
Ripple fined for acting as a money services business without registration - zmanian
http://www.fincen.gov/news_room/nr/pdf/20150505.pdf
======
Animats
I'm surprised that Ripple didn't register with FinCen. It's not hard.

After registering, a US money service business has to file reports on
"suspicious transactions". This is done electronically, although the data
formats are incredibly antiquated.[1] Each record is like a 1000+ column
punched card, and they're filed as big batches. On the other hand, there's not
much of an attack surface against FinCen, and since their opposition is drug
cartels, that's an issue.

[1]
[http://bsaefiling.fincen.treas.gov/docs/TestingProcedures.pd...](http://bsaefiling.fincen.treas.gov/docs/TestingProcedures.pdf)

~~~
lifeisstillgood
Surprised does not come close - the list of deeply connected investors is long
(AndresseenHorowitz, GoogleVentures) and yet the phrase "MoneyServiceBusiness"
did not cross anyone's mind?

Is this CEO ignoring good advice or fire and forget investors ? Or perhaps
even more worryingly, a disconnect between Silicon Valley investors and the
FinTech regulators in the East Coast - those three thousand miles will take a
lot of bridging.

A bit of history on this ruling will be interesting.

~~~
wmf
We are now in a "post-Uber" world where regulatory arbitrage is considered
just another business strategy.

~~~
cms07
Too bad people aren't going to jail for openly flouting regulations. That
would probably stop a lot of it.

~~~
dmichulke
Assuming that for all regulations the regulator is the good guy you're totally
right.

But these days there are people who'd disagree with that assumption.

~~~
Frondo
Then the place to discuss that is in the political arena.

Violating regulations because you think the regulations stink, the regulators
are wrong, they shouldn't apply to you, whatever, is wrong.

We probably all agree here that dumping mad pollution into the air is a bad
thing, and that regulation should be obeyed, but all it takes is one factory
owner deciding that that regulation sucks, and the air's unbreathable again.

~~~
Natanael_L
Depends entirely on the effect of the regulations. You could describe the
divisive racism laws of the past in USA as regulations, wouldn't it be better
to break them anyway? Do no harm, law or not.

~~~
TeMPOraL
Still, if you break a law, you should face consequences, whether you're doing
right or wrong. That's the point of civil disobedience - willing to accept the
punishment for going with your conscience.

Then there's a difference between breaking the law out for moral reasons and
breaking them because they're inconvenient and you could profit more by
ignoring them.

~~~
dmichulke
About "profit by ignoring them":

\- Is food profit?

\- When I'm hungry -is food profit?

\- When my family is hungry and I don't pay taxes in order to buy food today -
is it profit?

\- What if I don't pay taxes in order to send my kid to a school?

\- What if I don't pay taxes in order to send my kid to a good school?

\- What if I _collect_ taxes from people who could otherwise send their kids
to school?

There are a million possible definitions of profit and I bet that to each of
them I can invent a scenario where it's simply unjust.

~~~
TeMPOraL
And for each of your scenarios I can invent two in which your actions are just
parasitic, in which you freeload on your community. It's easier to make a
profit when you don't play by the same rules as everyone else. Also, if you
run a startup, you're likely not struggling to feed your kids, so the moral
picture you're painting does not apply.

------
notsony
> _" Pursuant to the agreement, Ripple Labs will also undertake certain
> enhancements to the Ripple Protocol to appropriately monitor all future
> transactions."_

Can anybody from Ripple comment on what those protocol changes will be?

~~~
Natanael_L
[https://www.coinprices.io/articles/ripple-moves-to-
require-i...](https://www.coinprices.io/articles/ripple-moves-to-require-
identification-from-all-users)

------
unethical_ban
I wonder how sustainable this is in the long-term: trying to shut down every
website/protocol where imaginary numbers that are valued by multiple people
are hosted.

~~~
xyzzy123
You police the interactions between the virtual currency and $COUNTRY banking
system. To have any real liquidity, such exchanges need to have valuable
reputation, i.e, be organisations subject to the law.

Yes, you can launder money through World of Warcraft but the payments usually
go through Paypal. Online poker is another obvious way to launder hit hard by
KYC.

