
US Senate Bill S.1241 to Criminalize Concealed Ownership of Bitcoin - tehlike
https://btcmanager.com/us-senate-bill-s-1241-criminalize-concealed-ownership-bitcoin/
======
ransom1538
General question. Currently money laundering is illegal (concealing money
gained from unlawful activity) [i] and the IRS already asks you specifically
if you own assets [digital currency] [ii], so i am honestly curious what this
would change. If you own bitcoin and are not disclosing this to the government
[irs] of such assets you are already breaking federal law. This just adds
charges? Or does this help fund the feds to form task forces? Lawyers I have
consulted mention trusts to legally hide assets [iii]. help.

[i]
[https://www.law.cornell.edu/uscode/text/18/1956](https://www.law.cornell.edu/uscode/text/18/1956)
[ii] [https://www.irs.gov/newsroom/irs-virtual-currency-
guidance](https://www.irs.gov/newsroom/irs-virtual-currency-guidance) [iii]
[https://www.wsj.com/articles/SB912140808262492000](https://www.wsj.com/articles/SB912140808262492000)

~~~
tehlike
Currently, irs asks you if you have ownership on a foreign account, or finra
or something asks you to declare money over 10k when you enter country. They
also know your bank accounts by its centralized nature.

Now, if they ask you your wallets, not declaring could be considered unlawful
if this bill passes.

Also technically, wince cryptocoins are commodities, or treated as such, you
still need to declare them as a profit on tax forms. They didnt have a way to
know so you could decide to not tell. You still can but the boundary gets
blurry now - you can expect to be asked more about this during audits etc.

~~~
cma
> you still need to declare them as a profit on tax forms

Not until you realize the gain, right? (at least unless you mined them)

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tehlike
mining is interesting, because mining is probably 'earned income' at the time
the coin is rewarded. Then you have capital gains when you convert.

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chroem-
Good old Dianne Feinstein, always protecting me from the scary terrorists.

~~~
tehwebguy
Not only did she pretend to be incredulous about NSA spying, she put forward
the bill to excuse most of it after completely redirecting the conversation to
"metadata." Now Ajit Pai made it a partisan issue she's having screaming about
being pro net neutrality but a few years back she co-sponsored the PIPA bill!

Worst of all she's considered to be basically impossible to replace. It would
be very nice to see CA stop giving her money and put a significant challenger
forward but it's probably not good ROI to attempt.

~~~
thaumaturgy
Kevin de Leon is running against her and has some political and media support.
Unfortunately, he's far to the left of her on the issue of gun control and
that alone may nullify whatever small chance he had of getting elected.

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adamnemecek
Is his district (LA) particularly pro gun?

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tsomctl
If he's running for US Senate, all of California will be voting for him or
Feinstein. And parts of California are extremely pro gun, and parts are
extremely anti gun.

------
21
Bank secrecy is dead*

To imagine that bitcoin could change that or not abide is foolishness.

* for poor people anyway, with poor meaning < $10 mil which affords you lawyers and offshore shell companies

~~~
mirimir
Well, bank secrecy is as dead as governments can make it, for obvious reasons.
However, for cryptocurrencies, it's mainly exchange interfaces with meatspace
currencies that are hard to keep private.

If you use local wallets like Electrum, transact via Tor, mix thoroughly, and
generally practice good OPSEC, your personas and their cryptocurrency can be
as anonymous as you like. But only as long as you maintain
compartmentalization from meatspace.

~~~
lordCarbonFiber
So long as you never use your currency to buy anything you've got a great
anonymous currency. Sounds very useful.

~~~
stale2002
If a coffee shop accepts bitcoin, your transaction is effectively as
untraceable as cash is today.

The more that people use bitcoin, the more useful it gets and the harder it is
to stop.

~~~
throwaway613834
> If a coffee shop accepts bitcoin, your transaction is effectively as
> untraceable as cash is today.

How? There is no globally public record of all cash transactions, unlike with
Bitcoin.

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teawrecks
Because at no point is your identity tied to the address.

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Retric
If you have an account with 100 mill in stolen bitcoins and use it at a coffee
shop then looking at security footage is relatively trivial as there is a
clear time stamp involved. Cash on the other hand might be traced at the bank,
but it it's hard to directly link it unless their is a clear pattern of
behavior. Even better, a random 5$ bill may not end up at the bank directly if
someone get's change at the end of the day.

