FinCEN Declares Bitcoin Miners, Investors Aren't Money

Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies

https://www.systems.cs.cornell.edu/docs/fincen-cvc-guidance-final.pdf
FinCEN Guidance report may have implications for mixing protocols/services for Bitcoin (such as Wasabi wallet).
4.5.1. Providers of anonymizing services for CVCs Providers of anonymizing services, commonly referred to as “mixers” or “tumblers,” are either persons that accept CVCs and retransmit them in a manner designed to prevent others from tracing the transmission back to its source (anonymizing services provider), or suppliers of software a transmittor would use for the same purpose (anonymizing software provider).
4.5.1(a) Anonymizing services provider An anonymizing services provider is a money transmitter under FinCEN regulations. The added feature of concealing the source of the transaction does not change that person’s status under the BSA.
Relevant to Monero because the providers (or users) of the opt-in tumble/mixing services for Bitcoin may run into some legal trouble if this report is anything to go by. Would further solidify Monero's necessary existence.
Also
4.5.2. Providers of anonymity-enhanced CVCs [convertible virtual currencies]. A person that creates or sells anonymity-enhanced CVCs designed to prevent their tracing through publicly visible ledgers would be a money transmitter under FinCEN regulations depending on the type of payment system and the person’s activity.62 For example:
(a) a person operating as the administrator of a centralized CVC payment system will become a money transmitter the moment that person issues anonymity enhanced CVC against the receipt of another type of value
(b) a person that uses anonymity-enhanced CVCs to pay for goods or services on his or her own behalf would not be a money transmitter under the BSA. However, if the person uses the CVC to accept and transmit value from one person to another person or location, the person will fall under the definition of money transmitter, if not otherwise exempted.
(c) a person that develops a decentralized CVC payment system will become a money transmitter if that person also engages as a business in the acceptance and transmission of value denominated in the CVC it developed (even if the CVC value was mined at an earlier date). The person would not be a money transmitter if that person uses the CVC it mined to pay for goods and services on his or her own behalf.
submitted by Galwoa to Monero [link] [comments]