~~~
lectrick
This will only cause people to flee to the virtual currency and stay there,
over time. It literally incentivizes staying in the virtual currency... just
like people like to "stay" in cash, now (in fact, _just today_ a contractor
offered me no tax if I paid him cash...)

How the powers that be do not see this, astounds me.

As soon as the first cryptocurrency acquires some semblance of price
stability, it becomes more dangerous to the old system.

Given 2 options, one with a lot of friction and one without, no matter the
"marketshare" of the first, the latter one will eventually win.

The only way fiat can prevent this is to stop punishing good actors with
AML/KYC compliance.

The fact that these laws still refer to and try to regulate _geographically-
focused_ transfers of money (which make literally no sense in an Internet
cryptocurrency context... If I fly in a plane and have a Bitcoin wallet app on
my phone which gives me access to spend 15 grand worth of Bitcoins anywhere
(including ON the plane, if it has wifi), do I have to "declare" the
"carrying" of more than $10,000 "cash"?) shows how behind-the-times this
worldview is.

~~~
xyzzy123
You're describing one trip through "the loop". Remember, the state will react
to crypto growth too.

There's a transitivity aspect to it. Ultimately taxes need to be paid in fiat,
and large organisations will eventually get stomped on for accepting crypto if
it subverts government control.

On the second trip through the loop, you have crypto which can be used for
small (in a sense, black market) transactions and fiat which can be used to
pay things like utility bills or buy stuff from companies which must accept
fiat. Individuals will provide exchange services (buy iphones with crypto!) at
their own risk, basically by subverting KYC with small transactions. [We are
already here].

What's the nth trip through the loop? I'm personally not sure, but interested
in your views.

~~~
themusicgod1
> Ultimately taxes need to be paid in fiat, and large organisations will
> eventually get stomped on for accepting crypto if it subverts government
> control.

Ultimately global trade will have to occur in the global currency, and
governments large and small will eventually get stomped on for accepting only
their local currency if it subverts international consensus.

~~~
GregorStocks
The current global currency is the US dollar. Most countries do not allow you
to pay taxes in dollars. Why are Bitcoins different?

~~~
jasonisalive
The USD is a pretty lousy global currency. You can't exactly use it anywhere
in any sort of transaction. I've only ever heard of a handful of places
outside of the States where the local currency is terrible enough that local
people prefer to hold and transact in USD over long periods of time. A true
global currency would be one that you could use to buy practically anything,
anywhere, whether it was a very large or very small transaction.

Regardless, Bitcoin has several advantages. For one thing, you're not
dependent upon continually obtaining a flow of paper notes from a foreign
country that may lie halfway around the world. For another, you can divide
Bitcoin to extremely small and precise quantities - the dollar on the other
hand doesn't scale as well to economies where a penny may start to approach a
significant individual unit of money.

There are of course many other advantages of Bitcoin that make it attractive
for people in many different countries to adopt. The fact that you can
transmit and receive it to and from anywhere in the world, with the same
certainty of transaction confirmation as cash in hand, without the need to
either physically ship cash or rely on a network of physical cash shipment, is
a pretty good one, especially as the world grows ever smaller.

A final advantage would be that you are never hostage to the political dangers
of a nation-state controlled currency (i.e. a small group of rich white men
can at any point decide to devalue your savings, to the point of destruction,
by printing an unlimited amount of the currency.)

------
27182818284
I'm really confused on this. I thought that the IRS taxed cyrptocurrencies as
property? If that's true, how is the "and selling its virtual currency, known
as XRP, without registering" a problem?

I can understand the aspect of transmitting money and how that could get them
into trouble, though.

~~~
MCRed
One thing I've observed many times over the years is that the government likes
to have its cake and eat it too. For instance, they ruled that gold coins were
legal tender. Then one bright employer started paying his employees in gold
coins from the US Mint.

If I give you 12 $50 gold coins that are legal tender, I've paid you $600
dollars, right? Say your salary is one of those a month. What should you claim
as your income on your taxes? $600? That's well below the $4k and you don't
even have to file.

[https://en.wikipedia.org/wiki/American_Gold_Eagle](https://en.wikipedia.org/wiki/American_Gold_Eagle)

But the IRS decided that it didn't matter that they were $50 legal tender, and
took him to court where the court rules that the "value" of them was what
mattered.

So here they are literally claiming it is one way when it's convenient to them
and another when that is more convenient.

The laws are written, always, to give maximum power and flexibility to the
government and little to none to you.

Expecting consistency out of them would be a mistake.

