
US financial regulator: We could regulate Bitcoin “if we wanted” - shawndumas
http://arstechnica.com/business/2013/05/us-financial-regulator-we-could-regulate-bitcoin-if-we-wanted/
======
benjamincburns
> [T]he new rules stipulate that "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" and is therefore subject to these federal regulations.

That's a scary statement. The "money transmitter" moniker is a very pay-to-
play scheme for which it isn't particularly easy for a common person to
achieve licensing. If they start enforcing this, it'll stop pretty much all US
involvement in Bitcoin something akin to the crackdowns on online gambling.

Would it be difficult to enforce? Sure. But then when you do get caught
they'll throw the book at you.

If this really is the current legal status of Bitcoin, here's hoping they do
in fact decide to regulate it in a way that preserves the average citizen's
ability to participate.

Edit: I'm not a finance person, but I think this may also be a way for major
financial institutions (existing licensed money transmitters) to seize control
of the Bitcoin markets in the US. Essentially they would take the place of a
Bitcoin exchange and pay on your behalf, but you would never have custody of
your own bitcoin funds. This of course would somewhat (if not entirely)
diminish the value of Bitcoin as a trading instrument, but preserve its value
as a payment mechanism. The gov't would like this since it would remove most
of the anonymity from the process as well.

~~~
gamblor956
This was discussed 2 or 3 weeks ago, when the government's position on bitcoin
was first released. They consider exchanges and bitcoin transaction processors
(i.e,. Coinbase) to be money transmitters subject to regulation.

Individual users (miners, bitcoin holders) are not money transmitters subject
to regulation.

~~~
dragonwriter
> This was discussed 2 or 3 weeks ago, when the government's position on
> bitcoin was first released.

The guidance on the "Application of FinCEN's Regulations to Persons
Administering, Exchanging, or Using Virtual Currencies" was released almost 2
months ago (March 18, 2013.)

> They consider exchanges and bitcoin transaction processors (i.e,. Coinbase)
> to be money transmitters subject to regulation.

True.

> Individual users (miners, bitcoin holders) are not money transmitters
> subject to regulation.

Less completely true. Per the guidance [1], anyone who "buys or sells
convertible virtual currency for any reason is a money transmitter [...]
unless a limitation to or exemption from the definition applies to the
person", and more specifically with regard to miners "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."

[1]
[http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001....](http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html)

------
JonnieCache
Anyone fancy weighing in on what he means here?

 _"If you guys want to be a shill for the financial industry and support a
chattel currency that people use to purchase drugs and money with—have a
party, man. My job is a regulator; I'm going to look after it."_

What is a chattel currency in this context? It seems to refer to a "commodity
as currency" arrangement but there is clearly some extra implied meaning that
I'm not getting.

What does he mean about "shill for the financial industry?" Is he referring to
sellers of bitcoin derivatives, or is he trying to claim that the "real"
financial industry is involved? The colloquial nature of his tone almost
suggests sarcasm. What's the deal?

~~~
drcode
He uses the word "chattel" because it's a term that was used in the slave
trade, but he can get away with it because technically it's just another word
for "currency".

It's a disgraceful smear. This is clearly going to get ugly.

EDIT: Some stats from Google search, since this is a sensitive point and
people are questioning what I'm saying (quotes included in the search):

    
    
      "chattel currency":      72 results
      "chattel property":  46,600 results
      "chattel slavery":  335,000 results

~~~
mikeyouse
The level of perceived persecution in the bitcoin community is pretty
humorous.

Chattel is just tangible personal property that is moveable and hard to value.
[1][2]

Bart Chilton is probably most well known for his outing of the manipulation in
the precious metals markets.[3] This guy is not bitcoin's enemy.

Edit:

From a writeup in which the EFF describes Trespass to Chattels in the context
of digital goods[4]:

    
    
         "A trespass to chattels occurs when one party itentionally uses or intermeddles with 
         personal property in rightful possession of another without authorization,"
    

Does that not sound entirely relevant to bitcoin exchanges?

[1] <http://www.investopedia.com/terms/c/chattel.asp>

[2] [http://www.trustees.org.uk/review-index/Chattels-CGT-and-
Cha...](http://www.trustees.org.uk/review-index/Chattels-CGT-and-Chattels.php)

[3] [http://www.bloomberg.com/news/2010-10-26/silver-market-
faced...](http://www.bloomberg.com/news/2010-10-26/silver-market-faced-
fraudulent-efforts-to-control-price-chilton-says.html)

[4] <https://ilt.eff.org/index.php/Trespass_to_Chattels>

~~~
drcode
> Chattel is just tangible personal property

Yes, this is what I wrote. Now type chattel into Google with autocomplete and
tell me the first item that comes up for you as an autocomplete option...

~~~
rayiner
Interpreting a statement that uses a word with many definitions by looking at
what Google's autocomplete comes up with is the height of fucktarded.

~~~
drcode
OK, so what methodology do you propose for determining whether the word
"chattel" is more commonly used in the context of discussing slavery, or is
instead used most often when talking about things unrelated to slavery?

~~~
tptacek
What does this have to do with anything? "Chattel" is a basic legal term; it's
used in every state of the US.

