Let's pop back to the big picture here. One of the functions of the Treasury Department is to prevent money laundering. And, by prevent, I mean make onerous for large amounts of money. Like millions or tens of millions or hundreds of millions of dollars. Think Mexican drug cartel money.
One way to do that is to log all exchange or transmission transactions above a certain size -- which is what licensed money changers and transmitters have to do. You're not prohibited from performing these transactions, you just have to give them your name and SSN or Taxpayer ID.
Sure, there are ways around this, like buying a million rubber duckies in China, then shipping them to the US and selling them at carnivals. But -again- try to import a million of anything, and US Customs will want to know your name and SSN.
If you're talking about changing $100 or even $1,000 into BTC, the government doesn't really care. You might think, can't the criminals just split their transactions into small enough chunks that they can avoid the law altogether? Sure, maybe they could (and certainly they do) -- but at some point, having to conduct a thousand individual exchange transactions to move a million bucks starts to get onerous, and is also likely to leave a data trail -- there will be correlations somewhere.
It's never going to be impossible to exchange BTC for USD untraceably. The point here, which should come as no surprise, is that the government intends to make it impossible to exchange large amounts of value anonymously without it being annoying, time-consuming and costly.
The US has not gone very far yet with their anti money laundering program. In Sweden, we have got to the point where one can only withdraw a maximum amount of $200/$1000 a day (it depend on the ATM, where common one is the $200 version). There is also a hard limit of $2000 a week.
Alternative, one can "request" a larger withdraw from the bank which means two consecutive physical visits to a designated bank office, with a week between, and during designated hours (10-14). At the bank, they may ask you questions regarding the nature of the money withdraw, and is allowed to deny you if they feel the answer is unsatisfactory.
As a side note, an ID is also always required for any money transfer no matter transaction size. They also removed the option for SMS payments (it was considered too anonymous). The effect from this have been that the most common form of donations to red-cross and the likes has dropped with 90%. Last, any transaction (all sizes) is logged and shared internationally with EU and US.
Please provide sources for these claims (and prove me wrong!). I'm quite sure none of them are actual law as compared to company policies. The ATM limit is surely because of personal security reasons (but it can be raised if you notice the bank), and the SMS payments being removed because the communications providers dont want to be scrutinised by the government under "financial service providers law".
Each bank differs slightly, through a good summery is a blog post from 2010 (http://mfc.elmberg.net/2010/03/07/kontantuttag-vad-galler-fo...). I am quite sure however that most is not law, but rather the banks trying to increase earnings by pushing customers to use credit cards over cash. However, if you ask the banks, they will say its to limit the number of robberies at banks. Given the speed that we are moving towards a cashless society, the truth is likely a mix of them all.
I picked Swedbanks number in my post above, mostly because they are focused on normal consumers and less so at businesses. The numbers are also fairly similar to other banks, with only a few hundred dollars in difference compared to other banks. Their exact numbers are written on their website (http://www.swedbank.se/privat/kort-och-betalningar/kort/om-k...). However, I couldn't find a link for the procedure with larger transactions. The best I could find is this news paper article (http://www.sydsvenskan.se/ekonomi/bankerna-stoppar-stora-utt...). I learned personally the procedure by calling my bank and going through the process myself.
There is very few who still deals with physical cash. Employers has to go through the same procedures, so salaries are almost exclusively paid through the bank.
For stores, most push customers to use personal card bounded to your bank account. The trains/buses uses a personalized travel card, and most has stopped taking physical cash altogether. Supermarket stores and gas stations has their "member" cards, but has also tried to move to smart phone apps (they get positional data on their customer through this method). Everyone else mostly takes both credit card and physical cash, but some towns have tried to move to credit card only.
You can pay with a debit/credit card almost everywhere. And most do. Local hot dog cart? Sure!
At least in the big cities, like Stockholm, Göteborg (Gothenburg), Malmö, Uppsala - cards are the main way of paying. You don't often see bills/coins changing hands.
