Converting Bitcoin (BTC) and Crypto for Customers – 5 ...
Converting Bitcoin (BTC) and Crypto for Customers – 5 ...
Cryptocurrency Money Transmitter Bond • Surety One, Inc.
Bitcoin Dealer Without Money Transmitter License Held ...
Bitcoin Money Transmitter License Guide JW Surety Bonds Blog
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Playing with fire with FinCen and SEC, Binance may face a hefty penalty again after already losing 50 percent of its trading business
Bitcoin gets another day in court- I had to testify for 30 minutes
I invested in Bitcoin in June of 2012 and I've done pretty well since then. Today I was posting bond for a friend of mine who was booked on a drug-related charge and I sold some BTC to cover the bond. I had to produce statements from MtGox in order to show how I obtained the money. I was grilled by the prosecution for about 30 minutes regarding Bitcoin. The prosecution had looked up some stuff in Bitcoin and they were trying to argue that I might have obtained the money by illegitimate means (i.e. laundering money), but their arguments were dismissed pretty quickly by the judge. Mind you that pretty much nobody in the court room, including the defense, had any idea what Bitcoin was when we started. Some of the questions I was asked by the prosecution: 1. Is it true that Bitcoin is not regulated by any state? 2. You are aware that MtGox is not a registered money transmitter? 3. Bitcoin is not a real currency in the sense you can't use it in Wal-Mart, is that correct? 4. Your MtGox account is not an investment account, such as a traditional mutual fund, stock or options, correct? 5. Is it true that Bitcoin is not the official legal tender of any country or jurisdiction? 6. Is it your understanding that Bitcoin is not regulated by FinCEN? 7. Do you realize gains from the rise or fall of the current Bitcoin price? 8. Do you know how Bitcoin mining works? 9. Do you mine Bitcoins? (there are many other questions in the span of 30 minutes, but these were the ones that stood out) My answers: 1. Yes, it's a decentralized currency so there is no country or state that controls it. 2. Objection by defense and sustained. 3. Is that relevant? (the judge said that he's going to determine if it's relevant and I should just answer the question) ... Yes, you can't use it in Wal-Mart. It's not a traditional currency in that sense. 4. It's not a traditional investment account, but it's no different from investing in currency. (the judge and the prosecution went back and forth here about how one can invest in DollaYen, DollaEuro and they agreed that it's an investment) 5. Objection by the defense (asked and answered) and sustained. 6. Yes. Objection by the defense, but it was overruled and I had already answered the question. 7. Yes. It works just like any other investment: you buy in at a certain price and you sell at a different price. If I have profit, then that's a capital gain. 8. Yes. 9. No. Statements by the prosecution (most of them dismissed by the judge): 1. Bitcoin is used for money laundering and other illegal activities. 2. Bitcoin is not a real currency. He went on about how it's not regulated, it's not real currency and it's used for illegal activities such as money laundering, but the judge dismissed it saying that it's irrelevant. They also tried to suggest that money obtained from Bitcoin is not traceable, but the judge agreed with the defense that the statements from MtGox are sufficient to prove where the money came from. The judge also made statements that this seems to be in line with any other investment and it should be accepted as a legal source for the bond. Closing statement from the defense (this was the best part): "Some people like to keep their money in the bank, some keep it under the mattress and some invest it in geeky stuff like Bitcoin. (the whole courtroom, including the judge, erupted in laughter) However, that's not grounds for rejecting the bond. It is entirely reasonable that the witness, who is x-years-old, not married, has no children, has no mortgage and makes x amount of money per year is capable of producing the bond amount." All and all, it was pretty fun to be up there and testify in defense of both my friend and Bitcoin. I'll try to get the court transcripts and post them up here, it was pretty entertaining to see the prosecution struggle with Bitcoin.
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.
Hello! My name is Slava Mikhalkin, I am a Project Owner of Crowdsale platform at Platinum, the company that knows how to start any ICO or STO in 2019. If you want to avoid headaches with launching process, we can help you with ICO and STO advertising and promotion. See the full list of our services: Platinum.fund I am also happy to be a part of the UBAI, the first educational institution providing the most effective online education on blockchain! We can teach you how to do ICO/STO in 2019. Today I want to tell you how to sell and transfer cryptocurrencies. Major Exchanges In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem. Function and History Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe. The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people. Popular Exchanges Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence. Bitfinex Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT). Binance Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours. Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles. Have you ever thought about what are the types of Crypto exchanges?
Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet. Regulatory Environment and Evolution Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold. The United States of America A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system. The European Union The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology. Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto. Behavior of Cryptocurrency Investors by Demographic Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions. The Cryptocurrency Market Cycle Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins. Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years. The Influence of Age upon Trading Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.” Geographic Influence upon Trading One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside. 2013 Bull run vs 2017 Bull run price Analysis In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely. Fraud & Immoral Activity in the Private Market Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak. What are the Exchange Hacks? The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts. Hardware Wallet Scam Case Study In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified). Hardware Wallet Scam Case Study Social Media Fraud Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed. Market Manipulation It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase. Examples of ICO Fraudulent Company Behavior In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”. Signposts of Fraudulent Actors The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper. Signposts of Fraudulent Actors §2 No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out. Methods to Avoid falling Victim Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.” Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not? If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper. Is this too good to be true? All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH. Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take: If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees. Selling Cryptocurrencies Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time. Methods of Sale Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons. The influence and value of your Trade There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project. Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market. Market Behavior in Different Time Periods The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order. Learn more on common behavioral patterns observed so far in the cryptocurrency space for different coins and ICO tokens. Follow the link: UBAI.co If you want to know how do security tokens work, and become a professional in crypto world contact me via Facebook to get all the details: Facebook
"Asynchronous data is data that is not synchronized when it is sent or received. In this type of transmission, signals are sent between the computers and external systems or vice versa in an asynchronous manner. This usually refers to data that is transmitted at intermittent intervals rather than in a steady stream, which means that the first parts of the complete file might not always be the first to be sent and arrive at the destination. Different parts of the complete data are sent in different intervals, sometimes simultaneously, but follow different paths toward the destination. The transfer of asynchronous data doesn’t require the coordination or timing of bits between the two endpoints."
It is more flexible and devices can exchange information at their own pace. Individual data characters can complete themselves so that even if one packet is corrupted, its predecessors and successors will not be affected. It does not require complex processes by the receiving device. This means that an inconsistency in the transmission of data does not result in a big crisis, since the device can keep up with the data stream. This also makes asynchronous transfers suitable for applications where character data is generated in an irregular manner.