Worse it's not just the government that can track bitcoins. I can easily see a
gang keeping an eye on transactions looking for people with large accounts so
they can use physical means of persuasion to liberate it.

~~~
stale2002
Cryptocurrencies can be mixed. If you engage in very basic precautions, such
as doing something easy like transferring your money to monero, and then back
again, it is effectively impossible to track where your money came from.

Once you get to the coffee shop stage, nobody knows where that money came
from.

~~~
21
With today statistical analysis methods is trivial to track big flows through
various block chains, even if some of them are totally hidden. And they only
get better by the day, with your traces sitting there like a duck.

And you don't need to be 100% certain, it's enough to get a pool of suspects
which then you can analyze/surveil with other methods.

~~~
tehlike
How about monero?

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HashThis
The United States has divided into a privileged class vs commoners:

1) PRIVILEGED CLASSES: Easy cheap to create Off-shore shell company legal
entity. Hide ownership of your money. It will auto-shift to a new country if
government tries to uncover ownership. Offshore laws make it illegal for bank
workers to uncover identity

2) COMMONERS: FinCen dominates over commoners. Every transaction tracked.
Prison if you have Bitcoin privacy. They can put you in prison if they claim
two transactions were because you were trying to get privacy from government.

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multibit
Of course the justification is to "stop money laundering and terrorist
financing".

~~~
jgh
Eh did you notice that huge tax cut they just gave the ultra-rich? They gotta
start digging through the couch to pay for it ;)

~~~
adventured
The US has the most progressive taxation system among all developed nations.
Nothing about that fundamental progressiveness has changed due to the tax
cuts. The top 20% are paying 95% of all income taxes, that will continue.

For example, the US is radically more progressive on taxation than all of
Scandinavia:

[https://taxfoundation.org/how-scandinavian-countries-pay-
the...](https://taxfoundation.org/how-scandinavian-countries-pay-their-
government-spending/)

~~~
StanislavPetrov
>The top 20% are paying 95% of all income taxes, that will continue.

You are comparing population with taxes, when you should be comparing wealth
to taxes. Of course people in poverty with no tangible income or net worth
don't pay income taxes. The wealthy in the US pay far, far less in taxes as a
percentage of their wealth than any other developed nation in the world. In
addition, the taxes paid by people in all civilized developed nations pay
(either in part or in whole) for healthcare and education instead of
bankrupting working citizens for basic needs. Working people in the United
States pay far more in taxes and receive far less than any other developed
nation - but at least we have our wars.

~~~
jcranmer
If you look at the statement "The top X% of the population hold Y% of the
wealth and pay Z% of the taxes," it turns out that Z > Y for most values of X.

~~~
jaycroft
Until you get to values of x below 1%...

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tfha
Is there any evidence of Bitcoin being used by terrorist groups? Wouldn't that
be a terrible idea for the terrorists?

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rothbardrand
Yes, it is a terrible idea for terrorists.

And currently, bitcoin is too hard to use for terrorists or most criminals.
You have to be relatively sophisticated. Yah, you may have gotten your grandma
a wallet, but that's not the same as mastering the level of opsec to fund a
clandestine organization using cryptocurrencies...

And further, since every transaction is recorded forever in the blockchain if
any future address is compromised, the entire network can be compromised
instantaneously....

Bitcoin is really worse for terrorist financing than good old USD.

And we "lost" trillions of USD on Pallets in the Iraq and Afghanistan wars.

~~~
sophont42
Yep, and Obama’s shipped a pallet directly to a state sponsor of terror. Why
use BTC?

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DennisP
The text doesn't sound so much to me like it's criminalizing intentionally
concealed ownership of cryptocurrency, as ownership of accounts at
exchanges...say, by signing up for an exchange with a fake ID.

~~~
moduspol
This link gives a little more background:

[https://news.bitcoin.com/proposed-u-s-legislation-may-
crimin...](https://news.bitcoin.com/proposed-u-s-legislation-may-criminalize-
those-who-conceal-bitcoin/)

> A ‘prepaid access device’ means an electronic device or vehicle, such as a
> card, plate, code, number, electronic serial number, mobile identification
> number, personal identification number, or other instrument, that provides a
> portal to funds or the value of funds that have been paid in advance and can
> be retrievable and transferable at some point in the future.