Want to know something else that's funny in Sweden regarding debit/credit cards? There's almost no cards that give a percentage/cash back - and if they do, there's a high yearly fee - or a low pay out.
The common type of expenses is almost exclusively done through credit cards. Food, travel, gas, and bills have gone so far that its difficult (and often more expensive) to use physical cash rather than something bound to the bank account. Its perfectly viable to live/visit stockholm and not have any physical cash on you. Of course one would have to live with the fact that the bank takes transaction fees (if your not using a Swedish bank), and that any purchase is logged.
On other hand, SEB has a hard limit of $14000 a month regarding any type of transaction (bank wire, withdraws, ectra).
as a side note, should test both types of atm to see if its per withdraw or per day. They do not actually say it explicitly. I have never tried to do 15 withdraws in a row on the same machine. I suspect the line behind me will start to mutter...
> Sure, there are ways around this, like buying a million rubber duckies in China, then shipping them to the US and selling them at carnivals. But -again- try to import a million of anything, and US Customs will want to know your name and SSN.
Importing and selling that volume of products also kind of defeats the purpose of running a drug cartel. Drug money is quick and easy, rubber ducky money, not so much (which is quite counter-intuitive if you ask me). At some point you will become more involved in the rubber ducky game, funded by drug money.
I didn't choose the duck life. The duck life chose me.
I'm not sure how much you know about the drug business, but no part of the chain of illegal narcotic production, from the farmers to the chemists to the smugglers to the dealers, is quick or easy. The barons get where they are by taking enormous risks, and are constantly under mortal threat from other drug cartels, backstabbers and governments. If it were easy, drugs would be cheaper.
FYI most reputable Bitcoin exchanges are compliant with "anti-money laundering" regulations ("AML") and require valid identification on record for anyone making transactions of significant size. You'd have to use a shady online btc brokerage or exchange the btc in local cash-based deals if you want to circumvent the international AML laws.
https://bitfloor.com/ which is not a particular shady site (in fact, apparently they're already registered with FinCEN) allows you to buy BitCoins by depositing cash into their Bank of America account. There's an upper limit, of course, but there's no ID required, so nothing stops someone from driving to multiple Bank of America locations.
If you don't attract attention, then yes, "nothing stops someone from driving to multiple Bank of America locations" but intentionally doing that to skirt the limits actually is prohibited - it's a crime, just not as easily detectable.
If you do it in a large enough amount or you become suspected of some other issue, monitored and this comes up - then you'll be prosecuted for that.
But the point is that it would be pretty easy to do it without getting caught. You could send multiple people to multiple banks, across a wide area. The cost of manpower and fuel would eat a percentage, sure, but presumably any form of money laundering does. Which explains why the feds are interested in BitCoin.
Sure, it is not hard to do money laundering, and the risk of getting caught isn't that high - but my point is that even if you technically stay below the reporting limit, you're still facing prison if you get caught in the end; so it's not a trivial decision to make.
Now this is getting interesting. For a decentralized virtual currency:
A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter.
I would translate that to mean "no sales tax"... and that won't last long.
> 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.
This sounds like they want miners to register as money transmitters?
I assume that depends on what the miner does with their bitcoins. My reading is that if they spend them directly as bitcoins, then no. If they convert them to US dollars, then yes. (I'm willing to believe that the latter is more common, of course.)
If you mine Bitcoins, you hold them. If you want to exchange them, you can give them to someone in exchange for dollars (in which case the exchange is an MSB and is subject to the rules for money transmitters) or you can give them to someone in exchange for "real or virtual goods or services", in which case you're fine, or you can hold them, in which case they don't care.
On the other hand, if you happen to mine some coins and then set up a lemonade stand in front of your house where you sell those coins to somebody in exchange for real dollars, then you are a money transmitter according to the guidelines.
That would make sense, but doesn't appear to be what they actually said. They didn't mention that if the party buying your bitcoins for dollars is itself an exchange, the miner is exempt from regulation.