The success of these transmissions depends on the start bits and their recognition. This can be easily susceptible to line interference, causing these bits to be corrupted or distorted. A large portion of the transmitted data is used for control and identification bits for headers and thus carries no useful information related to the transmitted data. This invariably means that more data packets need to be sent.
Choco's way of understanding it:
The protocol can still function even if data packets is sent on USB sticks one by one between continents.
Friendly with inter-galactic communication: consider that we only have line of sight of a planet every 20 hours for 10 hours
The disadvantages are fixed by channel bonding (see next point).
2) Channel bonding
"Channel bonding is an arrangement of communications links in which two or more links are combined for redundancy or increased throughput. Examples include links associated with network interfaces on a host computer, or downstream and upstream channels within a DOCSIS cable modem connection."
Choco's way of understanding it:
Torrent: The more seeds you have, the faster your download speed is. The more Skywire nodes you are connected to, the faster your download speed is. Compatible with asynchronous data transmission, you can download the beginning and the end of a file at the same time.
Redundancy: promotes cockroach-like tendency for information. Anti-fragile. If you want to censor a piece of information you must censor all transmitters of this information all at once. You miss one and it will replicate like a virus in an infected host.
Redundancy encourages decentralisation: this in turns encourages localism of data storage (CXO) and therefore anti-monopoly and data silos (anti surveillance capitalism practised by Facebook/Google). Demand will automatically find the path with the most optimal price (i.e. locally).
3) Economy based on data forwarding and downloading
The new Decentralized Internet, a wireless mesh network that pays you for supporting it.
Choco's way of understanding it:
Agenda-less efficient market for data transmission: if a piece of data has any demand, it is economically incentivised to supply it. The more you censor a desired piece of information, the higher the economic incentives there is to provide that data (cockroach-like/anti-fragile).
Well designed crypto-economics has been proven to work by Bitcoin. Skywire nodes will be incentivised to be built like Bitcoin miners were without the tendency of centralisation seen in Bitcoin (Bitmain).
4) Will even work on low-computationally intensive CPU boards like Raspberry Pi's.
Self-explanatory. See Skyminer.
Choco's way of understanding it:
Utilising dirt cheap Chinese manufacturing to maximise access to everyone.
Output is uncompromised by scaling linearly.
Spelling it out.
Digital transmission of 0.1 watt (20dBm) from Sweden to Australia, over 15000km using the WSPR protocol. For comparison, your cell phone uses many times this transmission power. :-)
Which crypto exchanges are usable by residents of Washington State?
Washington state put in place some strict regulations on July 23 of this year that prompted many exchanges (e.g. Bitfinex, Bitstamp, Kraken, Poloniex) to stop doing business with customers who reside in Washington state. The regulations require crypto exchanges to operate as a "money transmitter" under Washington state law, which requires things like: holding a certain amount of currency in reserve, having a surety bond of a certain value, and registering with the state's Department of Financial Institutions. The regulation exists ostensibly to protect consumers, but many just see it as a hindrance to crypto trading. I don't want to discuss the law itself, but did want to provide background for those not in Washington that may not know about our regulatory restrictions. These are the exchanges that I know do business in Washington state:
Coinbase (for exchange between BTC/LTC/ETH and dollars, but not between cryptos)
GDAX (the exchange behind Coinbase, enables trading between cryptos, but only BTC/LTC/ETH)
Bittrex (supports a couple hundred cryptos, is based in Washington state)
Here is why I think Bitcoin makes sense as a investment/hedge. TL:DR: From a macroeconomic outlook our economy is messed up in so many ways, thanks to central planners like Janet Yellen. The currency-wars have only begun, smart money will look for a way to hedge their currency exposure. Money Money is one of man’s greatest inventions. Since we left the barter system and started using mediums of exchange, different types of mediums has been used for trading. Gold, grain, salt amongst others, gold obviously being the most famous one. The right to redeem those papers you hold in your wallet for gold ended in a peculiar fashion with the death of Bretton Woods, and ever since then, we've been trading in fiat.(1). Like art, the intrinsic value of gold is definitely questionable. Yes, everyone does seem to desire gold, still it has very limited usefulness. Paper money being a lot worse, one could argue these unredeemable paper notes are worth as much as regular paper. But the fact that you need this fiat-money to pay taxes gives the market certainty of demand in the future, which I believe is the main reason why the markets are able to attribute these notes value. Governmental control of money As fiat became the predominant transmitter of wealth in our economy, governmental control over money increased. From a naive standpoint that power shift could seem unsignificant, but I would argue it has given us a profound shift in real economic activities. Money in the form of gold had a certain inflation built in to it, since people continuously dig it up from the ground. Yet the gold-economy saw price deflation as production became more efficient, thanks to the invisible hand of the market and advancements in technology. These deflationary powers were at times greater than the inflation coming from new gold findings. This might seem a little off topic but what I want to say is that price-deflation has historically been the norm, and shouldn't be viewed as dangerous. In todays fiat-world however, we hear about central banks trying to fight deflation, believing such an environment would be bad for the labour market. The argument being that workers have a hard time accepting lower nominal wages, and that this causes overwhelming troubles for companies when they have to cut labour costs. Although fairly logical, I think this theory is disputed by our economic history and should, in my (not so) humble opinion, definitely not be taken as a fact. However, today when we hear about central banks fighting deflation, what they're really fighting is a credit crunch. Debt, also a form of money, has been growing increasingly. Although taking a short break 07/08, the debt in ratio to almost everything, is a lot greater today than ever before. A deleveraging of debt would shrink the amount of debt-money (largely concentrated in stocks/bonds/real estate) and this is what centralbanks are fighting, their job is basically to get this overly leveraged economy more leveraged. Needless to say, we're in uncharted territory and their might be huge systemic risks involved. Government deficits and unfunded liabilities At which rate would you be willing to loan money to Greece? This one is really a no-brainier, meaning you shouldn't have to think