To me that seems pretty clear they're targeting cryptocurrencies held outside
of exchanges.

~~~
politician
That description covers literally every thing that has ever been sold to a
buyer.

The act of buying something makes it "prepaid access device" since it may
possibly in the future be used to retrieve funds, e.g. via a sale, and may be
transferred at some point in the future.

~~~
moduspol
Yep. Something tells me that was the intention.

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crb002
How do you define "digital currency"? Under US legal tender laws BTC isn't
money. You can incur capital gains when you exchange BTC for something over
the basis you acquired it for, but you essentially gave smoothing of value
away for something ephemeral.

~~~
mooman219
I'm waiting for the law to get so vague, they accidentally cover in-app/in-
game currencies with legislation that requires it to be regulated.

~~~
rothbardrand
I suspect money laundering is already there.... they don't care, its all
selective prosecution anyway. The purpose of the laws is not to stop crimes,
but to make so many things a crime that if you resist tyranny they can
discredit you and jail you.

~~~
failrate
Any game that has goods that can be exchanged by players is a potential for
illegal money transfers even without the ability to get money back out of the
game. For example, there's a shadow market for both CounterStrike weapon skins
and Team Fortress 2 items. Here's how it works: I have a big supply of items.
They have an assigned value. You give me money and the name of the receiving
party. I send some items to a broker across the planet. They receive the
goods, take their big, and give the rest in cash to the receiving party. We
have now just made a wire transfer inside of TF2.

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TazeTSchnitzel
Where's the problem? Can someone explain? It's not like this bans owning
Bitcoin.

~~~
JoshTriplett
What's the problem with being required to send a plaintext copy of every
encrypted email to various government agencies around the world? It's not like
that would ban using encrypted email.

~~~
cmurf
What the problem with being required to report your income from various
government agencies around the world? It's not like that would ban governments
from existing, surely some people will continue to voluntarily pay some taxes
on the honor system.

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grandalf
Uh, it says _intentionally concealing_ , not owning.

Income from investments is supposed to be reported to the IRS. It’s silly that
anyone would expect crypto currencies to be an exception.

This would be one of the few cases when the title should be updated.

~~~
drcode
> Income from investments is supposed to be reported to the IRS.

Bitcoin income has required disclosure since 2013, this bill seems to say that
even bitcoin just sitting idle in an account need to be disclosed somehow,
which is a MAJOR breach of privacy. This is like saying to someone "If you own
a nice painting in your house you need to let us know about it" even if it
generates no income.

They are basically saying "if you value your privacy you are a criminal, even
if you aren't breaking any other laws" which should scare everyone.

~~~
tehlike
Ish. it's not that different from status quo. 1\. Government already knows all
of your US bank accounts. 2\. They ask you to declare foreign bank accounts.
3\. Majority of countries have deals with US to inform them of US
residents/citizens accounts, and many banks for this reason do not accept new
accounts from us citizens. 4\. US asks you to declare any monetary instrument
as you enter country (above 10K) or so.

So if you think about it, they are not asking anything different from what
they already do.

~~~
garmaine
Bitcoin is more analogous to cash. The government does not mandate people
reveal how much cash they have in their possession.

~~~
tehlike
Cash-only transactions, maybe. But don't forget, the transactions are
tracable, so technically, if you somehow transfer money to a "monitored
account" that has ties to your identity (like, transfering money to DMV for
your driver's license), your identity is revealed.

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rothbardrand
One of the great things about bitcoin is it gives libertarianism a business
model... and it's right out of SEK3's New Libertarian Manifesto--which was
written in the 1970s-- SEK game theorized out what would happen with the
Soviet Union, and proved to be correct 20 years later... now we are seeing the
exact same game plan here in the USA with bitcoin and this law. But they are
too late. Most likely outcome is this will get reversed or widely ignored....
but if they are successful, everyone smart will start leaving the country...
or they will create an arab spring like response here, eroding respect for the
government and police.

Gay rights couldn't be resisted in the age of the internet when everyone knew
their cousin or that guy they went to work with was gay.... will be the same
thing with bitcoin.

Question is, just how violent and authoritarian the tyrants in DC want to get.