Lightning Network Will Likely Fail Due To Several Possible Reasons

ECONOMIC CASE IS ABSENT FOR MANY TRANSACTIONS
The median Bitcoin (BTC) fee is $14.41 currently. This has gone parabolic in the past few days. So, let’s use a number before this parabolic rise, which was $3.80. Using this number, opening and closing a Lightning Network (LN) channel means that you will pay $7.60 in fees. Most likely, the fee will be much higher for two reasons:
  1. BTC fees have been trending higher all year and will be higher by the time LN is ready
  2. When you are in the shoe store or restaurant, you will likely pay a higher fee so that you are not waiting there for one or more hours for confirmation.
Let’s say hypothetically that Visa or Paypal charges $1 per transaction. This means that Alice and Carol would need to do 8 or more LN transactions, otherwise it would be cheaper to use Visa or Paypal.
But it gets worse. Visa doesn’t charge the customer. To you, Visa and Cash are free. You would have no economic incentive to use BTC and LN.
Also, Visa does not charge $1 per transaction. They charge 3%, which is 60 cents on a $20 widget. Let’s say that merchants discount their widgets by 60 cents for non-Visa purchases, to pass the savings onto the customer. Nevertheless, no one is going to use BTC and LN to buy the widget unless 2 things happen:
  1. they buy more than 13 widgets from the same store ($7.60 divided by 60 cents)
  2. they know ahead of time that they will do this with that same store
This means that if you’re traveling, or want to tip content producers on the internet, you will likely not use BTC and LN. If you and your spouse want to try out a new restaurant, you will not use BTC and LN. If you buy shoes, you will not use BTC and LN.
ROAD BLOCKS FROM INSUFFICIENT FUNDS
Some argue that you do not need to open a channel to everyone, if there’s a route to that merchant. This article explains that if LN is a like a distributed mesh network, then another problem exists:
"third party needs to possess the necessary capital to process the transaction. If Alice and Bob do not have an open channel, and Alice wants to send Bob .5 BTC, they'll both need to be connected to a third party (or a series of 3rd parties). Say if Charles (the third party) only possesses .4 BTC in his respective payment channels with the other users, the transaction will not be able to go through that route. The longer the route, the more likely that a third party does not possess the requisite amount of BTC, thereby making it a useless connection.”
CENTRALIZATION
According to this visualization of LN on testnet, LN will be centralized around major hubs. It might be even more centralized than this visualization if the following are true:
  1. Users will want to connect to large hubs to minimize the number of times they need to open/close channels, which incur fees
  2. LN’s security and usability relies on 100% uptime of relaying parties
  3. Only large hubs with a lot of liquidity will be able to make money
  4. Hubs or intermediary nodes will need to be licensed as money transmitters, centralizing LN to exchanges and banks as large hubs
What will the impact be on censorship-resistance, trust-less and permission-less?
NEED TO BE LICENSED AS MONEY TRANSMITTER
Advocates for LN seem to talk a lot about the technology, but ignore the legalities.
FinCEN defines money transmitters. LN hubs and intermediary nodes seem to satisfy this definition.
Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
“…applicability of the regulations … to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies.”
“…an administrator or exchanger is an MSB under FinCEN's regulations, specifically, a money transmitter…”
"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…”
"FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. 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.””
"The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies.”
FinCEN’s regulations for IVTS:
"An “informal value transfer system” refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.”
“…IVTS… must comply with all BSA registration, recordkeeping, reporting and AML program requirements.
“Money transmitting” occurs when funds are transferred on behalf of the public by any and all means including, but not limited to, transfers within the United States or to locations abroad…regulations require all money transmitting businesses…to register with FinCEN."
Mike Caldwell used to accept and mail bitcoins. Customers sent him bitcoins and he mailed physical bitcoins back or to a designated recipient. There is no exchange from one type of currency to another. FinCEN told him that he needed to be licensed as money transmitter, after which Caldwell stopped mailing out bitcoins.
ARGUMENTS AGAINST NEED FOR LICENSING
Some have argued that LN does not transfer BTC until the channel is closed on the blockchain. This is not a defence, since channels will close on the blockchain.
Some have argued that LN nodes do not take ownership of funds. Is this really true? Is this argument based on a technicality or hoping for a loophole? It seems intuitive that a good prosecutor can easily defeat this argument. Even if this loophole exists, can we count on the government to never close this loophole?
So, will LN hubs and intermediary nodes need to be licensed as money transmitters? If so, then Bob, who is the intermediary between Alice and Carol, will need a license. But Bob won’t have the money nor qualifications. Money transmitters need to pay $25,000 to $1 million, maintain capital levels and are subject to KYC/AML regulations1. In which case, LN will have mainly large hubs, run by financial firms, such as banks and exchanges.
Will the banks want this? Likely. Will they lobby the government to get it? Likely.
Some may be wondering about miners. FinCEN has declared that miners are not money transmitters:
https://coincenter.org/entry/aml-kyc-tokens :
"Subsequent administrative rulings clarified several remaining ambiguities: miners are not money transmitters…"
FinCEN Declares Bitcoin Miners, Investors Aren't Money Transmitters
Some argue that LN nodes will go through Tor and be anonymous. For this to work, will all of the nodes connecting to it, need to run Tor? If so, then how likely will this happen and will all of these people need to run Tor on every device (laptop, phone and tablet)? Furthermore, everyone of these people will be need to be sufficiently tech savvy to download, install and set up Tor. Will the common person be able to do this? Also, will law-abiding nodes, such as retailers or banks, risk their own livelihood by connecting to an illegal node? What is the likelihood of this?
Some argue that unlicensed LN hubs can run in foreign countries. Not true. According to FinCEN: "“Money transmitting” occurs when funds are…transfers within the United States or to locations abroad…” Also, foreign companies are not immune from the laws of other countries which have extradition agreements. The U.S. government has sued European banks over the LIBOR scandal. The U.S. government has charged foreign banks for money laundering and two of those banks pleaded guilty. Furthermore, most countries have similar laws. It is no coincidence that European exchanges comply with KYC/AML.
Will licensed, regulated LN hubs connect to LN nodes behind Tor or in foreign countries? Unlikely. Will Amazon or eBay connect to LN nodes behind Tor or in foreign countries? Unlikely. If you want to buy from Amazon, you’ll likely need to register yourself at a licensed, regulated LN hub, which means you’ll need to provide your identification photo.
Say goodbye to a censorship-resistant, trust-less and permission-less coin.
For a preview of what LN will probably look like, look at Coinbase or other large exchanges. It’s a centralized, regulated and censored hub. Coinbase allows users to send to each other off-chain. Coinbase provides user data to the IRS and disallows users from certain countries to sell BTC. You need to trust that no rogue employee in the exchange will steal your funds, or that a bank will not confiscate your funds as banks did in Cyprus. What if the government provides a list of users, who are late with their tax returns, to Coinbase and tells Coinbase to block those users from making transactions? You need Coinbase’s permission.
This would be the antithesis of why Satoshi created Bitcoin.
NEED TO REPORT TO IRS
The IRS has a definition for “third party settlement organization” and these need to report transactions to the IRS.
Though we do not know for sure yet, it can be argued that LN hubs satisfies this definition. If this is the case, who will be willing to be LN hubs, other than banks and exchanges?
To read about the discussion, go to:
Lightning Hubs Will Need To Report To IRS
COMPLEXITY
All cryptocurrencies are complicated for the common person. You may be tech savvy enough to find a secure wallet and use cryptocurrencies, but the masses are not as tech savvy as you.
LN adds a very complicated and convoluted layer to cryptocurrencies. It is bound to have bugs for years to come and it’s complicated to use. This article provides a good explanation of the complexity. Just from the screenshot of the app, the user now needs to learn additional terms and commands:
“On Chain”
“In Channels”
“In Limbo”
“Your Channel”
“Create Channel”
“CID”
“OPENING”
“PENDING-OPEN”
“Available to Receive”
“PENDING-FORCE-CLOSE”
There are also other things to learn, such as how funds need to be allocated to channels and time locks. Compare this to using your current wallet.
Recently, LN became even more complicated and convoluted. It needs a 3rd layer as well:
Scaling Bitcoin Might Require A Whole 'Nother Layer
How many additional steps does a user need to learn?
ALL COINS PLANNING OFF-CHAIN SCALING ARE AT RISK
Bitcoin Segwit, Litecoin, Vertcoin and possibly others (including Bitcoin Cash) are planning to implement LN or layer 2 scaling. Ethereum is planning to use Raiden Network, which is very similar to LN. If the above is true about LN, then the scaling roadmap for these coins is questionable at best, nullified at worst.
BLOCKSTREAM'S GAME PLAN IS ON TRACK
Blockstream employs several of the lead Bitcoin Core developers. Blockstream has said repeatedly that they want high fees. Quotes and source links can be found here.
Why is Blockstream so adamant on small blocks, high fees and off-chain scaling?
Small blocks, high fees and slow confirmations create demand for off-chain solutions, such as Liquid. Blockstream sells Liquid to exchanges to move Bitcoin quickly on a side-chain. LN will create liquidity hubs, such as exchanges, which will generate traffic and fees for exchanges. With this, exchanges will have a higher need for Liquid. This will be the main way that Blockstream will generate revenue for its investors, who invested $76 million. Otherwise, they can go bankrupt and die.
One of Blockstream’s investors/owners is AXA. AXA’s CEO and Chairman until 2016 was also the Chairman of Bilderberg Group. The Bilderberg Group is run by bankers and politicians (former prime ministers and nation leaders). According to GlobalResearch, Bilderberg Group wants “a One World Government (World Company) with a single, global marketplace…and financially regulated by one ‘World (Central) Bank’ using one global currency.” LN helps Bilderberg Group get one step closer to its goal.
Luke-Jr is one of the lead BTC developers in Core/Blockstream. Regulation of BTC is in-line with his beliefs. He is a big believer in the government, as he believes that the government should tax you and the “State has authority from God”. In fact, he has other radical beliefs as well:
So, having only large, regulated LN hubs is not a failure for Blockstream/Bilderberg. It’s a success. The title of this article should be changed to: "Lightning Will Fail Or Succeed, Depending On Whether You Are Satoshi Or Blockstream/Bilderberg".
SIGNIFICANT ADVANCEMENTS WITH ON-CHAIN SCALING
Meanwhile, some coins such as Ethereum and Bitcoin Cash are pushing ahead with on-chain scaling. Both are looking at Sharding.
Visa handles 2,000 transactions per second on average. Blockstream said that on-chain scaling will not work. The development teams for Bitcoin Cash have shown significant on-chain scaling:
1 GB block running on testnet demonstrates over 10,000 transactions per second:
"we are not going from 1MB to 1GB tomorrow — The purpose of going so high is to prove that it can be done — no second layer is necessary”
"Preliminary Findings Demonstrate Over 10,000 Transactions Per Second"
"Gigablock testnet initiative will likely be implemented first on Bitcoin Cash”
Peter Rizun, Andrew Stone -- 1 GB Block Tests -- Scaling Bitcoin Stanford At 13:55 in this video, Rizun said that he thinks that Visa level can be achieved with a 4-core/16GB machine with better implementations (modifying the code to take advantage of parallelization.)
Bitcoin Cash plans to fix malleability and enable layer 2 solutions:
The Future of “Bitcoin Cash:” An Interview with Bitcoin ABC lead developer Amaury Séchet:
"fixing malleability and enabling Layer 2 solutions will happen”
However, it is questionable if layer 2 will work or is needed.
GOING FORWARD
The four year scaling debate and in-fighting is what caused small blockers (Blockstream) to fork Bitcoin by adding Segwit and big blockers to fork Bitcoin into Bitcoin Cash. Read:
Bitcoin Divorce - Bitcoin [Legacy] vs Bitcoin Cash Explained
It will be interesting to see how they scale going forward.
Scaling will be instrumental in getting network effect and to be widely adopted as a currency. Whichever Coin Has The Most Network Effect Will Take All (Or Most) (BTC has little network effect, and it's shrinking.)
The ability to scale will be key to the long term success of any coin.
submitted by curt00 to btc [link] [comments]