to come up with an answer, since Greece wouldn't pay you back either way. Greece has a enormous debt and a whole lot of unfunded liabilities. These unfunded liabilities are mostly consisting of workers pensions and healthcare obligations to the greek people. Greek politicians will always rank these payment obligations as a higher priority expenditure than to give "greedy speculators" back their money. That simple fact holds true for most government bonds. Therefore I think almost all government bonds are worth substantially less than they are being priced today. Right now the market deems these bonds as low-risk assets. For example, the U.S 10-year bond yields around 2%. In other words; you'll get close to no return (if the FED manages to reach close to its inflation target) for loaning out your money to the worlds largest debtor nation for a period of ten years. This anomaly is so great and profound, it should be viewed as a major indicator on just how messed up things have become. How did we get these absurd yields? Well, demand for bonds drive the yields down, and ever since the financial crisis central banks like the FED and ECB has been on a buying spree. Speculators joined them in their buying and have been betting on the the continuing bondpurchasing from the CB's, or holding a belief that the CB's will be unable to reach inflation targets, basically taking a bet on deflation. In a real market economy (not driven by central banks) with a low savings rate like the United States, these bonds would yield a lot more. The fact is the U.S, much like Greece, can’t repay its debt, ever, it’s impossible, nope, can’t be done. The U.S national debt is around 18 trillion dollars and their unfunded liabilities sums up to another whopping 210 trillion (as testified to congress by Boston university economic professor Laurence Kotlikoff).(2) Even though a lot of these future expenditures as Kotlikoff is including in his measurment could be slashed, some of them, like pensions, are going to be extremely unpopular to cut. I would say the writing has been on the wall for quite some time. Default or inflate The question we should ask ourselves is whether they’ll inflate their currency and repay their debt in dollars that are worth less, or if they’re simply going to default. In the former case we could see a German-like inflation with barrels of money to buy bread. In the latter case we could see the economy as we know it coming to a grinding halt. Either way I believe this anomaly will sort itself out in the end. I strongly believe that this interference with the market, basically not allowing price discovery to take place, has paved the way for certain economic disasters. Something that has been argued for a long time by gold-bugs and various outspoken skeptics. Although gold certainly would be a good trade for such an environment, I would not recommend buying gold at your friendly bank. Taking a lesson from what happened in the last crisis banks seem to have a high risk of defaulting, which would leave them unable to deliver on your gold position in the paper markets. I also fear the gold backing up the claims of gold is too small and I suspect this could potentially lead to a collapse in the gold paper market. I do like goldmining companies though, especially the one's with a low price to book value. I'm imagining it would be a lot harder for a bank to default on your ownership of a company. Either way, this is were Bitcoin really shines, it doesn't leave you with a risk of being screwed by a defaulting bank. All you would need to cash out on this "put option" is a computer and internet access. Fear of haircuts If this whole experiment with low interest rates fails, and economic chaos indeed ensues, I expect governments around the world to act in a similar fashion as seen in Greece/Argentine. Bank depositors will most likely have to take a haircut on their deposits to refinance the system. This is the most crucial part of why you should own bitcoins. I believe the threat of this bail-in approach to reach debt-equilibrium in the financial world, will drive people to assets which cannot be confiscated. As Reuters report, this bail-in legislation is now being extended to other EU countries, regardless of whether they're in the Euro or not.(3).We’ve already seen some correlations of the Bitcoin price with bad economic sentiment, and I expect that trend to catch on as time proceeds. The most clear cut example of this we got during the summer, with the increase in demand for bitcoins during the Greek-crisis. The day Greece reached an agreement with its creditors - Bitcoin dropped 12%. Yet, recent volatility in global stocks has not been accompanied with upward pressure on Bitcoin. When Dow Jones fell a thousand points intraday, Bitcoin fell as well, suggestion the link between financial instability and the value of Bitcoin at least for now is rather weak. But if we take a look at Argentine and their post collapse economy (after suffering a bond market collapse and soaring inflation), we find it is here where bitcoin is having the most impact as an actual money transmitter. As NYT notes ”Argentine has been quietly gaining renown in technology circles as the first, and almost only place where bitcoins are being regularly used by ordinary people for real commercial transactions.”(4) Valuation and risk First of all, one should obviously not invest more than what's bearable to lose, since there's still a nontrivial chance of bitcoin having the value of zero in the future. Today the Bitcoin market cap is about 5 billion dollars. Besides a small market cap, the uncertainty of demand and the arguably lack of intrinsic value is two of its biggest weaknesses. Even if you believe in the idea of a digital currency, Bitcoin is far from the only one out there. There's competition in the form of other cryptocurrencies with similar but different properties, and only the future will tell which of these (if any) will come out on top. As for now though, Bitcoin has established itself as the clear frontrunner. There is also a high governmental risk involved. If our political leaders start seeing this digital money as a threat to its powers of taxation, or fears grow about what it might do to enable shady transactions, it will certainly go out of its way to try and stop it. Even though the Bitcoin as a system itself is resiliencent to government intervention, one could easily foresee regulation aimed to strangle Bitcoin companies operating in the real world, making mass adoption a lot less likely. So far the western world haven’t cracked down too much on Bitcoin, in some places it has even been declared as a currency, not a commodity, meaning any potential gains in one's holding in those countries would be free from taxation. I'll leave the risks of the underlying technology to be explained by someone else, but google the words Bitcoin+fork and you'll find another very good reason not to go full retard in bitcoins. References: (1) https://history.state.gov/milestones/1969-1976/nixon-shock (2) http://cnsnews.com/news/article/barbara-hollingsworth/economist-tells-congress-us-may-be-worse-fiscal-shape-greece (3) http://ca.reuters.com/article/businessNews/idCAKBN0OD14Z20150528 (4) http://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-disrupting-argentinas-economy.html?_r=0
China's recent guidance great for Bitcoin in China, terrible for the US.