~~~
tehlike
Nobody will leave the country, i think that's a very bold prediction. The ones
that would leave would be hidden bitcoin millionaires/billionaires.

I agree on the "they are too late" point, but think of it this way: US already
knew about your financials. This law doesn't change that.

~~~
rothbardrand
People are already leaving the country, and at an increasing rate. The rate of
renouncements of US citizenship has been rising for the past 20 years but
sharply under Obama. They have started making it HARDER to renounce, as some
sort of attempt to keep people in-- one of the pieces of advice you will see
often regarding renunciation is to never tell them you are renouncing for tax
reasons.

That's one of the reasons they will refuse (yes, you have to beg permission to
be let out of your slavery, er, citizenship)..... so the old saw of "you owe
taxes because you choose to be here" is false..

More and more americans are leaving without renouncing, just going off the
grid in asia or wherever, showing up only to renew their passports.

Once some country is smart enough to offer citizenship to educated americans,
the trend will become a tide.

~~~
tehlike
Nothing that i am actually worried about: [https://www.usnews.com/news/best-
countries/articles/2017-02-...](https://www.usnews.com/news/best-
countries/articles/2017-02-09/record-number-renounce-us-citizenship-in-2016)

around 5500 in 2016.

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notaboutdave
This would make "Satoshi Nakamoto" a criminal for not declaring the genesis
block on his taxes.

~~~
6nf
Only if Satoshi is American. And if he's still alive.

~~~
tehlike
Or if he hasnt renounced his citizenship

~~~
garmaine
Renouncing citizenship wouldn’t prevent you from owing uncollected or misfiled
back taxes.

~~~
tehlike
Good point. Educate me (since i am not sure about that part of taxes), would
exercising your gains and converting them to fiat in a country which doesn't
have capital gains taxes (singapore, i think is one?) generate backtaxes?

I am thinking: BTC=0 value when satoshi generated them. Now they are worth
billions. There is capital gains, but assume he renounced his us citizenship
before converting them to fiat. What would happen?

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freeloop3
He'd pay taxes as if he sold at fair market value. This scenario has occurred
time and time again when someone acquires a lot of wealth through investment.

His best option would probably be to create an irrevocable trust which pays
him a percentage every quarter. Then he won't owe any taxes on what has
already accrued.

Then he can consider expatriation or moving to Puerto Rico.

------
nickysielicki
"I wasn't concealing ownership, I just thought I had lost the key to unlock my
wallet. You see, it all started with my friend's unreliable boat."

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chris_st
Well, at the very least that'll change how numer.ai works, if this passes.

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bobbybreakdanc
So, if this is taken to mean ownership or control of cryptocurrency wallet,
what does that imply?

What defines ownership? Access? If someone holds a key to a house that doesn't
mean they own the house.

What defines control? If a key is destroyed, and no one else owns that key, is
is control lost? What if the key is lost? Is control lost until the key is
recovered?

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Simulacra
With the NSA permeating so much, how sure can we be a bitcoin was ever truly
anonymous ?

~~~
estroz
Bitcoin was not and never will be anonymous if a user converts to fiat. There
is always a way to trace a transaction through the blockchain, and from there
to a fiat-Bitcoin exchange where you have an account tied to your bank.

~~~
mercer
I suppose the more anonymous option would be to 'buy' mining or use something
like localbitcoins? You could still get caught, of course, but it'd be a lot
more difficult.

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nickthemagicman
Monero still ok?

~~~
tehlike
Edit: Sorry, i misunderstood. The laws do cover monero and other cryptocoins,
it seems like, but i am not a lawyer.

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zeep
is it the same for gold?

------
bitsane
Good, finally some concrete step by senate to stop block craze. Meh typical HN
commenters "Taxes are great, except when its us who get taxed". The way I see
its time to throw book at bitcoin holders, lets start putting Coinbase execs
in prison.

~~~
tehlike
People must declare their income from cryptos, but they like to be in gray
area. Many many people has generated massive taxable events as they moved
their cryptocoins into other cryptocoins as a means of diversification, for
example. They just like to think of it as an "invisible" event that's not
government's business.

But then, the same people complain about quality of public education, or why
101 sucks, or something along those lines that require tax money.

Currently, cryptocoins are seen as "have your cake and eat it too".