Good catch. Looks like miners can only avoid being classified an MSB if they use their mined coins to buy goods and services. If they simply convert them to cash, they'll have to follow the regulations.
Among other things, it states that there is an activity threshold of $1,000/day before you have to register.
Regarding miners, in current exchange rates, there is $180,000 in BTC being mined each day, so you'd have to be doing about 0.5% of the total BTC hashrate, which would currently be around 250Ghash/s, to one organization to qualify. Anyone with a rate that high is basically a for-profit business at this point, and with that income level, I'm not too worried about them having to register. The large pools also have rates well above that, but I'm not sure if they would qualify, depending on exactly how they distribute earnings.
As far as exchanges, at that level of business, they pretty much are a substantial financial institution, and I don't see a real problem with them having to register as such.
I see it as a net win for Bitcoin - a relatively reasonable amount of regulation, and in return, the implied assurance that there will not be a much more severe level of regulation or an attempt to criminalize anything involving Bitcoin. I think the market is reading it the same way, because BTC seems to be up against the USD on all of the exchanges I checked.
Of course, I could be reading this all wrong... I'm no lawyer and I don't really know much of anything about financial regulations.
> No activity threshold applies to the definition of money transmitter. Thus, a person who engages as a business in the transfer of funds is an MSB as a money transmitter, regardless of the amount of money transmission activity.
So, the $1000/day threshold appears not to apply to money transmitters.
Hadn't noticed that, could change things... There's a lot of wrinkles in how these laws are actually applied, though. I suppose it will take a while to sort out exactly what each type of entity needs to do.
Does this guidance also apply to video game virtual currencies as well? My initial assumption was that "convertible" means it only applies to currencies that can be exchanged back and forth with fiat currency, but I don't explicitly see that stated.
Insofar as such currencies can be converted back and forth to "real" currency, yes, they're covered. I think that's what the document is trying to get at when it discusses "centralized" virtual currencies.
I doubt the authors were smart enough to think of this, and I don't think most people here have really thought of this yet. The online gaming industry is going to be very interested in this once they realize the potential impacts.
In the case of Diablo III, you can sell your in-game virtual gold for real money in their Real Money Auction House, via PayPal. Other games have less official means of exchanging between currencies, but that's at least one official/built-in version that I can think of.
Where can I convert that stuff to dollars? Yes, they have "value", but they aren't currency. Often there's a "market" you can find to convert real world currency in to game junk. But there are no symmetrical markets for buying dollars with game current. That's a vitally important distinction, and part of the definition of a currency.
Bitcoin is a currency. It was designed that way, there is no attempt to hide that fact, and everyone involved knows what it is. Pretending that a currency exchange won't be regulated like other exchanges is just fantasy.
In the case of Diablo3 you can buy in game gold for money off the real money auction house.
Going the other way you can sell gold for money on the real money auction house and in return can receive the money into a PayPal account.
There is a transaction fee of 15% of the total sale price for converting to real money. This is on top of the transaction fee for selling the item on the real money auction house which is either $1 (items) or 15% (consumables including gold).
So sending money from one person to another via diablo3 gold would cost 30% or possibly less if you buy items with the gold you buy and sell them on the real money auction house, though that's probably slower and more time consuming.
Alternatively you can transfer the money to a Blizzard account, which can be used to buy items on Blizzard's own store. This avoids the 15% fee for the transfer of real money (but not the listing fee). However, laundering money with Blizzard merchandise is probably a risky business. That said, if you bought enough of a game right around it's release that was popular it might be worthwhile.
PayPal itself is a registered MSB. So that may avoid the issue for Blizzard in the case of the route of converting to real money via PayPal. However, I'm not clear if the regulation applies in the case of buying goods and services from a Blizzard account.
I'd say the fact that you can trade gold in game between players is itself another problem for Blizzard.
In other words, if you run a Bitcoin exchange in the United States and you don't have 47 money transmission licenses, you'd better call your lawyer.