America believes that yesterday's People's Bank of China statement on Bitcoin constituted a "crackdown." They said it's not a currency, banks can't touch it, and payment processors can't facilitate transactions. Therefore, China is trying to reign in Bitcoin. This is completely false. With this announcement, China now has one of the most favorable and friendly regulatory environments in the world. China has acted quickly and decisively, and established very clear permissible behaviors re: Bitcoin (esp. vis-a-vis the US). And the US, be it the media or the government, doesn't understand this development. Generally speaking, China had to balance two vital concerns. One, how to mitigate Bitcoin's potential to circumvent the State Administration of Foreign Exchange. (People's Bank controls all foreign exchange for the Chinese banking system). And two, how to corner and keep as much Bitcoin wealth as possible. In declaring Bitcoin a "virtual commodity" AND expressly saying Bitcoin is NOT a currency, they avoided the utter mess of having to integrate Bitcoin into current foreign exchange controls. It's a pretty sizable challenge to both allow internal Chinese bitcoin transactions, and forbid all international bitcoin transactions. Even if that was possible, they certainly have no idea how to do it at present. Further, had they permitted banks and payment processors to do anything involving Bitcoin whatsoever, they would've tremendously exacerbated the wealth flight problem. They can't declare it a currency without regulating it as a fiat currency, and they can't permit banks and payment processors to handle it w/o risking capital flight. Assuming China's goal is to not blow up their own foreign exchange controls, which seems likely, a strict separation between Bitcoin and bank is really the only option they had. In addition, by declaring Bitcoin a virtual commodity and placing its regulation under the Ministry of Industry and Information Technology (MIIT), China hasn't burdened Bitcoin's growth with banking regulations and controls. Now, exchanges like BTCChina know they don't have to become a bank or financial institution - they are simply a virtual commodity company. MIIT is the regulatory body that approves and manages, essentially, anything having to do with the internet (save for content). While "payment processors" cannot handle Bitcoin because it's not a currency, facilitating virtual commodity (which is "private property") trading and exchange (even for goods and services) looks to be perfectly legal. Expect the MIIT to approve a "payment processor" for BTC as something like a "virtual commodity processor." This would now be a "natural" expansion of BTCChina's business platform. So this guidance achieves both goals; China reduces the risk of capital flight while also establishing the regulatory future of BTC as free of undue financial institution regs. The US has effectively gone in the opposite direction - since BTC can be defined various ways, and there have been multiple "official" declarations of what it is, various federal agencies / regulators are involved, and most are bewildered. Exchanges must have banking relationships, have state-by-state money transmitter licenses, surety bonds, etc... BTC faces nearly all the financial services barriers-to-entry the US can muster. Not so in China. Separating Bitcoin and bank, expressly defining BTC, and assigning a regulator are brilliant moves by the Chinese. The rules and regulations around "virtual commodities" are now free to develop unencumbered by the Banking system's controls. Unlike the US, China has laid the legal and regulatory framework that can best facilitate Bitcoin growth. EDIT: A currency is a contract. The terms and conditions of state currency are: 1) issued and managed by a central government, 2) used to pay debts to the state. China used these two contractual conditions to DEFINE a "currency." Therefore, BTC cannot be a currency: "Bitcoin...does not have equal legal status with currency, and it cannot and should not be circulated as currency on the market." Nevertheless, China did not ban CONTRACTS. In fact, they created a new one, a "virtual commodity." BTC is a virtual commodity. Virtual commodities, such as BTC, can be used for transactions between people.
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.
China's recent guidance great for Bitcoin in China, terrible for the US.
(Originally posted to bitcoin...the 10th circle of hell since Wednesday) (Thank you mods for this board.) America believes that yesterday's People's Bank of China statement on Bitcoin constituted a "crackdown." They said it's not a currency, banks can't touch it, and payment processors can't facilitate transactions. Therefore, China is trying to reign in Bitcoin. This is completely false. With this announcement, China now has one of the most favorable and friendly regulatory environments in the world. China has acted quickly and decisively, and established very clear permissible behaviors re: Bitcoin (esp. vis-a-vis the US). And the US, be it the media or the government, doesn't understand this development. Generally speaking, China had to balance two vital concerns. One, how to mitigate Bitcoin's potential to circumvent the State Administration of Foreign Exchange. (People's Bank controls all foreign exchange for the Chinese banking system). And two, how to corner and keep as much Bitcoin wealth as possible. In declaring Bitcoin a "virtual commodity" AND expressly saying Bitcoin is NOT a currency, they avoided the utter mess of having to integrate Bitcoin into current foreign exchange controls. It's a pretty sizable challenge to both allow internal Chinese bitcoin transactions, and forbid all international bitcoin transactions. Even if that was possible, they certainly have no idea how to do it at present. Further, had they permitted banks and payment processors to do anything involving Bitcoin whatsoever, they would've tremendously exacerbated the wealth flight problem. They can't declare it a currency without regulating it as a fiat currency, and they can't permit banks and payment processors to handle it w/o risking capital flight. Assuming China's goal is to not blow up their own foreign exchange controls, which seems likely, a strict separation between Bitcoin and bank is really the only option they had. In addition, by declaring Bitcoin a virtual commodity and placing its regulation under the Ministry of Industry and Information Technology (MIIT), China hasn't burdened Bitcoin's growth with banking regulations and controls. Now, exchanges like BTCChina know they don't have to become a bank or financial institution - they are simply a virtual commodity company. MIIT is the regulatory body that approves and manages, essentially, anything having to do with the internet (save for content). While "payment processors" cannot handle Bitcoin because it's not a currency, facilitating virtual commodity (which is "private property") trading and exchange (even for goods and services) looks to be perfectly legal. Expect the MIIT to approve a "payment processor" for BTC as something like a "virtual commodity processor." This would now be a "natural" expansion of BTCChina's business platform. So this guidance achieves both goals; China reduces the risk of capital flight while also establishing the regulatory future of BTC as free of undue financial institution regs. The US has effectively gone in the opposite direction - since BTC can be defined various ways, and there have been multiple "official" declarations of what it is, various federal agencies / regulators are involved, and most are bewildered. Exchanges must have banking relationships, have state-by-state money transmitter licenses, surety bonds, etc... BTC faces nearly all the financial services barriers-to-entry the US can muster. Not so in China. Separating Bitcoin and bank, expressly defining BTC, and assigning a regulator are brilliant moves by the Chinese. The rules and regulations around "virtual commodities" are now free to develop unencumbered by the Banking system's controls. Unlike the US, China has laid the legal and regulatory framework that can best facilitate Bitcoin growth.