Rayiner, who is a lawyer, presumably typed his comment with his mouth wide
open and his forehead bleeding from being pounded on the desk. There isn't a
lawyer in the country who doesn't know what the term means. Presumably, your
comments are to a legal professional what the guys who invent their own
ridiculous substitution ciphers are to professional cryptographers.

~~~
rayiner
I wouldn't expect many if not most people to know that 'chattel' is a basic
legal term. I would generally expect most people not to commit the logical
error of assuming that just because two words are commonly used together,
whenever one word is used it must be in the context of the other word.

If I say: "I had to tape my rims back together so I could see" is it relevant
that Google's first completion for the word "rims" is "rims and tires?"

------
johnohara
_"I don't want to regulate everything under the sun," Chilton added in the
CNBC interview. "If you guys want to be a shill for the financial industry and
support a chattel currency that people use to purchase drugs and money
with—have a party, man. My job is a regulator; I'm going to look after it."_

 _“The bank that is storing my money is highly regulated by federal regulators
and backed by a government with a huge army behind it,” James Angel, a
business professor at Georgetown University, told Ars last month._

<http://www.despair.com/arrogance.html>

------
Zikes
I have no doubt they could. They could pass all kinds of laws about how
Bitcoin should be operated.

Enforcing those laws is another matter.

~~~
craigyk
As long as people need to use USD for most purchases, then yes. As long as
businesses are required to keep track of and report their earnings, then yes.

As long as the government could easily afford enough hardware to takeover the
blockchain, then yes.

~~~
falcolas
Taking up the sarcasm cape:

It explains the development of all the NSA datacenters lately - they want in
on bitcoin mining!

------
Tycho
The beautiful thing about BitCoin and governments is this 'dammed if they do,
damned if they don't' dynamic. If they try to regulate Bitcoin, the legitimise
it as a currency and invite the masses to use it, thus diminishing the power
of their fiat currencies, which is what they were trying to avoid in the first
place...

~~~
dublinben
Bitcoin is already pretty painful to use. I don't think regulating it would
encourage use in any way. If anything, it would remove the primary reason most
people have for using it, independence from the government.

~~~
w1ntermute
BTC isn't inherently painful to use. Things are improving a lot.

~~~
tocomment
How are things improving?

------
grimtrigger
Statements like this put a chilling effect over the whole industry, even if
they never take any action.

Bitcoin users should push for a letter of no-action by the CFTC.

~~~
iaw
I think you'd have a better chance getting a response from Obama on the issue
before the CFTC chimed in. The limited experience I've had with the CFTC (and
other financial regulatory entities) implies that they want to maintain the
broadest reach possible and will rarely, if ever, offer clarifying statements.

We have literally asked for clarification on sections of regulations before
and offered several scenarios asking which interpretation was correct. The
response : "we can't offer an opinion on that." Even though they would be the
ones enforcing it.

------
mkbrody
“The bank that is storing my money is highly regulated by federal regulators
and backed by a government with a huge army behind it,” James Angel, a
business professor at Georgetown University, told Ars last month.

The irony is that:

1\. Bitcoin doesn't need a highly regulated financial institution to securely
store your money (but it does require highly secure technology).

2\. Acknowledging that the only thing backing legal tender post gold-standard
is coercive force (you could even argue that implied force is the main driver
behind market demand for $USD - i.e. petrodollars, the EURO, the Federal
Reserve, government agencies that only accept payment in $USD, etc.).

~~~
Cushman
> 1\. Bitcoin doesn't need a highly regulated financial institution to
> securely store your money (but it does require highly secure technology).

Only if you don't consider protection from theft an attribute of secure money
storage. If somebody compromises my bank account credentials, it will be
annoying and time consuming but I will ultimately get my money back. If
somebody steals my bitcoin wallet, I am shit out of luck.

~~~
jeffasinger
Bitcoin is like cash. If someone steals a bunch of cash from you, you're
likely to be out of luck.

You could build a complicated banking system on top Bitcoin too, that could do
things like reverse unauthorized transactions, but that would get rid of the
reason some people are really interested in Bitcoin.

~~~
krupan
Someone could build the banking system for those who would like the warm
fuzzies it gives them, and others could still choose not to use it, keeping
their bitcoins in their own wallet in their own house. Again, just like cash.
The cool thing is that, unlike cash, you can send and receive bitcoin to and
from anywhere in the world electronically without that big banking system's
help!

------
protomyth
Is Bitcoin a currency or a commodity? Does its classification affect who get
to do what with it?

~~~
iaw
It could be either but for ease of prosecution they'll probably dump it into
the commodity category because (I believe) it gives them more regulatory
leeway in their efforts.

I don't believe that the CFTC [1] regulates currency transactions but they
definitely regulate commodities.

[1] <http://www.cftc.gov/index.htm>

------
jeremyjh
I think it is great news for BTC. This sort of coverage can only legitimize
it. It is a complete fantasy if people think the USG will not wet their beak
in the BTC trough. If they find themselves unable to tax and regulate BTC
transactions then they will probably find it necessary to destroy it instead.

------
drcode
> "I don't want to regulate everything under the sun."

The fact that he spells it out so clearly definitely is a great relief.
</sarcasm>

------
venomsnake
Or we could say Bitcoin is religion. It is faith and math combined.

------
madaxe
I could lasso the moon "if I wanted".

------
ttrreeww
It's the drug wars all over again.

