Federal and state regulators, the Bitcoin industry could suffer an early exit from the United States.
Apparently, the trading company, targeted by Homeland Security Investigations, told the credit union that it was not required to register as a money transmitter. Should your bank have any current customer who may be engaged in the cash redemption of Bitcoins, you should turn all your information on that customer to outside legal counsel immediately, and request an opinion on whether the account should be closed, and whether your bank should take other action.
The commentary was published by <removed as this is personally identifiable information>.
Kind regards,
<name>
Sources Supplied:
1. http://www.thedailysheeple.com/us-seizes-top-bitcoin-exchange-as-crackdown-begins_052013
2. http://rt.com/usa/bitcoin-exchange-seized-crackdown-begins-334/
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BTC needs to redefine itself as a commodity over a currency.
If the gov succeeds in destroying BTC there is no less than a dozen others waiting to take the throne. The instability caused in digital currencies would be disastrous.
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BTC needs to redefine itself as a commodity over a currency.
If the gov succeeds in destroying BTC there is no less than a dozen others waiting to take the throne. The instability caused in digital currencies would be disastrous.
My issue with turning bitcoins into a commodity is levied taxes and trading restrictions. Fair enough they'd be hard as hell to implement but it's still a factor. On the other hand, monetary instruments isn't even a good category for it since they too can be very heavily regulated.
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BTC needs to redefine itself as a *derivative* over a currency.
There. Fixed it for you.
Right now Bitcoin is in a grey area of the law. The FINCEN bullshit may stick. Or it may not. There aren't any clear regulations which can undeniably be used to govern Bitcoin. On the other hand, there ARE clear regulations which govern commodity transactions. The CFTC is in charge of all that.
With derivative transactions, they are all completely unregulated. You can place derivative trades with insider knowledge and cash in, all completely legally. Yes, really. But if you buy stock, you're dead.
Bitcoin is the perfect derivative. It doesn't exist anywhere but virtually and is an electronic contractual transaction performed between two or more parties. Its value is derived solely by the trade of that instrument between various buyers and sellers electronically. This fits the very definition of what a derivative is. This is what I would argue in court if I were ever charged with such a fictitious joke of a crime.
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BTC needs to redefine itself as a *derivative* over a currency.
There. Fixed it for you.
Right now Bitcoin is in a grey area of the law. The FINCEN bullshit may stick. Or it may not. There aren't any clear regulations which can undeniably be used to govern Bitcoin. On the other hand, there ARE clear regulations which govern commodity transactions. The CFTC is in charge of all that.
With derivative transactions, they are all completely unregulated. You can place derivative trades with insider knowledge and cash in, all completely legally. Yes, really. But if you buy stock, you're dead.
Bitcoin is the perfect derivative. It doesn't exist anywhere but virtually and is an electronic contractual transaction performed between two or more parties. Its value is derived solely by the trade of that instrument between various buyers and sellers electronically. This fits the very definition of what a derivative is. This is what I would argue in court if I were ever charged with such a fictitious joke of a crime.
+1
I think you just quoted Mark Kerpeles defense to DHS. What's ridiculous is that they're citing a FINCEN guideline from 03/19/13 in the case. Even though this guideline didn't exist when Mark created Mutum Sigillum, therefore he wasn't required to register as a MSB at the time of opening the account. It doesn't bode well for the Bitcoin economy in US as it seems like FINCEN can just write a guideline and then you have to be instantly compliant or face criminal charges.
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This thing of ours gets more and more complicated by the week.
I assume, though, even if transactions are subpoena'd, they are still untraceable to SR, correct?
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This is probably what happened to BitFloor (If I'm wrong please correct me)
What about exchanges in foreign countries that don't have extradition treaties with the US?
That might be the future.
Or on hidden servers (ala Tor). For all LEO knows, that hidden server could be 1000 ft. or 1000 miles away.
If a market exists (it does) it will eventually come about.
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Subbing.
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This thing of ours gets more and more complicated by the week.
I assume, though, even if transactions are subpoena'd, they are still untraceable to SR, correct?
That it does.
I'm not sure I know what you mean? Mutum Sigillum only transferred USD from US to Japan. It was Mt.Gox that exchanges USD for BTC. If you mean bitcoin transactions, they're all traceable via the Blockchain. That's why it's so important to shuffle your BTC before you send them to SR. To ensure the BTC you bought end up in someone else's possesion.
This is probably what happened to BitFloor (If I'm wrong please correct me)
What about exchanges in foreign countries that don't have extradition treaties with the US?
That might be the future.
Or on hidden servers (ala Tor). For all LEO knows, that hidden server could be 1000 ft. or 1000 miles away.
If a market exists (it does) it will eventually come about.
Not sure on circumstances of BitFloor. Bank of America froze their bank account is all we know currently.
Bitstamp fits that criteria (Slovenia). Although American banks could block transactions to those bank accounts if they wanted.
The server location isn't the issue. It's the bank account locations that are the problem.