States put heat on Bitcoin. (WSJ - 6/26 - article cut & Paste for w/o Subscription)
By ROBIN SIDEL and ANDREW R. JOHNSON State regulators are warning virtual-currency exchanges and other companies that deal with bitcoin that they could be closed down if their activities run afoul of state money-transmission laws, according to people familiar with the matter. According to people familiar with the situation, banking regulators in California, New York and Virginia in recent weeks have issued letters telling the companies that they need to follow the state rules or prove that the rules don't apply to them. The warnings fall short of formal "cease and desist" orders, which would demand that the companies immediately stop engaging in their business, these people said. Still, the moves show that state regulators have moved beyond merely scrutinizing virtual currencies and now are taking steps to prevent people and companies from using them for illegal activities. Federal regulators already are cracking down on virtual currencies. Similar actions are expected from other states in coming weeks and months, according to people familiar with the matter. California, New York and Virginia are three of the 48 states that require the companies to obtain money-transmission licenses to operate. South Carolina and Montana don't have such rules. The money-transmission rules vary among states, but most require detailed financial data, business strategy and information about the company's management. States also typically require companies to put up a bond that could run as high as several million dollars. Bits and Pieces Read about Bitcoin's evolution. The actions aren't related to the announcement last week that Mt. Gox, the largest bitcoin trading exchange, has halted withdrawals of customer funds in U.S. dollars. The Tokyo company said it was making system improvements. Unlike dollars or euros that are backed by a central bank, bitcoin users can create the units in a process called "mining." Users also can trade the currency on a number of exchanges or swap it privately. The state actions come three months after federal regulators issued guidelines placing virtual-currency exchanges under the same comprehensive anti-money-laundering requirements as traditional money-transmission businesses such as Western Union Co. Since then, a handful of bitcoin exchanges have registered with the U.S. Treasury Department's Financial Crimes Enforcement Network. The California Department of Financial Institutions has issued at least three warnings to bitcoin-related companies in recent weeks, according to people familiar with the actions. One of the recipients is the Bitcoin Foundation, an industry-backed group that promotes the digital cash. Patrick Murck, general counsel for the Bitcoin Foundation, said it is a nonprofit organization and doesn't engage in money transmission. The group is formulating its response to the letter it received from regulators last week. A spokeswoman for the California banking department declined to comment on the warning letters, saying the communications are confidential and "the goal is safety and soundness and compliance with the laws that DFI enforces." California is particularly important to the bitcoin community because many of the startup companies that are tied to the virtual currency are based there. California and New York are known for having stricter money-transmission laws than other states. Bloomberg News Bitcoin supporter Peter Vessenes "Bitcoin businesses are spending a lot of time and energy figuring out how to stay out of California," said Peter Vessenes, chief executive of CoinLab, a Bainbridge Island, Wash., company that has registered as a money-services business with the Financial Crimes Enforcement Network. CoinLab is waiting to launch any exchange-related services until it gets its "state licensing strategy sorted," said Mr. Vessenes, who also is chairman of the Bitcoin Foundation. The New York Department of Financial Services issued a similar letter to BitInstant, a New York company that allows customers to buy and sell bitcoins. The company earlier this month alerted customers on its website that it wasn't accepting cash deposits "as we make steps to transition to our new website." Charlie Shrem, chief executive of BitInstant, couldn't be reached for comment. The company has registered as a money-services business with federal regulators. "Virtual currency firms inhabit an evolving and sometimes murky corner of the financial world," Benjamin Lawsky, superintendent of New York's Department of Financial Services, said in an interview. "The extent and nature of their operations morph constantly, so it's important for regulators to ask the hard questions and stay ahead of the curve in order to root out dangerous or illegal activity," he said. In Virginia, a company called Tangible Cryptography suspended the purchase of the currency through its service called FastCash4Bitcoins after receiving a letter from state regulators who received a complaint that the company was operating as an unlicensed money transmitter, according to a notice on its website. Company representatives couldn't be reached for comment. Tangible Cryptography said on its website that its activity is exempt from licensing requirements and that the commission's initial assessment contained factual errors. "While we respond to the commission's notice, the prudent action is for the company to suspend all new transactions," the company said. A spokesman for the Virginia Bureau of Financial Institutions declined to comment on whether it has issued similar notices to other companies. Write to Robin Sidel at [email protected] and Andrew R. Johnson at [email protected] A version of this article appeared June 26, 2013, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: States Put Heat on Bitcoin.
This bears repeating: My concerns with the draconian NYDFS proposal.
I've now had a chance to thoroughly review the NYDFS proposal, so the following is a summary of what I believe are the worst aspects of the draft. I know these have been mentioned many times over again; but, as the the title suggests, I think this bears repeating. My biggest concerns: 1) The creation of alt-coins in New York requires a BitLicense. This includes any New York resident or business participating in global open source alt-coin projects, or projects that involve hosted wallets or exchanges of any kind. 2) New Yorkers can't conduct business or be affiliated with any business that doesn't have a physical address, so DACs and DAOs are completely off limits. So much for Bitcoin 2.0 innovation! 3) All hosted wallets and exchanges in the world that are not fully NYDFS compliant are expected to identify and block all NY customers. (Goodbye Changetip!) 4) The bond requirements don't scale, so small startups won't be able to afford BitLicenses. 5) businesses are prevented from keeping any profits in bitcoin, and are forced to keep them in USD or USD derivatives instead. So much for closing the loop with suppliers! And, while it's now perfectly legal for anyone in the U.S. to invest in bitcoin itself, that's no longer true for Bitcoin-based businesses themselves... say wut?! O.o 6) The section on required capital reserves isn't specific at all, so once again startups will likely be stifled. The required amounts will be dictated on a case by case basis by Herr Lawsky himself. 7) users of BitLicensed services are expected to provide the personal identifying information for any entity they use said service to send bitcoin to. This is only one step shy of Coinvalidation, so it's a real killer. Those of us who wish to maintain a little privacy will now have to ask people not to send us coins from such services. 8) All businesses must keep full logs, including full names and addresses for all senders AND recipients, for 10 years. Seems a little excessive, don't ya think? 9) all licensed businesses must keep a fully certified compliance officer on staff, including startups. 10) All businesses are expected to file Suspicious Activity Reports and all transfers of over $10k to the NYDFS and FinCEN. I don't even think banks in the New York have this requirement under current law -- they only report those incidents to FinCEN. (I could be wrong on this last point). There are actually many other examples of these draconian measures throughout the regs, but the above are the worst offenders in my opinion. The entire proposal lacks clarity and forethought, including the definition of which types of businesses these even apply to. Oh, and did I mention that current licensed banks and money transmitters are exempt from all of the above? Including the very bitcoin-specific aspects? Gee, I wonder why that is... Edit: if you believe I'm misinterpreting any of the above, or that I missed something else that is excessive, please explain why. Thank you! :)
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.