~~~
NeutronBoy
> One thing I've observed many times over the years is that the government
> likes to have its cake and eat it too

Just like the Bitcoin community, who to this day insist that Bitcoin is a
legitimate alternative to 'cash money', then crow that they aren't subject to
any of the existing laws governing 'cash money'?

~~~
jasonisalive
Hello, I'm a Bitcoin community member, I can help clear this one up for you:

1) Bitcoin is claimed as a legitimate alternative to cash money insofar as:
Bitcoin proponents believe that, if the world valued Bitcoin, it would
function superbly as a money. So "legitimacy" here means "workable" or
"beneficial" \- it has nothing to do with legitimation by governments.

2) Many Bitcoin proponents are of the opinion that governments destroy wealth
and hamper economic progress by trying to restrict and control the actions of
people, in so doing preventing more organic and consensus-based mechanisms of
social organisation emerging. Thus the argument that Bitcoin should not be
subjected to existing cash laws is a) an attempt to prevent Bitcoin from early
smothering by suspicious governmental authorities and b) an early-game
strategy, the end game of which would be the significant or total
disempowerment and/or disestablishment of government.

------
drawkbox
In theory, a smart forward-thinking country could come along and look at
themselves as a company/reserve and make a virtual currency + exchange that is
desired because they will not touch it. They could create a killer currency, a
neutral country that doesn't play in the theatre of games. Like the Swiss used
to do with banking.

However banking is also getting more regulated. Money flow is living under a
rule where "papers please" is the norm, untracked cash is suspect. Many of the
excuses for this much regulation on a currency is the War on Drugs and the War
on Terror.

The demand just keeps getting higher and higher for a killer currency.

~~~
roymurdock
The "killer currency" must reach a point where it is robust enough to
withstand what Kroll, Davey, and Felten describe as a "Goldfinger" attack. [1]

They use basic game theory to show that any actor participating _within_ the
Bitcoin community would not commit a 51% attack. They go on to identify the
biggest threat to a budding virtual currency: some _outside_ actor being able
to take a sufficiently large short position on Bitcoin (or otherwise gain
utility from Bitcoin's destruction), then mounting or simply threatening to
mount a 51% attack. This would start a death spiral that would cause rational
actors not to participate in the network at an increasing rate.

They conclude that good, active governance is necessary to make sure that
Bitcoin and similar virtual currencies survive.

The creators will need to "touch" the currency in order to protect and
maintain its value. A true killer currency would be a virtual currency that is
pegged to some well-chosen and largely diversified basket of essential goods
such as wheat, lumber, metals, energy, etc. Peg the currency to a broad range
of economic inputs and raw materials.

[1] Full paper here:
[https://www.cs.princeton.edu/~kroll/papers/weis13_bitcoin.pd...](https://www.cs.princeton.edu/~kroll/papers/weis13_bitcoin.pdf)

~~~
Natanael_L
Any peg requires a trusted third party. It would be like tying gold
certificate ownership to cryptocurrency tokens, like colored coins.

And when you have that trusted third party, why do you have independent
miners? In other words, you get Ripple again rather than Bitcoin or an
altcoin. You drop the decentralization.

------
gonzo
I was trying to figure out the 'Why' and then I got to Roger Ver being an
investor in Ripple.

~~~
aaronbrethorst
Context: [http://talkingpointsmemo.com/edblog/im-so-so-glad-this-
guy-e...](http://talkingpointsmemo.com/edblog/im-so-so-glad-this-guy-exists)

------
colinsidoti
Oh! I've been waiting for a good place to ask this. I made www.stripepal.com
as a weekend project. It's a super lightweight wrapper built on top of Stripe
Checkout and Stripe Connect. Does anyone know if that makes me a money
transmitter or money services business?

~~~
matthewarkin
IANAL. You're using Stripe Connect (and assuming you're doing this the old
connect way), its your user's Stripe account that is processing the charge and
receiving the money. Your Stripe account isn't processing the charge and nor
sending them money hence you're not transmitting anything. Stripe would be the
MSB.