If you own Bitcoins, you should prepare for the very real possibility that one day, depending on arbitrary state or USDOJ enforcement actions, you may never be able to convert your Bitcoins back to dollars.
For a sense of how backwards our financial regulators are, and how poorly they understand the issues at hand, take a look for yourself:
I don't dispute any of that, but in an ideal Bitcoin economy people wouldn't need to convert to USD. Obviously the Bitcoin economy isn't at that point yet and people need the USD to peg "value" to what a Bitcoin is. But eventually, if Bitcoin becomes more widely accepted, shouldn't the economy settle on to what 1BTC is "worth" regardless of what other currencies are doing?
It's the ability to move between USD that allows us to discover the true value of a bitcoin.
Quick example - in Argentina currently, the government is desperate to keep foreign currency reserves in USD, so they've banned most means of converting ARS to USD. This has created a dual exchange rate where the official value is 5:1 USD, but the "alternative" rate is 8:1 USD. The difficulty of conversion is causing the value of pesos to fall by nearly 40%. The "true" value of the peso is probably somewhere between those two numbers but the market's ability to discover its true price is being distorted.
If a currency as "big" as a member of the G20 ($450 billion GDB) can get massive distortions from closing just some of the easy conversion points, it could destroy bitcoin if the US Government made it difficult to convert into and out of USD.
Further, it seems to indicate that BTC would need to be incredibly liquid before converting to USD wouldn't matter that much.
"in an ideal Bitcoin economy people wouldn't need to convert to USD"
So how do you think they will pay their taxes? How do you think businesses will repay their loans? Do you really think the US government will accept Bitcoin tax payments, or that banks would be stupid enough to issue loans in a deflationary currency that conveys no legal protections?
Bitcoin's only real value in its ability to ultimately be sold for a fiat currency.
Its real value is being a medium of exchange. For example selling X widgets for Y bitcoins and exchange those for Z months use of a VPN.
There are many, many ways people who wish to deal in bitcoins can find a way to convert them into USD. Even if that means buying prooducts from overseas using bitcoin, importing them, then selling the products on ebay for USD.
I am afraid this is incorrect. The problem is, you seem to have a very basic, early 19th century, Jean-Baptiste Say style concept of money. This early school was, too, of the opinion that money's only role in the economy is as a medium of exchange, barely abstracting how the underlying economy is just the exchange of commodities. Thus Say's law as corollary.
But this analysis misses the time dimension of money: lending, borrowing and interest . Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment. I look at it and see a massively deflationary currency, dependant on a empirical rule of thumb (Moore's Law), that is even today failing to accommodate the mildest exponential growth. When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions.
Don't get me wrong, I see value in an automated currency that can provide at least an amount of anonymity . In my opinion, Bitcoin is just not it. When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it. No sane modern-capitalist economy can be given birth by faulty economics.
 Unless of course you belong to the school of the Austrians, like whomever wrote the "deflationary currency" joke of an entry in Bitcoin's Wikipedia. For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong.
 Maybe with a fixed 4% inflation rate, like Milton Friedman suggested. It could also be a fiat currency, and simultaneously decentralized and anonymous, if we could take the principles of the free-banking era, see why they failed (because they failed by themselves, no amount of austrian self-bullshitting will change that) and fix them. Who knows, I'm not an economist.
> this analysis misses the time dimension of money: lending, borrowing and interest . Keynes knew that, and before him Marx, and I bet someone before him too. And in this aspect, I find Bitcoin to be an irreversibly brain-damaged, if interesting, experiment
So we went straight from an analysis (what was it btw?) "missing the time dimension of money" - according to you - to Bitcoin being a brain-damaged experiment. What exactly was the logic there?
> a massively deflationary currency .. that is even today failing to accommodate the mildest exponential growth
How does a currency "accommodate exponential growth", and why should it? Are you saying Bitcoin can't be used for lending etc because it's "deflationary"? Don't you think it would be possible for lenders to estimate the risk involved in using (deflationary?) Bitcoins, and then pricing their loans accordingly?