I posted this on my blog a couple of weeks ago, and since Bitcoin has been getting a lot of press lately I thought investing might be interested. Also bitcoinmarkets pretty much hated it and told me to post it here instead. I won't be going in too deep of the underlying technology behind it, cause, you know..it's boring as shit. Of course the technology part is of great importance, but it's better explained by math/computer geeks - aka smart people. In short, Bitcoin is a peer-to-peer network containing units (bitcoins) that can be transferred in the system with zero to low costs. These units can themselves incorporate other pieces of data. Every transaction is verified by the computers running the system. The math behind it makes it impossible for any entity to mess with this process of continuous update of the ledger. The ledger being a sort of receipt which contains all previous transactions in the network. To break the system you would need to muster up more than half of the systems combined computer power. Discounting the possibility of quantum computing this would be incredibly expensive and/or impossible. Which is why banks around the world are working with this technology (not Bitcoin but the block-chain tech) to make tradingsystems where traders can buy/sell stocks. But to understand why Bitcoin is a good hedge, we need to understand money and the fragility of our current economy, and why this might lead to a lot of demand for bitcoins. Money Money is one of man’s greatest inventions. Since we left the barter system and started using mediums of exchange, different types of mediums has been used for trading. Gold, grain, salt amongst others, gold obviously being the most famous one. The right to redeem those papers you hold in your wallet for gold ended in a peculiar fashion with the death of Bretton Woods, and ever since then, we've been trading in fiat.(1). Like art, the intrinsic value of gold is definitely questionable. Yes, everyone does seem to desire gold, still it has very limited usefulness. Paper money being a lot worse, one could argue these unredeemable paper notes are worth as much as regular paper. But the fact that you need this fiat-money to pay taxes gives the market certainty of demand in the future, which I believe is the main reason why the markets are able to attribute these notes value. Governmental control of money As fiat became the predominant transmitter of wealth in our economy, governmental control over money increased. From a naive standpoint that power shift could seem unsignificant, but I would argue it has given us a profound shift in real economic activities. Money in the form of gold had a certain inflation built in to it, since people continuously dig it up from the ground. Yet the gold-economy saw price deflation as production became more efficient, thanks to the invisible hand of the market and advancements in technology. These deflationary powers were at times greater than the inflation coming from new gold findings. This might seem a little off topic but what I want to say is that price-deflation has historically been the norm, and shouldn't be viewed as dangerous. In todays fiat-world however, we hear about central banks trying to fight deflation, believing such an environment would be bad for the labour market. The main argument being that workers have a hard time accepting lower nominal wages, and that this causes overwhelming troubles for companies when they have to cut labour costs. Although fairly logical, I think this theory is disputed by our economic history and should in my opinion definitely not be taken as a fact. However, today when we hear about central banks fighting deflation, what they're really fighting is a credit crunch. Debt, also a form of money, has been growing increasingly for quite some time, driven of course by both fiscal and monetary policy actions. A deleveraging of debt would shrink the amount of debt-money, largely concentrated in stocks/bonds/real estate. This is what central banks are fighting, their job is basically to get this overly leveraged economy, more leveraged. Needless to say, we're in uncharted territory and their might be huge systemic risks involved. Bitcoin may be one way to hedge against this. Government deficits and unfunded liabilities At which rate would you be willing to loan money to Greece? This one is really a no-brainier, meaning you shouldn't have to think to come up with an answer, since Greece wouldn't pay you back either way. Greece has a enormous debt and a whole lot of unfunded liabilities. These unfunded liabilities are mostly consisting of workers pensions and healthcare obligations to the greek people. Greek politicians will always rank these payment obligations as a higher priority expenditure than to give "greedy speculators" back their money. That simple fact holds true for most government bonds. Therefore I think almost all government bonds are worth substantially less than they are being priced today. Right now the market deems these bonds as low-risk assets. For example, the U.S 10-year bond yields around 2%. In other words; you'll get close to no return (if the FED manages to reach close to its inflation target) for loaning out your money to the worlds largest debtor nation for a period of ten years. This anomaly is so great and profound, it should be viewed as a major indicator on just how messed up things have become. How did we get these absurd yields? Well, demand for bonds drive the yields down, and ever since the financial crisis central banks like the FED and ECB has been on a buying spree. Speculators joined them in their buying and have been betting on the the continuing bondpurchasing from the CB's, or holding a belief that the CB's will be unable to reach inflation targets, basically taking a bet on deflation. In a real market economy (not driven by central banks) with a low savings rate like the United States, these bonds would yield a lot more. The fact is the U.S, much like Greece, can’t repay its debt, ever, it’s impossible, nope, can’t be done. The U.S national debt is around 18 trillion dollars and their unfunded liabilities sums up to another whopping 210 trillion (as testified to congress by Boston university economic professor Laurence Kotlikoff).(2) Even though a lot of these future expenditures as Kotlikoff is including in his measurment could be slashed, some of them, like pensions, are going to be extremely unpopular to cut. If you listen to austrian economists they are pretty much all agreeing, proclaiming that the writing has been on the wall for quite some time. Fear of haircuts If this whole experiment with low interest rates fails, and economic chaos indeed ensues, I expect governments around the world to act in a similar fashion as seen in Greece/Argentine. Bank depositors will most likely have to take a haircut on their deposits to refinance the banking system. I believe the threat of this bail-in approach to reach debt-equilibrium in the financial world, will drive people to assets which cannot be confiscated. And if you don't think bail-in is a high probabilty event in your country, here's Reuters reporting on the new bail-in legislation: "Bail-in legislation is now being extended to other EU countries, regardless of whether they're in the Euro or not."(3).We’ve already seen some correlations of the Bitcoin price with bad economic sentiment, and I expect that trend to catch on as time proceeds. The most clear cut example of this we got during the summer, with the increase in demand for bitcoins during the Greek-crisis. The day Greece reached an agreement with its creditors- Bitcoin dropped 12%. Yet, recent volatility in global stocks has not been accompanied with upward pressure on Bitcoin. When Dow Jones fell a thousand points intraday, Bitcoin fell as well. Suggestion the link between financial instability and the value of bitcoins at least for now is rather weak. But take a look at Argentine and their post collapse economy and you'll find something very interesting. After suffering a bond market collapse and soaring inflation, it is here where bitcoin is having the most impact as an actual money transmitter. As NYT notes ”Argentine has been quietly gaining renown in technology circles as the first, and almost only place where bitcoins are being regularly used by ordinary people for real commercial transactions.”(4) Valuation and risk First of all, one should obviously not invest more than what's bearable to lose, since there's a nontrivial chance of bitcoin having the value of zero in the future. I also don't want to be responsible for anyone losing a big piece of their net worth, but if you invest your money according what someone on the internet with the name "UngNaiv" (young and foolish) you probably have no one to blame but yourself. Anyway, today Bitcoin have a market cap of about 4.5 billion dollars. Besides a small market cap, the uncertainty of demand and the arguably lack of intrinsic value is two of its biggest weaknesses. Even if you believe in the idea of a digital currency, Bitcoin is far from the only one out there. There's competition in the form of other cryptocurrencies with similar but different properties, and only the future will tell which of these (if any) will come out on top. As for now though, Bitcoin has established itself as the clear frontrunner. There is also a high governmental risk involved. If our political leaders start seeing this digital money as a threat to its powers of taxation, or fears grow about what it might do to enable shady transactions, it will certainly go out of its way to try and stop it. Even though the Bitcoin as a system itself is resiliencent to government intervention, one could easily foresee regulation aimed to strangle Bitcoin companies operating in the real world, making mass adoption a lot less likely. So far the western world haven’t cracked down too much on Bitcoin, in some places it has even been declared as a currency, not a commodity, meaning any potential gains in one's holding in those countries would be free from taxation. I'll leave the risks of the underlying technology to be explained by someone else, but google the words Bitcoin+fork and you'll find another very good reason not to go full retard in bitcoins. References: https://history.state.gov/milestones/1969-1976/nixon-shock (1) http://cnsnews.com/news/article/barbara-hollingsworth/economist-tells-congress-us-may-be-worse-fiscal-shape-greece (2) http://ca.reuters.com/article/businessNews/idCAKBN0OD14Z20150528 (3) http://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-disrupting-argentinas-economy.html?_r=0 (4)
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)).