Lightning Network Will Likely Fail Due To Several Possible Reasons

ECONOMIC CASE IS ABSENT FOR MANY TRANSACTIONS
The median Bitcoin (BTC) fee is $14.41 currently. This has gone parabolic in the past few days. So, let’s use a number before this parabolic rise, which was $3.80. Using this number, opening and closing a Lightning Network (LN) channel means that you will pay $7.60 in fees. Most likely, the fee will be much higher for two reasons:
  1. BTC fees have been trending higher all year and will be higher by the time LN is ready
  2. When you are in the shoe store or restaurant, you will likely pay a higher fee so that you are not waiting there for one or more hours for confirmation.
Let’s say hypothetically that Visa or Paypal charges $1 per transaction. This means that Alice and Carol would need to do 8 or more LN transactions, otherwise it would be cheaper to use Visa or Paypal.
But it gets worse. Visa doesn’t charge the customer. To you, Visa and Cash are free. You would have no economic incentive to use BTC and LN.
Also, Visa does not charge $1 per transaction. They charge 3%, which is 60 cents on a $20 widget. Let’s say that merchants discount their widgets by 60 cents for non-Visa purchases, to pass the savings onto the customer. Nevertheless, no one is going to use BTC and LN to buy the widget unless 2 things happen:
  1. they buy more than 13 widgets from the same store ($7.60 divided by 60 cents)
  2. they know ahead of time that they will do this with that same store
This means that if you’re traveling, or want to tip content producers on the internet, you will likely not use BTC and LN. If you and your spouse want to try out a new restaurant, you will not use BTC and LN. If you buy shoes, you will not use BTC and LN.
ROAD BLOCKS FROM INSUFFICIENT FUNDS
Some argue that you do not need to open a channel to everyone, if there’s a route to that merchant. This article explains that if LN is like a distributed mesh network, then another problem exists:
"third party needs to possess the necessary capital to process the transaction. If Alice and Bob do not have an open channel, and Alice wants to send Bob .5 BTC, they'll both need to be connected to a third party (or a series of 3rd parties). Say if Charles (the third party) only possesses .4 BTC in his respective payment channels with the other users, the transaction will not be able to go through that route. The longer the route, the more likely that a third party does not possess the requisite amount of BTC, thereby making it a useless connection.”
CENTRALIZATION
According to this visualization of LN on testnet, LN will be centralized around major hubs. It might be even more centralized than this visualization if the following are true:
  1. Users will want to connect to large hubs to minimize the number of times they need to open/close channels, which incur fees
  2. LN’s security and usability relies on 100% uptime of relaying parties
  3. Only large hubs with a lot of liquidity will be able to make money
  4. Hubs or intermediary nodes will need to be licensed as money transmitters, centralizing LN to exchanges and banks as large hubs
What will the impact be on censorship-resistance, trust-less and permission-less?
NEED TO BE LICENSED AS MONEY TRANSMITTER
Advocates for LN seem to talk a lot about the technology, but ignore the legalities.
FinCEN defines money transmitters. LN hubs and intermediary nodes seem to satisfy this definition.
Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
“…applicability of the regulations … to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies.”
“…an administrator or exchanger is an MSB under FinCEN's regulations, specifically, a money transmitter…”
"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…”
"FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. 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.””
"The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies.”
FinCEN’s regulations for IVTS:
"An “informal value transfer system” refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form.”
“…IVTS… must comply with all BSA registration, recordkeeping, reporting and AML program requirements.
“Money transmitting” occurs when funds are transferred on behalf of the public by any and all means including, but not limited to, transfers within the United States or to locations abroad…regulations require all money transmitting businesses…to register with FinCEN."
Mike Caldwell used to accept and mail bitcoins. Customers sent him bitcoins and he mailed physical bitcoins back or to a designated recipient. There is no exchange from one type of currency to another. FinCEN told him that he needed to be licensed as money transmitter, after which Caldwell stopped mailing out bitcoins.
ARGUMENTS AGAINST NEED FOR LICENSING
Some have argued that LN does not transfer BTC until the channel is closed on the blockchain. This is not a defence, since channels will close on the blockchain.
Some have argued that LN nodes do not take ownership of funds. Is this really true? Is this argument based on a technicality or hoping for a loophole? It seems intuitive that a good prosecutor can easily defeat this argument. Even if this loophole exists, can we count on the government to never close this loophole?
So, will LN hubs and intermediary nodes need to be licensed as money transmitters? If so, then Bob, who is the intermediary between Alice and Carol, will need a license. But Bob won’t have the money nor qualifications. Money transmitters need to pay $25,000 to $1 million, maintain capital levels and are subject to KYC/AML regulations1. In which case, LN will have mainly large hubs, run by financial firms, such as banks and exchanges.
Will the banks want this? Likely. Will they lobby the government to get it? Likely.
Some may be wondering about miners. FinCEN has declared that miners are not money transmitters:
https://coincenter.org/entry/aml-kyc-tokens :
"Subsequent administrative rulings clarified several remaining ambiguities: miners are not money transmitters…"
FinCEN Declares Bitcoin Miners, Investors Aren't Money Transmitters
Some argue that LN nodes will go through Tor and be anonymous. For this to work, will all of the nodes connecting to it, need to run Tor? If so, then how likely will this happen and will all of these people need to run Tor on every device (laptop, phone and tablet)? Furthermore, everyone of these people will be need to be sufficiently tech savvy to download, install and set up Tor. Will the common person be able to do this? Also, will law-abiding nodes, such as retailers or banks, risk their own livelihood by connecting to an illegal node? What is the likelihood of this?