> When your currency gains value by the hour, actually borrowing and trading and doing capitalist things are losers' propositions.
I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency.
If it were losing value by the hour, well then, yes, people would be reluctant to trade in it.
> When your economic theory is still getting an erection over the gold standard, like some 19th century robber baron, you know you just don't have the economic chops to do it.
Care to tell us what's wrong with the gold standard, and why is anyone who supports it a robber baron?
> For you all evil's root is either the government or fractional reserve banking, so I'm obviously wrong.
Care to explain why the government and fractional reserve banking are good for us all, then?
> I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing?
It is bad for several reasons. The easiest to grasp is that people tend to keep their money in their hands (hoarding) if that money is acquiring value by itself. If people don't spend their money, or lend it, the economy suffers.
> If it were losing value by the hour, well then, yes, people would be reluctant to trade in it.
If they have a choice of many currencies, yes, that can be a problem. But with legal tender the contrary is true: When there is high inflation people will spend all their money as soon as possible, before it loses value. Too much inflation is bad too, but some inflation is good.
> Care to tell us what's wrong with the gold standard
With the gold standard the supply of money is completely independent of the need for money. The discovery of a great source of gold will bring inflation; an expansion of the economy without a corresponding increase of the money supply will bring deflation. The same would be true with bitcoin and bitcoin mining.
> Having a deflationary currency is pro-citizen, it is pro-poor, and pro-middle class.
How so??? With a deflationary currency rich people just need to keep their money at home (not even the bank) and they become richer in real terms. Indebted people see their deflationary-currency-denominated debt become more and more difficult to repay. Home owners see the resale price of their home come down. Poor people have less opportunities to work because people don't need to invest their money to keep their real value. How can all this be pro-citizen?
>> I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing?
> It is bad for several reasons. The easiest to grasp is that people tend to keep their money in their hands (hoarding) if that money is acquiring value by itself. If people don't spend their money, or lend it, the economy suffers.
What I have never understood about this argument is people can't eat money, they can't sleep under it, they can't do any number of things with it. What they can do is buy things, like food, which allow them to do the things they desire. Having a deflationary currency is pro-citizen, it is pro-poor, and pro-middle class.
These classes are primarily uninterested in "investing." What they are interested in is saving. Saving to go to college, to buy better accommodations, to go on a vacation, to stop working two jobs, etc... They have no interest in complex inflation protection vehicles.
You may say: you are being silly, you don't understand how the financial system works! Maybe I don't, but neither does a large percentage of the population. Shouldn't our default policy always be about protecting those most vulnerable? Those most likely to be exploited? Are we doing that now? Would a deflationary economic system be to their benefit? I think so and so did the creator of bitcoin.
Having a deflationary currency is pro-citizen, it is pro-poor, and pro-middle class.
People who have a high amount of debt relative to income (generally the poor, the middle class, governments) benefit from inflation, not deflation, as they can spend full value money today and pay it back with diminished value money later.
Your concept of the poor as savers benefitting from deflation because they save money and stick it in the bank directly conflicts with the core definition of "poor".
Well, why are we in this current situation? Because at the margin at very low income levels it makes more sense to borrow than save. However, in a deflationary system it makes more sense to save than borrow. QED
You make it look like poor people are not saving because of ill will. In my experience, poor people don't save because they don't have any discretionary income, as in, you need to eat, have a shelter and clothes, and your income barely meets those needs.
Even when there is surplus income in an inflationary system it makes zero sense to save it outside of an inflation protected vehicle. It makes more sense to simply spend it and borrow when you are short. This isn't "ill will." It is a natural consequence of inflation.
It only makes sense to save when there is enough income that the risk of losing savings from a) bad investment or b) inflation is lower than the expected payoff.
You're right, it doesn't make sense to keep $BIG_BUCKS lying around on an account somewhere, losing value to inflation. It's a better idea to seek a return on that kind of money.
