

Bitcoin Foundation's Response to California Cease & Desist - dustcoin
http://www.scribd.com/doc/151346841/Bitcoin-Foundation-Response-to-California-DFI

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anigbrowl
May I say how much I appreciate you linking to the actual document expounding
the legal argument, instead of some blog post attempting to summarize it.

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ukoto
I agree, but for anyone who wants the summary:

 _The Bitcoin Foundation is not in the business of selling bitcoin to
consumers and does not otherwise operate a bitcoin exchange. Even if it did
sell bitcoin to consumers, however, the Foundation believes it would not be
regulated as a seller or issuer of payment instruments because a bitcoin is
not a payment instrument under California law._

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anigbrowl
I don't mean to offend, but this is what is wrong with the typical tl;dr
summary; you've excerpted a core part of the argument, but you haven't
explained the assertion made therein. To follow on (in my own words):

 _As Bitcoin is a separate currency from the USD, the kind of transactions
that Bitcoin Foundation members are engaged in are in effect foreign exchange
(forex) transactions, and Forex is not considered subject to money
transmission regulations by the state of California._

I'm not sure I buy this argument, but haven't studied the legal background
enough to form a proper opinion yet. the reason I was so pleased to see a link
to a document with primary sources is that it makes it a lot easier to
research the arguments therein, inviting good-faith attempts at falsification.

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bigiain
Hmmmm, I wonder how strategic this claim is?

Perhaps they're just waiting for the state of California to declare in a
legally binding way that Bitcoin is not a "separate currency from the USD".
That'd be something a _lot_ of people would love to be able to promote and
quote prominently…

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Torgo
tl;dr 1\. We are a foundation that promotes bitcoin use, we do not accept or
remit or transmit money. 2\. We are not incorporated in nor doing money
transmittal in California are therefore are not under your jurisdiction. 3\.
Bitcoin does not seem to fit California's legal definition of money, unit of
exchange, or store of value. 4\. "Currency Exchanges" do not seem to meet
California's legal criteria of "Money Transmitters", cites recent court case.

really really tl;dr: bitcoin's not money; bitcoin exchanges aren't money
transmitters; even if they were, we don't do that; even if we did that, we're
not subject to California's jurisdiction.

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anigbrowl
_we do not accept or remit or transmit money_

But they _do_ accept donations, and acknowledge as much (page 2). If you're
going to tl;dr please do so accurately.

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Torgo
I didn't think I had to clarify that a nonprofit taking donations in USD would
count as money transmittal since that would apply to all nonprofits accepting
donations. But I take your point, my statement was all-encompassing.

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quackerhacker
As I've said before, it's disappointing this C&D came from California,
especially when I view our state as one that embraces tech.

I speculate that the purpose of this publicized cease and desist letter was
just to send a message about DFI's disapproval of Bitcoin and ward off
adopters of the _awesome_ crypto.

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csense
This site sucks. It requires an account or Facebook login to access the PDF. I
refuse to do this.

Dissecting it with web developer tools, apparently they parse the PDF content
server-side and rewrite it as HTML. So you can't just view source and find the
link to the PDF file, or intercept the download with a proxy -- you really do
have to log in to get the PDF from them, AFAICT.

Can anyone provide a direct link?

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quackerhacker
There's a link right under the blue FB login [ _Sign up without Facebook_ ]
that _should_ allow you to download the pdf, that's worth a try.

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csense
I object in principle to giving them an email address, Facebook login or
establishing any sort of account. I just want to anonymously download the PDF
over HTTP. Because this doesn't seem to be possible, I'm probably going to
stop clicking on links to them altogether.

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coingig
here you go :) [https://dl.dropboxusercontent.com/u/2877271/Bitcoin-
Foundati...](https://dl.dropboxusercontent.com/u/2877271/Bitcoin-Foundation-
Response-to-California-DFI.pdf)

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thinkcomp
Interesting hand-waving going on here. For some reason they're citing the
California Commercial Code when they know full well than FinCEN Guidance
FIN-2013-G001
([http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001....](http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html))
takes precedence. Of course Bitcoin is a "payment instrument," that's the
whole point, and the Department of the Treasury has already deemed that it is
within the bounds of state regulators. Any semantic argument to the contrary
is just ridiculous.

Also surprising that a reputable law firm wouldn't have known that as of July
1, 2013, the DFI no longer exists, and has been merged into the California
Department of Business Oversight.

I'll be interested to see how the DBO responds, or if this comes up at the AB
786 hearing tomorrow.

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Torgo
Does federal law take precedence for state regulation? It just seems like
California has a narrower definition of "money transmitter" for the purposes
of regulation inside their own borders above and beyond the federal one. Also,
if a business is in compliance by state law but out of compliance federally,
is California obligated to do anything about that? They allow medical
marijuana dispensaries to operate despite being illegal at the federal level.
Not insinuating you're wrong, just legitimately curious since IANAL.

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thinkcomp
Federal law definitely would preempt state regulation. Here, FinCEN has issued
a guidance with what I believe is the weight of federal regulation however.
California typically ignores FinCEN rulings (except this one), but generally
shouldn't.

Preemption is a complex business. Also, I'm not a lawyer, but this is one of
the reasons why the issue is in federal court. The rules are so complex and
contradictory as to be more of a burden on society than a help.

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marco_salvatori
I'm not sure I understand what advantages incorporating offers to the Bitcoin
Foundation, when (a) it facilitates legal targeting by the government and (b)
does not further their stated purpose beyond what they could achieve as an
informal working body. If Bitcoin becomes successful, that success will
threaten governments and they will seek to suppress or control the currency
and its associated organizations. If the Bitcoin Foundation is in this for the
long term, then, like bitcoin itself, they should be focused on establishing
their legitimacy outside of the governmental sphere.

You didnt really think 'the government' was going to leave you alone, did you?

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lucb1e
It's nice to see they defend Bitcoin itself as well as themselves. But then
this nice thing might happen that governments can do when they're said to be
unjustified in a request: they just change the law and then close you down
instead of warn. Might be interesting to try and see them seize Bitcoin
itself, but the Bitcoin Foundation is a legal entity that _can_ be shut down.

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zero_intp
But, as stipulated quiet extensively, not under the jurisdiction of the
California legal system.

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anigbrowl
'Stipulated' means that both parties have already agreed about this (in a
matter which is before a court), which I doubt to be the case. Here, that
claim is argued, not stipulated.

Bear in mind that the Bitcoin Foundation already organized a conference in San
Jose, CA, and solicits donations from a website accessible in CA. As I
understand it, that is quite sufficient for the state of CA to assert _some_
jurisdiction over its activities:
[http://en.wikipedia.org/wiki/Minimum_contacts#Activities_as_...](http://en.wikipedia.org/wiki/Minimum_contacts#Activities_as_a_basis_for_jurisdiction)