Some argue that unlicensed LN hubs can run in foreign countries. Not true. According to FinCEN: "“Money transmitting” occurs when funds are…transfers within the United States or to locations abroad…” Also, foreign companies are not immune from the laws of other countries which have extradition agreements. The U.S. government has sued European banks over the LIBOR scandal. The U.S. government has charged foreign banks for money laundering and two of those banks pleaded guilty. Furthermore, most countries have similar laws. It is no coincidence that European exchanges comply with KYC/AML.
Will licensed, regulated LN hubs connect to LN nodes behind Tor or in foreign countries? Unlikely. Will Amazon or eBay connect to LN nodes behind Tor or in foreign countries? Unlikely. If you want to buy from Amazon, you’ll likely need to register yourself at a licensed, regulated LN hub, which means you’ll need to provide your identification photo.
Say goodbye to a censorship-resistant, trust-less and permission-less coin.
For a preview of what LN will probably look like, look at Coinbase or other large exchanges. It’s a centralized, regulated and censored hub. Coinbase allows users to send to each other off-chain. Coinbase provides user data to the IRS and disallows users from certain countries to sell BTC. You need to trust that no rogue employee in the exchange will steal your funds, or that a bank will not confiscate your funds as banks did in Cyprus. What if the government provides a list of users, who are late with their tax returns, to Coinbase and tells Coinbase to block those users from making transactions? You need Coinbase’s permission.
This would be the antithesis of why Satoshi created Bitcoin.
NEED TO REPORT TO IRS
The IRS has a definition for “third party settlement organization” and these need to report transactions to the IRS.
Though we do not know for sure yet, it can be argued that LN hubs satisfies this definition. If this is the case, who will be willing to be LN hubs, other than banks and exchanges?
To read about the discussion, go to:
Lightning Hubs Will Need To Report To IRS
COMPLEXITY
All cryptocurrencies are complicated for the common person. You may be tech savvy enough to find a secure wallet and use cryptocurrencies, but the masses are not as tech savvy as you.
LN adds a very complicated and convoluted layer to cryptocurrencies. It is bound to have bugs for years to come and it’s complicated to use. This article provides a good explanation of the complexity. Just from the screenshot of the app, the user now needs to learn additional terms and commands:
“On Chain”
“In Channels”
“In Limbo”
“Your Channel”
“Create Channel”
“CID”
“OPENING”
“PENDING-OPEN”
“Available to Receive”
“PENDING-FORCE-CLOSE”
There are also other things to learn, such as how funds need to be allocated to channels and time locks. Compare this to using your current wallet.
Recently, LN became even more complicated and convoluted. It needs a 3rd layer as well:
Scaling Bitcoin Might Require A Whole 'Nother Layer
How many additional steps does a user need to learn?
ALL COINS PLANNING OFF-CHAIN SCALING ARE AT RISK
Bitcoin Segwit, Litecoin, Vertcoin and possibly others (including Bitcoin Cash) are planning to implement LN or layer 2 scaling. Ethereum is planning to use Raiden Network, which is very similar to LN. If the above is true about LN, then the scaling roadmap for these coins is questionable at best, nullified at worst.
BLOCKSTREAM'S GAME PLAN IS ON TRACK
Blockstream employs several of the lead Bitcoin Core developers. Blockstream has said repeatedly that they want high fees. Quotes and source links can be found here.
Why is Blockstream so adamant on small blocks, high fees and off-chain scaling?
Small blocks, high fees and slow confirmations create demand for off-chain solutions, such as Liquid. Blockstream sells Liquid to exchanges to move Bitcoin quickly on a side-chain. LN will create liquidity hubs, such as exchanges, which will generate traffic and fees for exchanges. With this, exchanges will have a higher need for Liquid. This will be the main way that Blockstream will generate revenue for its investors, who invested $76 million. Otherwise, they can go bankrupt and die.
One of Blockstream’s investors/owners is AXA. AXA’s CEO and Chairman until 2016 was also the Chairman of Bilderberg Group. The Bilderberg Group is run by bankers and politicians (former prime ministers and nation leaders). According to GlobalResearch, Bilderberg Group wants “a One World Government (World Company) with a single, global marketplace…and financially regulated by one ‘World (Central) Bank’ using one global currency.” LN helps Bilderberg Group get one step closer to its goal.
Luke-Jr is one of the lead BTC developers in Core/Blockstream. Regulation of BTC is in-line with his beliefs. He is a big believer in the government, as he believes that the government should tax you and the “State has authority from God”. In fact, he has other radical beliefs as well:
So, having only large, regulated LN hubs is not a failure for Blockstream/Bilderberg. It’s a success. The title of this article should be changed to: "Lightning Will Fail Or Succeed, Depending On Whether You Are Satoshi Or Blockstream/Bilderberg".
SIGNIFICANT ADVANCEMENTS WITH ON-CHAIN SCALING
Meanwhile, some coins such as Ethereum and Bitcoin Cash are pushing ahead with on-chain scaling. Both are looking at Sharding.
Visa handles 2,000 transactions per second on average. Blockstream said that on-chain scaling will not work. The development teams for Bitcoin Cash have shown significant on-chain scaling:
1 GB block running on testnet demonstrates over 10,000 transactions per second:
"we are not going from 1MB to 1GB tomorrow — The purpose of going so high is to prove that it can be done — no second layer is necessary”
"Preliminary Findings Demonstrate Over 10,000 Transactions Per Second"
"Gigablock testnet initiative will likely be implemented first on Bitcoin Cash”
Peter Rizun, Andrew Stone -- 1 GB Block Tests -- Scaling Bitcoin Stanford At 13:55 in this video, Rizun said that he thinks that Visa level can be achieved with a 4-core/16GB machine with better implementations (modifying the code to take advantage of parallelization.)
Bitcoin Cash plans to fix malleability and enable layer 2 solutions:
The Future of “Bitcoin Cash:” An Interview with Bitcoin ABC lead developer Amaury Séchet:
"fixing malleability and enabling Layer 2 solutions will happen”
However, it is questionable if layer 2 will work or is needed.
GOING FORWARD
The four year scaling debate and in-fighting is what caused small blockers (Blockstream) to fork Bitcoin by adding Segwit and big blockers to fork Bitcoin into Bitcoin Cash. Read:
Bitcoin Divorce - Bitcoin [Legacy] vs Bitcoin Cash Explained
It will be interesting to see how they scale going forward.
Scaling will be instrumental in getting network effect and to be widely adopted as a currency. Whichever Coin Has The Most Network Effect Will Take All (Or Most) (BTC has little network effect, and it's shrinking.)
The ability to scale will be key to the long term success of any coin.
submitted by curt00 to Bitcoincash [link] [comments]