~~~
colinsidoti
Hey - I recognize you from Stripe IRC

This is the interpretation I'm hoping for. I am indeed using "the old connect
way" (assuming you mean charging directly instead of through the platform). I
wonder if taking a fee has an effect, though.

I pushed a question through to Stripe support. Will update here when I find
out.

~~~
anigbrowl
Even if you get the answer you want, talk to a lawyer _anyway_. It's not a
good idea to just jump into the money transfer services market without a legal
gameplan, any more than it is to buy a bunch of chemicals and go into the
explosives manufacturing business, or buy a very high quality printer and go
into the banknote printing business. IT's not that you're forbidden to run
businesses of that sort, but that such businesses involve onerous licensing
requirements.

Put another way, your minimum viable product requires some legal
infrastructure, otherwise you'll probably discover the hard way that it is not
viable after all.

------
redbeard0x0a
They should be going after Proctor & Gamble because Tide is a form of
alternative currency. [http://nymag.com/news/features/tide-detergent-
drugs-2013-1/](http://nymag.com/news/features/tide-detergent-drugs-2013-1/)

~~~
maxerickson
Ripple is not in trouble for using some form of alternative currency. They are
in trouble for facilitating transactions between other parties without keeping
track of who those people are.

It's fun to pretend that the government is always completely arbitrary in its
actions, but it isn't very realistic.

~~~
mike_hearn
The point is that by manufacturing Tide, that was in some sense also
"facilitating transactions". Where the line is drawn is pretty arbitrary and
vague.

~~~
maxerickson
It isn't that vague, P&G isn't buying Tide, no questions asked, from anyone
who wants to sell it to them.

~~~
mike_hearn
But regular people do buy Tide without asking questions, don't they? They just
walk into some shop they found on the street and hand over the money.

~~~
maxerickson
Yeah sure. I'm not sure what the difficulty is, when I say "facilitate a
transaction" I mean that there is a party with minority interest in the
transaction (it ends up with just a fee) and that it does business with 2 (or
more) other parties (that are presumably transferring an amount greater than
the fee).

That is a pretty normal use of the word facilitate (involving an action in the
middle of the other parties).

In the case of Proctor and Gamble, they end up with whatever price they charge
for the Tide when they first sell it and (AFAIK) don't buy any of it. They do
business only as a seller and keep their profits.

So sure, the existence of bottles of Tide does in fact make it possible to use
bottles of Tide to transfer value. It does not however implicate Proctor and
Gamble as a party to each of those transactions. In the case of a company that
makes a business out of receiving value from one party and transferring it to
another, they are naturally implicated in every single transaction that they
participate in.

------
MCRed
IF you think back to the days when the USA was founded, there was a great many
risks facing the new government-- British spies could have been sent to
undermine it, criminals of all manner and sort were out there as well. There
were any number of excuses to make banks register transactions, limit
ownership of firearms, control speech to stop anti-american and pro-british
propaganda and the like.

But they didn't. In Britain, they saw the result of onerous regulations piled
on top of each other for decades--- always with good excuses and claims of
noble intentions-- and how it stifled the spirit.

As a result they fought, and then they went thru two forms of government in
rapid succession ending up with the constitution which was only able to be
passed after the Bill of Rights was added.

One of the arguments against tacking on the bill of rights was that by naming
these rights they would be limited, and no mere 10 amendments could encompass
all of mans rights. Thus, if you read the preamble to the bill of rights
you'll notice a curious phrase that makes it clear that the rights are not
granted by the constitution and not subject to its interpretation, but
universal and pre-dating the constitution.

They chose freedom.

In the past 14 years, since 2001, but also since WWII, 1915 and the civil war
to different degrees, we have seen our rights eroded, repeatedly and in small
increments. Since 2001 it's been fast enough to be shocking to me, but at this
point a 20 year old probably has never known a world without mass survielance.

My point is, people can talk about "money laundering"[1], terrorism and tax
evasion-- these are all excuses. (There weren't even federal taxes before
1915, and for good reason. It took a constitutional amendment, which some
debate was never properly ratified, to even get them.)

If the USA doesn't turn around and start embracing freedom, then more and more
quickly we will slide to the despotism that caused use to leave the British in
the first place.

