The 2013 San Jose Bitcoin Conference has proven to be rather controversial. While it is considered to have been a success, being well attended and attracting high profile speakers, it has brought up a very divisive topic in the Bitcoin community…regulation.
By Paul Rosenberg, FreemansPerspective.com
An increasing number of people have complained about governments and central banks in recent years, even using the word “tyranny” to describe them. They are, of course, called names in the establishment press: conspiracy theorists, mainly.
Calling someone a name, however, does not erase their argument (at least not among rational people) and both the governments and the big banks stand accused.
Up till now, however, these accusations were never accepted by the general public. The average guy really didn’t want to hear about the evils of government money. After all, that was the only thing he had ever used to buy food, clothes, gasoline, cars, and so on. He didn’t want to acknowledge the accusations because he feared what might happen to him without his usual money.
Now, however, we have a brand new currency (called Bitcoin) available to us: something radically different. This gives us a new way to directly address the subject of monetary tyranny, providing a clear test for the governments and money masters of the world:
The Electronic Frontier Foundation, which aims to defend “your rights in the digital world”, has announced that they will again accept Bitcoin donations.
Via the EFF website
Today, we’re happy to announce that we will be accepting Bitcoin donations through our website. You can use them to make one-time donations, set up monthly donations or get an EFF membership (which includes awesome membership swag like EFF hats and digital freedom t-shirts).
While we are accepting Bitcoin donations, EFF is not endorsing Bitcoin. EFF does not typically endorse products or services, and we certainly do not endorse any of the electronic payment methods that we currently accept (credit cards, PayPal, and now BitPay).
The EFF stopped accepting Bitcoin donations two years ago. They give the reasons for the reversal of this decision as…
- “Censorship by payment intermediaries is an ongoing problem for free speech online – so it makes sense to start diversifying the available options.”
- “You can now give Bitcoins to EFF in the same way that you can give stock.”
- “Our research and FinCEN’s guidance removed a key risk to EFF.”
- “Our members keep politely asking for it.”
The Russian based online payment service allows users to store their funds in different “purses”. For example WME for Euros and WMG for gold. The new purse, WMX, is denominated in Bitcoin where one WMX = 0.001BTC.
WebMoney has its own exchange to allow users to convert between the supported currencies. This change means that users will be able transfer Bitcoin(WMX) to any of WebMoney’s other denominations.
More details here.
The problem here is that Mt. Gox is operating as an unlicensed money transmitter.
With their recent guidance, FinCEN decided that virtual currency exchangers are money transmitters.
“An administrator or exchanger that (1)accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations.”
Mt. Gox is not a US company; however, it does a lot of business in the States and is not registered with FinCEN.
An informant working with a Homeland Security agent signed up for both Mt. Gox and Dwolla accounts. After making a few transactions, he was able to determine that his funds had gone through a Wells Fargo bank account owned by Mt. Gox and opened by the exchanges’ CEO Mark Karpeles. The account was opened by Mark in May 2011 who at the time signed a Wells Fargo form declaring that his business was not a Money Services business or a Money Transmitter. Of course this was almost 2 years prior to FinCEN’s guidance on the issue.
The Warrant states that Mt. Gox is in violation of 18 U.S.C. section 1960. The punishment for this can include fines and up to 5 years in prison.
Ars Technica obtained a copy of the warrant which can be read here.
As Forbes’ Kashmir Hill demonstrated last week, the Bitcoin economy is small. Hill attempted to live on Bitcoin for a week going through coffee withdraw and losing 5lbs in the process. She should have waited a week.
This means you can use your bitcoins (although indirectly) to buy a whopper at Burger King, a bed to sleep in at Marriott, some new shoes from Nike and hundreds more. Gift cards purchased through Gyft can be spent at over 50,000 locations. However, the service is only available in the US. If you want to live on Bitcoin elsewhere better move to Berlin.
Bitcoiners, Bart Chilton is here to protect you. In a Monday interview on Bitcoin with the Financial Times the CFTC’s lead commissioner Bart said “It’s not monopoly money we’re talking about here – real people can have real risk in these instruments, and we need to ensure that we protect markets and consumers, even in what at first blush appear to be ‘out there’ transactions.”
Another regulator with their eye on the currency can only add to the headache that US based Bitcoin businesses are already experiencing as they try to sort through the implications of FinCEN’s recent guidance and deal with scared banks closing their accounts.
As Bitcoin is a global, non-political currency the obvious question is will heavy regulation simply move Bitcoin businesses off shore? This possibility isn’t lost on the Financial Times who discussed this with Bitcoin entrepreneur Roger Ver. The Bitcoinstore.com founder said that he knew of a few Bitcoin entrepreneurs who had moved to Panama to look into basing their businesses outside the US adding “Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency,”
Chilton is head of the CFTC, that’s the Commodity Futures Trading Commission. As Bitcoin is not a traditional commodity one might not think of the CFTC as a Bitcoin regulator. However, the regulator has broad authority and certainly Mr. Chilton sees his organization as having authority. Reuters is reporting him as saying “Here’s what I know for sure: we could regulate it if we wanted. That is very clear,”
Last November Mt. Gox and CoinLab, a small US based Bitcoin exchange, entered into an agreement “to service the Bitcoin exchange market in a mutually beneficial manner”. According to CoinLab’s formal complaint, the agreement allowed CoinLab an exclusive license in North America to use Mt. Gox’s software in providing exchange services, in return CoinLab would provide the Japan based Mt. Gox with access to its US banking relationships.
CoinLab alleges that Mt. Gox failed to uphold their end of the bargain and is requesting damages for breach of contract.
After a string of US banks closing the accounts of Bitcoin businesses, it seems that Canadian banks are following suit, well at least the Royal Bank of Canada, or RBC.
What was an incident now appears to be a trend. Banks are refusing to work with Bitcoin businesses…It would seem out of fear. In the latest example TransferWise, a business that offers low fee international money transfers, has announced that they will no longer be processing transfers to Bitcoin exchanges as their banking providers are “not comfortable with Bitcoin”.