Adam S. Tracy Breaks Down FINCEN’s Regulation of Cryptocurrency

https://www.youtube.com/watch?v=8qbUG05jKPY
Cryptocurrency attorney Adam S. Tracy discusses FINCEN’s regulation of cryptocurrency and the impact on traders, cryptocurrency exchanges, and OTC bitcoin dealers. Email: [email protected]
— —
A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
Email me: [email protected]
Primary website: http://www.tracyfirm.com
Twitter: https://twitter.com/TracyFirm
Youtube: https://www.youtube.com/channel/UCVOa...
Linkedin: https://www.linkedin.com/in/adamtracy/
Facebook: https://www.facebook.com/thetracyfirm/
Instagram: @adamtracyattorney
Telegram: @adam_tracy
Skype: @adamtracyesq
Email me: [email protected]
TRANSCRIPTION:
Obviously, there’s a huge emphasis on compliance from a cryptocurrency standpoint with respect to the SEC and to a lesser extent to the CFTC. But the one government agency that’s really put forth the most guidance, if you will, would be FinCEN. And we’ve talked about money service business registration in past, and FinCEN is the government agency that is dealt with enacting the tenants of the Bank Secrecy Act and overseeing money service businesses. And so FinCEN has put out guidance that sort of defines the players in the cryptocurrency market. And those three players are: users, administrators, and exchangers.
And so user is someone who uses virtual currency or cryptocurrency to buy and sell goods. FinCEN has come out directly and said that a user is not a money transmitter and hence not a money service business. An exchanger is one who deals in the exchange of cryptocurrency — the buying and selling of cryptocurrency in exchange for real or other virtual currencies. And in most cases FinCEN and has found that a exchanger is a money transmitter and thus a money service business, and subject to registration as a money service business. Then finally, an administrator, which is the interesting sort element here, is a party that issues virtual currency and has the ability to redeem that virtual currency. And in most cases FinCEN has found that an administrator is, in fact, a money transmitter and thus a money service, and is required to register as a money service business. And it’s a weird implication, or important implication, for ICO companies because they are obviously issuing cryptocurrency, but the caveat or sort of the tenant where I think most ICO companies fall out of the definition of an administrator is that most ICO companies don’t have the ability to redeem their cryptocurrency, right? They issue it, but they don’t redeem it. So therefore they wouldn’t fall into that definition of a money transmitter. So, you know, it’s a very strange implication because there are some ICOs out there that, you know, have this innate ability to redeem whether through conversion or some other mechanism the cryptocurrency that they’ve issued and sold. And technically by the book, according to FinCEN, you are the money transmitter and you need to register as a money service business or face severe fines, penalties, and the like. That’s sort of point one that people, I think, overlook.
Point two is, you know, how do you, sort of, fall outside the ambit of this, if you are a speculator, right? Let’s say I’m an individual who engages in the buying and selling of cryptocurrency or the arbitrage of different cryptocurrencies for my own account. FinCEN has come out with a decision that actually exempts such activity from the definition an exchanger, which across the board is almost always a money transmitter and thus required to register as a money service business. So, you know, there’s a great emphasis on the SEC, and where the SEC is going to fall, and to some extent the CFTC. And that’s valid. That’s super valid, because ultimately that’s cryptocurrency and the large part is a function of an ICO and raising capital for businesses, right? And so the question becomes are we engaging in offerings of securities? And that’s another discussion for another time. But what is codified, what is real, what people overlook, in my opinion my humble opinion for it’s worth, is FinCEN, and their money service business registration and the money transmitter laws that are associated there with. So, it’s definitely something to consider and definitely something to check out, you know, depending on what player you are within the the ecosphere of cryptocurrency. So check me out — TracyFirm.com.
submitted by bitattorney to u/bitattorney [link] [comments]

US Bitcoin traders who identify as users are under siege. Do you have the same issue in your country?