Here's what Michael from Snapcard had to say about bit license in a blog post just pushed out to their e-mail list. Hey everyone! There’s been a lot of talk about the Bitlicense throughout the past week and I thought it would be a good time to summarize what it is / what it means, and also give some thoughts to what it will mean for consumers and for entrepreneurs entering the digital currency space. I’ve taken the information provided here as a point of reference. It doesn’t cover every single detail, but it covers some of the main points. Feel free to add your thoughts below. There are a lot who skeptics that argue that New York’s Bitlicense creates for entrepreneurs barriers to entry (which it naturally does) but in the same token it takes away one of the real pain points for entrepreneurs (especially in the Bitcoin community) of gaining trust as being a reputable, honest, and accountable service. Right off the bat, it’s important to note that the Bitlicense isn’t relevant for all businesses touching Bitcoin (and it shouldn’t be). It’s focused to Bitcoin businesses that act as an Bitcoin exchange, digital currency payment processor, or Bitcoin wallet. Anti-Money Laundering
Maintain a detailed record of each transaction that includes the parties’ identities and physical addresses, the value and dates of the transaction, the method of payment used, and a description of the transaction Verify customers’ identities when opening customer accounts and check them against the U.S. Treasury Department’s Office of Foreign Asset Control’s Specially Designated Nationals list. Enhanced diligence would be required for accounts involving foreign entities, and accounts on behalf of foreign shell entities would be prohibited. Notify NYDFS of any transactions that might signify illegal or criminal activity and when an individual engages in transactions that exceed US$10,000 in a single day.
If you’re a registered Money Service Business, all of the above is already quite standard. Knowing the physical address is not new to identity verification procedures. While it might seem infuriating, it’s been par for the course for companies for awhile. Companies such as Bitstamp, one of the largest bitcoin exchanges, have an extremely thorough verification process. Now it’s not ideal for me as a user, but if it means that Bitstamp is going to exist and I get the same level of quality product, then it’s not a big deal from my side. I’d rather have them exist and verify my ID, knowing they’re not going to be shut down the next day, as opposed to knowing the site could go offline at any time for one reason or another. It references having a “description” of the purchase. This is a little interesting. I know that Coinbase has started doing this in their procedures and there was a little bit of kick back from the community. This isn’t Coinbase wanting to know where you’re shopping and what you’re buying for their own reasons; this is Coinbase maintaining their level of regulatory compliance. With all this being said, these are measures that worked for previous technologies. It could be time with Bitcoin to change that process, make it more efficient, and give users the privacy they seek while still maintaining some form of customer understanding. Consumer Protection
To the extent a Licensee stores virtual currency on behalf of a third party, the Licensee would have to hold virtual currency of the same type and amount as that which is owed or obligated to a third party. Maintain a bond or trust account (in U.S. dollars) for the benefit of its customers in a form and amount acceptable to NYDFS. Provide customers with a receipt for each transaction with information about the firm’s name and address, specifics of the transaction, and statements about the Licensee’s liability for non-delivery and refund policy. Disclose to consumers the material risks associated with virtual currencies, in writing, both in English “and in any other predominant language spoken by the customers of the Licensee.” Each Licensee shall be permitted to invest its retained earnings and profits in only the following high-quality, investment-grade permissible investments with maturities of up to one year and denominated in United States dollars: (1) certificates of deposit issued by financial institutions that are regulated by a United States federal or state regulatory agency; (2) money market funds; (3) state or municipal bonds; (4) United States government securities; (5) United States government agency securities
BitLicense businesses cannot invest or hold their ANY of their profit in Bitcoin, ONLY in US Dollars. It was stated that companies must only and always have USD, and are not allowed to keep profits in Bitcoin, etc. First, this means that a company based in Europe must now utilize USD at all times. This seems like it’s worded very poorly from the regulators part because then the investments they’re referring to must be ridiculously low risk… (this paragraph was a little confuding to me, I may not have gotten the correct meaning) One part of me says they’re trying to really take the life out of Bitcoin by not giving companies a chance at utilizing it completely for their operations. Another part thinks that it’s more comcerned about companies that are day-trading with Bitcoin (either profits or customer funds) and moving the market. The latter gives me some optimism that the regulators are aware of how big this will become. So when institutional level banks are really entrenched in the Bitcoin economy, it will take away their ability to move the market. Regardless, this does need a lot of clarification. It feels very rushed from the regulators standpoint. Cyber Security
Designate a qualified employee to serve as a Chief Information Security Officer responsible for implementing >a cyber security program to identify cyber risks, protect systems from unauthorized access, detect data >breaches, and respond to system breaches and unauthorized use. Conduct system penetration testing at least annually and vulnerability assessments at least quarterly.
