Friday, March 22, 2013

Bitcoin Alert: The U.S. Treasury Announces Money-Laundering Rules Apply to "Virtual Currencies"

You didn't think the Treasury was going to just let the bitcoin business develop outside the system, did you?

WSJ reports:
The U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities.

he move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU 0.00% They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000.[...]


The arm of the Treasury Department that fights money laundering said Monday that the standard federal banking rules aimed at suspicious dollar transfers also apply to firms that issue or exchange money that isn't linked to any government and exists only online.

One of the fastest-growing alternative cash products is Bitcoin, an online currency launched in 2009 that isn't backed by a central bank or controlled by a central administrator. Currency units, known as "bitcoins" and consisting of a series of numbers, are created automatically on a set schedule and traded anonymously between digital addresses or "wallets." Certain exchange firms buy or sell bitcoins for legal tender at a rate that fluctuates with the market[...]law enforcement, regulators and financial institution have expressed worries about the hard-to-trace attributes of virtual currencies, helping trigger this week's move from the Treasury's Financial Crimes Enforcement Network, or FinCen.

Creating clear-cut rules for virtual currencies is difficult. A FinCen official said that anti-money-laundering rules would apply depending on the "factors and circumstances" of each business. The rules don't apply to individuals who simply use virtual currencies to purchase real or virtual goods.

The new guidance "clarifies definitions and expectations to ensure that businesses…are aware of their regulatory responsibilities," said Jennifer Shasky Calvery, FinCen director.

(ht Dale Fitz)

20 comments:

  1. The point of bitcoin is that the government cannot shut it down. It would have to shut down the whole internet. They cannot do what they did with e-gold.

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    1. They don't have to. They will just go after businesses that accept BitCoins. That will leave BitCoins in the domain of individual-to-individual transactions, thereby limiting their usefulness.

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    2. You're assuming that about U.S. businesses only, and others that use the U.S. dollar, such as those in Ecuador. Swiss and Canadian businesses, for example, use the Swiss franc and Canadian dollar, respectively. Any currency worldwide is convertible into bitcoin, which makes it an international currency. The U.S. Treasury can clamp down on it only where the U.S. dollar is concerned.

      And even if the whole internet is shut down, bitcoin can still be used on local community networks. It only needs a two computer minimum. Bitcoin isn't going away anytime soon.

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    3. You're assuming that about U.S. businesses only, and others that use the U.S. dollar, such as those in Ecuador. Swiss and Canadian businesses, for example, use the Swiss franc and Canadian dollar, respectively. Any currency worldwide is convertible into bitcoin, which makes it an international currency. The U.S. Treasury can clamp down on it only where the U.S. dollar is concerned.

      And even if the whole internet is shut down, bitcoin can still be used on local community networks. It only needs a two computer minimum. Bitcoin isn't going away anytime soon.

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    4. Nah, not only the US will go after the BitCoin. Other governments globally are extremely hungry for tax revenues, anywhere and any way possible...the US isnt the only government trying to find ways to regulate, track and tax online currencies. Combine this with earlier issues BitCoin has had, along with the recent panic on BitCoin holders (which BitCoin tried to spin as being caused by its amazing new "popularity")....well, doesnt take a Warren Buffet to see the writing on the wall.

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  2. If proceeds from the sale of drugs between a willing buyer and a willing seller is dirty money, then the proceeds of taxes stolen by the government under threat of violence from unwilling victims must be really dirty money. Which needs to be laundered more?

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    1. The weak point is the exchanges where money is converted to or from bitcoins. That is what the Treasury is focusing on.

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    2. @RW. So Wordpress can spend their Bitcoin loot any way they want and Treasury will look the other way? Cool. Maybe we could all buy and sell to each other in Bitcoin and get the same privacy. No exchanges required.

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    3. Going after exchanges will encourage usage of bitcoins as a currency.

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  3. Bring it state. You may have met your match. Little tiny 1s and 0s.

    I find exhilarating that the largest empire in world history is scared of the tiniest mouse.

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  4. Does anyone really care what the government says anymore? What a joke!

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    1. Agreed. The federal government are the most hyprocritical sons of bitches in the universe. They impose all these rules here to supposedly stop crimes while they themselves commit worse crimes all over the planet. We should just kill them all and be done with it.

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  5. The great thing about Bitcoins is that where its supporting institutions get created doesn't really matter; a Bitcoin bank/exchange run out of Japan is just as good as one run from the US. It's all the same internet.

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    1. What happen if the government restricts internet access to Bitcoin related sites. how would one redeem or use Bitcoins?

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    2. There will always be a way. Look what happened to WikiLeaks when the government tried shutting it down...

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  6. Seriously, who couldn't see this coming?

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  7. Cross-posted from my http://libertyblitzkrieg.com comment:

    I read a white paper from Carnegie Mellon Cyber labs entitled ‘Traveling the Silk Road: A measurement analysis of a large anonymous online marketplace’ not too long ago. For those who don’t know, The Silk Road is a comprehensive measurement analysis of Silk Road, an anonymous, international online marketplace that operates as a Tor hidden service and uses Bitcoin as its exchange currency. (it also deals in black market merchandise)

    In the paper, they identified The Silk Road as a threat and proposed ways in collapsing the market. Since the marketplace is anonymous and encrypted, one of the proposed methods is: ‘Disrupting the Bitcoin network appears, compared to attacking the Tor network, to be a more actionable possibility.’ Bitcoin has definitely been on the radar of the US government (as well as those with a vested interest in maintaining their monopoly hold on the money supply).

    Referenced paper here: http://arxiv.org/pdf/1207.7139v1.pdf

    FBI paper here: http://cryptome.org/2012/05/fbi-bitcoin.pdf

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  8. Once again, small minded men attempting to regulate something they do not understand, and do not understand they do not understand.

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  9. The government laundered money from the taxpayers for criminal bankers and idiots with lobby connections who are trying to kill the economy. Sorry, Bitcoin isn't the problem. It's the red herring.

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  10. Simply put - government is a criminal gang engaged in theft, extortion, violence and murder in every country. One area in which this criminal gang has a monopoly is central banking and the control of money and credit in the marketplace and government. In today's world the central bank's money is in large part digital. Thus it is not surprising that the government criminal gang would try to regulate and control Bitcoin since it is a threat to the government criminal gang's monopoly control of money and ultimately credit.

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