As a bitcoin trader myself, I follow all the news of us trader arrests. These fall into two categories. First, the user did something otherwise unlawful such as trafficking drugs or committing money laundering and was charged with "operating an unlicensed money servicing business" and "conspiracy for agreeing to distribute controlled dangerous substances". In these types of cases I agree that the user should be punished for conspiracy to distribute drugs and money laundering. The second type of case that is becoming far more prevalent now is where the bitcoin user has simply made sales and purchases of bitcoin for his or her own account. These users are still charged with "Operating an unlicensed money services business."
This I do not agree with at all because FIN-2008-G008 declared that "When a broker or dealer in currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of currency or other commodities for or with a customer, such person is not engaged as a business in the transfer of funds, and is not acting as a money transmitter as that term is defined in our regulations.8 In such circumstances, the transmission of funds is a fundamental element of the actual transaction necessary to execute the contract for the purchase or sale of the currency or the other commodity. The transmission of funds is not a separate and discrete service provided in addition to the underlying transaction. It is a necessary and integral part of the transaction."
This determination was reiterated in subsequent guidance FIN-2013-G001 & response FIN-2014-R002. Simply put a bitcoin user who only purchases or sells bitcoin of his own account to or from a customer is not a money transmitter.
Most simple bitcoin traders operate under this guidance and are simply flabbergasted when confronted with charges for operating an "unlicensed money services business" or "operating an unlicensed bitcoin exchange". When the government makes their case the conveniently only quote the portion of the rule that states " An exchanger is a person engaged as a business in theexchange of virtual currency for real currency, funds, or other virtual currency". [FIN-2013-G001] Except that it is clearly explained in FIN-2008-G008 that "When a broker or dealer in currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of currency or other commodities for or with a customer, such person is not engaged as a business in the transfer of funds, and is not acting as a money transmitter as that term is defined in our regulations." This is carried forward and reiterated in FIN-2013-G001 where it states "In 2008, FinCEN issued guidance stating that as long as a broker or dealer in real currency or other commodities accepts and transmits funds solely for the purpose of effecting a bona fide purchase or sale of the real currency or other commodities for or with a customer, such person is not acting as a money transmitter under the regulations. However, if the broker or dealer transfers funds between a customer and a third party that is not part of the currency or commodity transaction, such transmission of funds is no longer a fundamental element of the actual transaction necessary to execute the contract for the purchase or sale of the currency or the other commodity. This scenario is, therefore, money transmission. Examples include, in part, (1) the transfer of funds between a customer and a third party by permitting a third party to fund a customer’s account; (2) the transfer of value from a customer’s currency or commodity position to the account of another customer; or (3) the closing out of a customer’s currency or commodity position, with a transfer of proceeds to a third party. Since the definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies, the same rules apply to brokers and dealers of e-currency and e-precious metals.
A simple way to think about the definition of a money transmitter is that a money transmitter typically collects funds from one customer and transmits those funds to another customer via its agents in a remote location. So A western Union agent for example collects $100 from Bob Smith in Iowa and deposits this money into its Bank of America Account. Peggy Sue in Ohio goes to a western union agent where the agent prints out a check from western union or gets an ach credit into its business checking account from Bank of America and pays out a portion of the received funds to Peggy Sue. Western Union is transmitting money by accepting it from agent A and transmitting it to agent B for further credit to Peggy Sue. So let's think about this in terms of bitcoin. Bitcoin is a centralized ledger of funds for each public key or "account". If I have 0.05 bitcoin in account 1001 and I want to pay my landlord 0.05 bitcoin rent,I send the bitcoin to account 1002. All this does is make a notation on the blockchain that account 1001 now has 0 bitcoin and account 1002 now has 0.05 bitcoin. This is simplified a bit so you programmers out there don't cringe over the details of constructing a bitcoin transaction, inputs, and outputs. Suffice it to say, that sending my landlord who is standing next to me, 0.05 bitcoin, does not make me a money transmitter any more than paying him with my VISA card. In fact in both cases we could consider VISA or bitcoin a money transmitter since they take funds from person A and transmit them to person B via their agents. In VISA's case the party's banks are the agents, while in bitcoin's example the agents could be the wallet program on each phone or computer that reads the person's wallet or account balance.
Circle back to our friendly traders under siege. No, not the criminals slinging drugs, they knowingly committed their actions. I'm speaking about the bitcoin users, only selling or purchasing bitcoins from their own account to or from a customer. These traders haven't committed an offenses at all according to fincen's directions. What does the government do? Do they engage in a public information campaign to inform these traders of their rights and responsibilities? Do they create a new MSB category for digital currency and define rules and responsibilities for a virtual currency trader? No, instead they try to mislead traders in these cases where a secondary offense such as drug trafficking hasn't been committed. "You have got to be kidding me. Right?" No, I'm really not. If you start reading into these cases you'll find literally hundreds of examples of agents encouraging traders to send bitcoin to a trader in Africa for example so that trader can disburse local currency to a friend. Agents buying bitcoin for less than $10,000 USD without ID and considering this illegal behavior in the indictment! Remember a user doesn't need to report any transaction unless it exceeds $10,000 USD if it is part of his trade or business. If an auto worker who is a casual user that only trades bitcoin 3 times a year sold his for Christmas money to a friend, he wouldn't even need to report the $15,000 sale. But most traders who trade on a daily basis or do it for a living will need to file either an IRS 8300 or a Fincen CTR. Such agents who approach these casual traders entice them with inflated rates and use such phrases as "I'm going to make you rich!'". And they often ask questions about limits and regulations that don't apply to the bitcoin user. They consider all responses as violations of the money transmitter regulations that aren't supposed to apply.
So what is a trader to do? You have two choices. You can follow the law literally as most have done and have countless agents come and test you...and then worry about being arrested on charges that don't even apply to you except when acting unlawfully when strongly encouraged or even elicited under duress in some cases by government agents. Or you can falsely claim you are a money transmitter and follow those rules.
On my own personal journey I decided in October of 2014 to register with Fincen because I saw that one of my suppliers had done so on his website. I asked him about it and he said it was a precautionary measure. I asked around and I was told by many that I had to select money transmitter and other and write in bitcoin trader because there was no selection for bitcoin trader. This in spite of not being a money transmitter. After I had registered I received a call from a man in "Internal Revenue" in Boston about my registration. He asked me about my bitcoin trading and then he said he had to consult with a supervisor. About 15 minutes later he returned my call and told me, "You are not a money transmitter, so I don't need anything from you." A couple months after that, I received a call from Key Bank's compliance office in Cleveland. They had detected my registration as a money transmitter with Fincen and wanted to ask me a few questions. After questioning me, the lady told me that she previously worked for fincen and that I was not an MSB. Key bank had me sign an affidavit that I wouldn't perform any money services businesses activities such as cashing checks for profit, transmitting money, issue money orders, or create gift cards. This compliance officer understood that I was not an exchange in any way and that I only purchased and sold bitcoin of my own account. She understood I didn't hold funds for customers to trade with each other of their own accord like Bitstamp, Kraken, or Gemini.
In the years that would follow, I would have many bank accounts shut down due to this registration as a money transmitter. Most banks simply looked and said, you are a money transmitter. After all, you registered as one. I called Ficen and asked if I could un-register. "No, you cannot". The banks wouldn't even listen to the facts and make a decision. The only other business to actually study my investment model and grant me user status was Gemini. They also agreed I was a user. I think years later they came under pressure to terminate all localbitcoins accounts because many were terminated and at the end of those, mine was too. Was it a coincidence? Or could one of my customers have sabotaged me? It is possible for a user to lie about his wallet address and give out one belonging to a site such as Alphabay. I had one customer do this to me when I was selling him coin from Alphabay. Coinbase questioned me about the transaction and I informed them that someone I was sending money give that wallet out as his own. They reinstated my account since I had years of history with them and it was only one transaction. After that I was careful not to send to customer wallets directly from coinbase. I guess my point is here, if you don't register as a money transmitter they want to harass and prosecute you; but if you do register as a money transmitter they still want to harass and shut down your business. I have recently been engaged in conversations with Fincen by email and by phone and other traders. I haven't been able to speak with many compliance people who are knowledgeable about bitcoin. When I do, for example I've spoken with BitAML on this subject, they agree with me about being a user as a trader. Other compliance people won't even answer my emails or call me back. Now I'm on the verge of either retiring or going the whole money transmitter route and even following the $3,000 ID requirement that only applies to money orders, traveler's checks, and money transfers, but not virtual currency. So my question to you is, do you have the same kinds of problems in your country? Is it better, or worse where you are? Tell me your stories. From my perspective now at least, it seems like the USA has the most malfeasance and harassment of the simple bitcoin traders, excluding those who commit crimes.
Thanks for reading
submitted by scottemick to Bitcoin [link] [comments]