Only in this age there are no colonies-- but there is cyberspace.

When bitcoin is illegal, only criminals will have bitcoin. When the black
market grew to a certain size, the USSR fell. There's, in fact, an entire
revolutionary movement[2] whose goal is to build and grow a black market to
such a size that it forces the government to reveal the violence "inherent in
the system" as Monty Python put it.

IF you're a frog in a pot of water, would you rather think of it as a hot tub
or leap out into the fire?

[1] Literally a thought crime, that at the federal level is so broadly written
that if you transfer money from your checking account to your savings account
in order to pay your visa, you're guilty. IT's a catch all that wins
convictions, never mind legal or moral principles.

[2] Counter-Economics, which came from the counter-cultural era, but is taking
form more and more technologically these days. Google New Libertarian
Manifesto by SEK3

~~~
javert
Every generation says the next generation is worse. It's actually true.

Western civilization reached it's peak right around 1776, the height of the
Enlightenment, and it's been going downhill since then.

Every generation is worse than the last, and Western civilization will not
last much longer unless the trend reverses.

You can't turn the United States into a Hugo Chavez-style system and expect a
different outcome than the one in Venezuela.

Western Europe is more robust to socialism because the culture within each
country is so homogenous, but even they won't be able to last forever.
Especially with crackdowns on free speech.

~~~
dragonwriter
> Every generation says the next generation is worse. It's actually true.

Every generation has said that since, at least (judging from the earliest
documented case I'm personally familiar with, which is no doubt many
generations from when the trend started), the time of Plato.

> Western civilization reached it's peak right around 1776, the height of the
> Enlightenment

[Considers status of the Atlantic slave trade, position of women in society,
etc., in 1776]

Um, no. Just no.

> Every generation is worse than the last

Its really not.

> and Western civilization will not last much longer unless the trend
> reverses.

Western civilization isn't on any trend to disintegration, even if you may not
like its current organization.

> You can't turn the United States into a Hugo Chavez-style system and expect
> a different outcome than the one in Venezuela.

In what meaningful sense is the United States a "Hugo Chavez-style system"?

~~~
coldtea
> _[Considers status of the Atlantic slave trade, position of women in
> society, etc., in 1776] Um, no. Just no._

There existed societies without slaves, and multi-cultural cities were
everybody got along, milenia before the "Atlantic slave trade".

So it's not a great example of something that "got better as things
progressed".

> _Western civilization isn 't on any trend to disintegration_

That's like, em, your opinion man. Lots of people think otherwise -- so it's
not that clear cut.

~~~
dragonwriter
> There existed societies without slaves, and multi-cultural cities were
> everybody got along, milenia before the "Atlantic slave trade".

The first part is true, but irrelevant. 1776 is the point that was proposed in
the post I was responding to as the peak of Western civilization.

(Whether "multicultural cities where everyone got along" can be anything but
hyperbole for anything that has ever existed is another question, but also
irrelevant.)

> So it's not a great example of something that "got better as things
> progressed".

It wasn't offered for that purpose. It was offered -- as the direct quoting of
the claim about the 1776 peak that preceded it should have suggested -- to
counter the idea that 1776 was the high point of Western civilization.

------
tomasien
I think the title is wrong, they didn't register with FinCen or comply with
BSA AML. Money Transmitter stuff is a really different thing, did I miss
something?

~~~
lambda
The title currently reads "Ripple fined for acting as a money services
business without registration", and the complaint says "Ripple Labs willfully
violated several requirements of the Bank Secrecy Act (BSA) by acting as a
money services business (MSB)and selling its virtual currency, known as XRP,
without registering with FinCEN".

That looks like the title matches the contents. Did the title change since you
wrote the question? It is important on Hacker News, when addressing anything
about the title of a submission (or about the precise URL of the submission),
to quote the title or URL you are talking about, as moderators sometimes
silently change the title or update the URL to point to the actual underlying
story rather than blogspam.

~~~
lambda
Ah, while I was writing that sctb replied explaining that they had changed the
title.

~~~
tomasien
haha he made me look kinda stupid now!!!

------
morpheous
Oh fuck!, this is the WRONG kind of publicity.