This fair enough. Companies use this as a way to also promote their operations as being efficient and secure. Giving the company a somewhat “seal of approval” to add confidence to the consumers. Examples of this have already happened. I know for me personally, Andreas is someone who’s opinion I take extremely seriously. He’s a rockstar in the Bitcoin world! So when he gives something the tick of approval, it certainly goes very far for Entrepreneurs in the community. Perhaps we should introduce an Andreas Icon! It gets put onto websites that have been verified, do away with the Bitlicense, and consider that the tick of approval? Mentioned as a joke, but for me as a community member, that would actually mean more than a “Bitlicense” label at the moment :) But seriously, for entrepreneurs this is a good way to provide legitimacy for our users and potential users. The closest thing I’ve seen to this is CrowdCurity, who is doing great things for entrepreneurs to secure their sites in a more budget friendly way. You’ll see they’ve got a big focus on Bitcoin companies in their client list. Capital Requirements
Maintain at all times such amount of capital as NYDFS determines. The proposed rules do not set forth any specific minimum levels of capital or methods for computing required capital. Rather, the proposal would permit NYDFS to determine the required amount of capital on a case-by-case basis, after considering such factors as the Licensee’s assets and liabilities, the amount of leverage used by the firm, the liquidity position of the firm, and extent to which additional financial protection is provided for customers.
This is very similar to money transmission regulations… (Which are ridiculously messy for entrepreneurs to be honest. They vary from state to state and just provide headache after headache after headache.) For example, if I’m a money transmitter and have $150M in transactions going through my service everyday, but our cash at bank is $10,000, it provides zero margin for error in our operations and thus places more risk on consumers. It would give me a lot more confidence to give them my money as opposed to a company that doesn’t have any sort of capital reserve in the event of a problem. That’s an oversimplified example of course, but as a user, I know wallet providers/exchanges/payment processors should have this (but it should be much more clear and concise to remove the ambiguity which requires paying legal teams to help decipher it). Money Transmission Wiki Financial Reporting and Audit
Submit quarterly and annual financial statements to NYDFS. Annual statements are to be audited and submitted with an opinion of an independent certified public accountant and an evaluation by the accountant of the firm’s accounting procedures and internal controls.
This is necessary if you’re a wallet provideexchange in my opinion. Companies are already doing independent audits to promote their legitimacy. It’s good for business. As a user, as a company, everyone wins. Example. Now, does this cost money for entrepreneurs? Yes. But what would I gain from it? Well, I know that a user is going to be much more inclined to go with a well audited business, so for me, this is a business expense but it’s worth it’s weight in gold to show that we didn’t just whip up an exchange overnight, we’ve got proven legitimacy from reputable (reputable is a key word) 3rd parties. If you’re familiar with the Online Poker space, there was a day called “Black Friday" which was basically the day when Full Tilt Poker was found to actually be using their players funds for company operations/spending/employee salaries etc.. This essentially means they were depending on user deposits (or as the saying goes Robbing Peter to pay Paul) - The result of this is that US players can no longer make deposits to major online poker sites (like Pokerstars) and thus the whole online poker industry took a huge decline as the USA is so influential in it. Essentially it was like a Mt. Gox, but for poker. What that means is that if Mt. Gox were to happen in the USA, the consumer protection ramifications could really damage the potential opportunity for the mainstream adoption of Bitcoin. I know that no matter what, Bitcoin will still exist. However, if credit card processors and all banks never allow any form of deposits into Coinbase/Circle etc., the adoption of Bitcoin will be slowed down in the US. Adoption in the US isn’t where the real benefit for this currency is, but it still provides a lot of influence for the development of infrastructure. Meaning if it’s a new hot property in the US, then you increase investor interest. If investor interest increases, then the entrepreneur interest increases. If entrepreneurial interest increases, more products hit the market. This leads to awesome people building awesome things that can be used globally and helps create an infrastructure for it to grow faster and faster. I feel like I’ve been rambling, and if you got this far, thanks for reading my thoughts! In summary, I think the NYC Bitlicense offers legitimacy for everyday users and help hold companies accountable. It also can be looked at as a business investment for entrepreneurs, not just a drain on resources. It shouldn’t be relevant to all Bitcoin businesses. The proposed regulations seem very rushed and require a lot more thought in order to help Bitcoin keep the things that are awesome about it. Regulators gonna regulate. Thanks for reading! Michael. Source: http://snapcard.cmail1.com/t/d-l-egujy-vuimjdt-
Are you a money transmitter? Question for btc sellers
Hi how are you all doing? I am starting a bitcoin selling business and would like some of your input. So i recently registered as a business and would like to open a business bank account. I plan on registering as a money service business federally with fin cen but not with my state. So my question is, when opening a bank account, Should i check the box asking if i am a msb? What will happen if i check yes? will i be required to get a state license? I get the feeling most of these people on local bitcoin are not registered as MSB it does not seem possible they could meet the requirements (100,000+bond,millions in sales, ect). So i assume when they open their bank acount they just say they are not a money transmitter, which is a felony. Are they opening these acounts in their own name or are they using false information?? How should i go about doing this? Also does anybody know of a case were people have been prosecuted (other than mtgox) for not registering in their state as a msb?
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]
Although applicant financial condition is a factor in bond underwriting, we have programs to fit EVERY credit condition. Call (800) 373-2804, email us at [email protected] or click here for a live chat for a cryptocurrency surety bond (money transmitter bond) application or to discuss your particular needs. 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. These licenses have bond requirements as part of the licensure. If a money transmitter was to be licensed in all 50 states, the minimum bond penalty would be $8,000,000. While the ... Bitcoin Money Transmitter Bond Cost. The cost of your money transmitter bond will depend on the bond amount as well as your personal credit score. Bond cost is a fraction of the full bond amount and is determined by the surety on the basis of your credit score. The higher your credit score, the lower your bond rate will be. Money Transmitter Bond. Real-Time Surety Bond Quotes. Free quotes using soft credit pulls. #1 Bond Writer with the Lowest Rates. Our high volume allows us to negotiate excellent rates. Get Your Free Quote. 100% Money Back Guarantee. Your bond will be accepted, or your money back. Get Bonded Online in Three Steps . 1. Real-Time Quote ; 2. Buy Securely Online; 3. Get Bonded in Minutes ; Choose ... Bitcoin “Exchanger” without Money Transmitter License Indicted on 28 Counts of Money Laundering. California native Jacob Burrell-Campos, 21 years old, has been arrested at the U.S-Mexico border for dealing on bitcoin without a money transmitter license. He was held without bail on charges of operating an “illegal money transmitting ...
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