The ticking time bomb of crypto exchanges and compliance

I believe the next "black swan" event for bitcoin is when the US comes down hard on almost all the exchanges out there which are brazenly flouting the regulations.
Some common fallacies:
Fallacy 1: Exchange is based in [some remote country], so they don't have to worry about US laws.
Fact 1. Most people don't realise, it's not sufficient to be based outside of the US to be free of their jurisdiction. If an exchange is serving US citizens they must comply with the regulations, regardless of which country their exchange is based in.
Fallacy 2: Exchange XYZ doesn't accept fiat and it's crypto to crypto only. Therefore it doesn't need a money transmission license.
Fact 2. Fincen has issued multiple statements very clearly stating that a business which exchanges a virtual currency in exchange for another virtual currency is a money transmitter and thus requires a money transmission licence. Similarly for fiat to crypto. Some sources: (http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://globalcryptonews.com/fincen-ruling-on-cryptocurrency-exchanges-explained-part-1-definition-of-money-transmitter-and-msb/). Here fincen publishes a redacted letter to a crypto exchange telling them they are a money transmitter: http://www.fincen.gov/news_room/rp/rulings/pdf/FIN-2014-R011.pdf
Fallacy 3: Exchange XYZ is a money service business and is therefore compliant
Fact 3. It's actually a piece of piss to get registered as a money service business and I wish people wouldn't look at it as a symbol of authenticity. If the exchange doesn't have the money transmission licenses and is serving customers in most states of america it's only a matter of time until they get a knock on the door.
Fallacy 4: Most other exchanges aren't compliant so we have safety in numbers.
Fact 4. That is not a robust legal defense.
Exchanges which aren't compliant and therefore are NOT safe places to leave your money at:
And probably almost all of the others! I've listed the above as they are exchanges which qualify as money transmitters and are operating without the correct licenses. An exchange I am fairly certain has no licenses is:
If someone can prove me wrong, let me know.
Exchanges that are doing things by the book:
tldr: Use Coinbase or Kraken if you don't want to run the risk of an exchanges funds being seized.
submitted by blackcoinprophet to Bitcoin [link] [comments]

Lightning Network and US FinCEN regulations

In light of the fact that the state of Washington has recently enacted digital currency regulations that have forced some Bitcoin businesses to leave the state, I think the writing is on the wall for Lightning Network. Onchain Bitcoin is hard to regulate but they're doing it anyway. I hope this post makes it clear why Lightning Network greatly amplifies the likelihood of regulatory involvement.
Onchain Bitcoin is a "fire and forget" broadcast system. There is no one relay or miner who transmits your funds: it is instead the entire network - all miners and relays - that transmits your funds. No one miner or relay is responsible for or can affect the transmission. This is in no small part why onchain Bitcoin - real Bitcoin - is so very subversive. You can participate literally by connecting one time to the network, broadcasting a few bytes, and disconnecting. To regulate money transmission onchain would require regulating essentially all actors.
Lightning Network on the other hand is a point to point network. Users lock funds in a channel with hub who can unilaterally decide to route, or not route funds; and which can exclusively place a hold on funds. The hubs will charge a fee for routing. The channels are persistent. Unlike fire and forget, the Lightning user must monitor the channel for the life of the channel, and must be online any time they wish to receive money through the channel.
Now let's read this quote posted earlier by skyhookuser
FinCEN guidance on virtual currencies couldn't make it much clearer. Here are 4 different direct quotes from it:
  1. “FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds. 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. 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.”
  2. The administrator of that repository will be a money transmitter to the extent that it allows transfers of value between persons or from one location to another. This conclusion applies, whether the value is denominated in a real currency or a convertible virtual currency. In addition, any exchanger that uses its access to the convertible virtual currency services provided by the administrator to accept and transmit the convertible virtual currency on behalf of others, including transfers intended to pay a third party for virtual goods and services, is also a money transmitter.”
  3. “Under FinCEN's regulations, sending "value that substitutes for currency" to another person or to another location constitutes money transmission”
  4. “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.”
submitted by jessquit to btc [link] [comments]

Marco Santori (Reg Affairs Committee Chair at the Bitcoin Foundation) breaks down the BitLicense

Note: This is NOT the Foundation's official response, just Marco's gut reactions...
http://two-bit-idiot.tumblr.com/post/92075292699/todays-bit-marco-santori-on-the-bitlicense
"Breaking Down the BitLicense" | Marco Santori, Regulatory Affairs Committee Chairman, The Bitcoin Foundation
Hi everyone. I’m Marco Santori. For those of you who don’t know me, I’m a lawyer here in New York City. About 90% of my practice is digital currency clients. My team represents some of the biggest names in crypto, and even more of the littlest names I hope you’ll all have to learn one day. I am also Chairman of the Bitcoin Foundation’s Regulatory Affairs Committee, but the thoughts in this post are my own, not those of the Foundation. Believe me, those are forthcoming.
You’ve likely felt the shockwaves of today’s seismic news: New York’s Department of Financial Services (DFS) has released proposed “BitLicense” regulations. Here is a quick rundown of some of the more interesting terms, along with my gut reactions – in no particular order and with very little filter.
Definition of Virtual Currency: “Virtual Currency” seems to include bitcoin and other convertible currencies, but specifically exclude WOW [World of Warcraft] gold and customer affinity points. Expectedly, there is no carve-out for coins used to track digital assets and there is no specific treatment of branded coins that are quasi-convertible.
Who Requires a License: Surprise! Everyone does. Direct purchasers and sellers, multi-sig wallet providers, merchant payment processors, custodial exchanges, hell, even local wallet software providers probably need one. Payment processors and payment networks all need licenses. Anyone who receives or transmits crypto as a business needs one. This is because the BitLicense language is even broader than the federal language, which only regulates those receiving and transmitting funds.
Identity Verification: If a BitLicense holder “opens an account” for a customer, then that firm must collect and retain the customer’s name and address, check the names against the OFAC SDN lists and retain that information for ten years. It’s difficult to know what “opens an account” means. Even if we figured that out, this is more than even traditional money transmitters are required to do.
Crypto is not a “Permissible Investment”: A BitLicense holder can only invest its earnings in: government securities, money market funds, insured CDs. No investing in Bitcoin. Strange – Moneygram is permitted to invest in dollars…
Full Reserve: A BitLicense holder may not lend or spend bitcoins that it is holding on its customers’ behalf. Those bitcoin “banks” out there promising returns on your “deposits” are going to be “felons”.
State-level AML Reporting: I’ve saved the best for last. NY is taking the first steps to create yet another anti-money laundering program. FinCEN – the federal regulator - already requires reporting cash transactions over $10k. Now, NY is requiring reporting to it for any crypto transactions over $10k. BitLicense holders must also file state Suspicious Activity Reports with NY, not just the ones required to file with FinCEN. I wonder how the boys at FinCEN feel about this.
There will be a 45-day comment period beginning on July 23rd. If you disagree with any of these proposals, you should submit comments. If there is anything you agree with, and are happy to see, you should submit comments. If there is anything you don’t understand, and so aren’t sure if you agree or disagree, guess what? You should submit comments. DFS is giving the industry an opportunity to engage in a dialogue that never existed when FinCEN and IRS published their famous virtual currency guidance. We should not ignore that opportunity.
If you’re looking for assistance or just want to talk crypto law, you can reach me at m[email protected].
(Back to TBI)
There is much work to be done with this BitLicense proposal. It will be a defining bit of regulation for the industry, which means that the amount of constructive feedback and proactive effort needed from everyone in this industry must be nothing short of herculean if bitcoin is to evolve unencumbered in the US. This proposal simply cannot survive as is. So if you are an entrepreneur, investor or just general enthusiast, you better step up this summer. If we can make our case effectively, we should be able to keep the sane, legitimizing parts and scrap the stifling, unnecessary parts of the proposal.
Many more of my organized thoughts tomorrow…
Cheers, TBI
eepurl.com/JgGy5
submitted by twobitidiot to Bitcoin [link] [comments]

Understanding USA Crypto/Cash Exchanges

Let this post serve to inform those who buy/sell Dogecoin [from other individuals], in order to protect yourselves as well as others.
Update: Title says USA, but someone asked about UK. I don't live there, but laws are meant to be read. Added UK section.
USA Section
The USA has been very helpful in regards to understanding the rising Crypto currency markets, and has provided updated guidances in regards to money exchanges, as well as mining. It's tough to cover all the points, but I'll try to make a few.
Common Questions:
What happens if I'm not "trading", but "gifting" my "friend" $10,0000?
Nothing. And everything. You see, when it comes to the "guidance", it really is just that: A guidance. Where it comes to hurt you is when the FBI knocks on your door, asking you why you transmitted $10,000 to a known terrorist. Ok, that example is a bit extreme, but the fact stays that the guidance is there to protect you until subsequent formal laws are put in place.
So I can trade $999.99 worth of Dogecoin in a day?
You can trade up to $1000 in a 24 hour period. This mean $1000, not a penny more. You'll give yourself a headache trying to keep it at exactly "$999.99".
How does this guidance and current law effect Dogecoin?
All virtual currencies are effected by this law, and does not "nail down" or target any one specific virtual currency.
What if I don't mine Dogecoin, but have bought some and want to use them for goods/services, what then?
You are then a "user" of Dogecoin, and are subject to all regular laws and limitations. Essentially, you can use the coin for all goods/services that are of a legal nature. Use it to buy coffee, hire someone to mow your lawn, or give out freely as you like.
What's the deal with USA taxes?
As it stands, no clear precedents have been set, and though the IRS is aware of the massive amount of earnings many Bitcoin'ers have, this is the first year that users are making a substantial sum of money from crytpo-currencies. Because of this, dealing with taxes has been a much heated debate. Link 1Link 2
More then likely, we'll be getting guidances later in the year in order better understand what to claim and how to claim it. From what I've seen (do NOT take this as legal advice), many users are claiming any gains as Short-term gains on their taxes. Link #2 above is a link to a user claiming to be a tax attorney, and is worth a read (it's LOOONG).
So the people buying $1k+ for doge are actually breaking the law?
No. The buyer is considered a "user" as part of the guidance: "A user is a person that obtains virtual currency to purchase goods or services.". A seller is listed in the guidance as "An exchanger is a person engaged as a business in the exchange of virtual currency for real currency...[etc]".
A good example of this is when you go to an international airport, and go to the currency exchange station. The station must be licensed in order to perform the transaction, but the "buyer" (you) does not need to be licensed.
UK Section
Note that all the requirements below must be met in order to NOT have to register as a Money Service Business; It's not that you are not allowed to perform services if you do not meet all the requirements, but that you must register if you want to perform such actions legally. Since I do not live in the UK and additionally am not aware of any guidances as related to virtual currency, I cannot faithfully interpret the laws as they pertain to Dogecoin.
  • You cannot make more then £64,000 a year total in exchange services
  • Turnover (anything you gain after losses are calculated) cannot be more then 5% of your total annual turnover
  • Currency exchange worth more than 1,000 euros must be limited to one per customer - This is both for one single large transaction and multiple small transactions to a single individual
  • Your primary business cannot be solely performing monetary transactions, it must be secondary to your main business. This is hard to interpret, so let's put it this way: You can't just exchange money as a business. You would need to sell lemons at your lemon stand, and do money exchange on the side. It's very hard to do this without seeming like a front for a money laundering service though.
  • You cannot perform an exchange for just anyone: They have to be your customer. For example, if you go to a private bank, they cannot exchange money for you unless you open an account with them (just an example). (Note: This is a very weird portion of the law.)
After reading and interpreting the current UK laws to the best of my understanding, all I can say is that until the UK provides guidance for cryptocurrency, be