But saving makes sense even just to prepare for unexpected expenses. We're not talking about hundreds of thousands of dollars here, in most cases, it's not even tens. Barely scraping by might be a bit of an alien concept to someone pulling in $250K/year from programming.
> People who have a high amount of debt relative to income (generally the poor, the middle class, governments) benefit from inflation, not deflation, as they can spend full value money today and pay it back with diminished value money later.
But they keep having to pay more for Stuff. In other words, their purchasing power keeps decreasing, unless their wages rise to compensage for inflation. Deflation "means" an increase in purchasing power, which means getting more stuff for your money, which is.. good? What's not to like?
> If people don't spend their money, or lend it, the economy suffers.
Do you think people buy stuff because their currency is steadily losing value, or might it be because they need or want stuff?
> When there is high inflation people will spend all their money as soon as possible, before it loses value. Too much inflation is bad too, but some inflation is good.
Your average Joe off the street has no clue about what inflation means or what the current official (understated) rate is. You're talking about a situation where it's obvious to everyone that they just should not hold on to the currency they have. Think hyperinflation.
> With the gold standard the supply of money is completely independent of the need for money.
The need for money? Well, if gold is money, then you don't "need money" because you already have it. There's no need to worry about your money having lots of purchasing power either, that's just a good thing.
> The discovery of a great source of gold will bring inflation;
And conjuring up trillions of quatloos out of thin air will not?
You're saying that the money supply increasing without a corresponding increase in economic activity will cause your currency's purchasing power to dwindle? Well yeah, that's about right. But what exactly is supposed to be the problem you're talking about here?
> an expansion of the economy without a corresponding increase of the money supply will bring deflation.
Yyyep. Again, what's the problem?
> The same would be true with bitcoin and bitcoin mining.
> Do you think people buy stuff because their currency is steadily losing value, or might it be because they need or want stuff?
So you think that people don't think twice about buying the newest PC or phone, knowing that they will be able to buy it in 6 months at a lower price? Ora that buying a home now can be bad or good, depending if prices are going up or down? I don't know your average Joe, but my average Jane knows perfectly well what inflation (or deflation) is :)
People buy stuff _because_ they need or want it, but they buy it _when_ they think it's a good time to buy it. Evaluating "a good time to buy" depends on many subjective factors, and (perceived) inflation is an important one.
My point is exactly that people buy things because they need or want it, but, when prices are expected to fall, they wait longer ("when") than when prices are expected to increase or be stable - not that they don't buy at all.
Waiting longer means a decrease in consumption, and less (aggregate) consumption means less (aggregate) production, which also means less total jobs even if productivity is stable (not to mention if it is increasing, as it is because of technological innovation).
> People buy stuff _because_ they need or want it, but they buy it _when_ they think it's a good time to buy it.
If you need a computer right now, you'll buy it now. But overall, people only really need a handful of things, like sustenance, shelter, healthcare etc. No one needs some cheap trinkets from China or whatever. We're just trained to covet Stuff.
Economic theories or policies can't be based on the expectation that people are some kind of spending-automatons that will spendspendspend all the money they have, forever and ever, because inflation encourages them to.
A wise little worker ant will set aside quite a large percentage of his income, just in case a serious need for money arises.
The wise little worker ant doesn't have money, and he doesn't even know what money is. He will stash a quite large percentage of this harvested food (his production) until the stash is enough for the coming winter, for him and for the other non-worker ants.
The wise little worker person, on the other hand, will produce a production P, and get in return some money. Part of that money he will use for consumption C, and part of it he will set aside for savings S. But what he sets aside is NOT production, as in the case of the ant, it is just money - that is, unless the wise little worker person isn't so wise and actually stashes food or car parts or something like that.
The percentage of his production that he is not consuming (after having bartered it through the mean of money) is either going to the consumption C of somebody else, to the accumulation of capital (ie investment goods, thus investment I) or to the actual stashes of our world - stocks S.
If you think not in terms of money, but in terms of actual goods, you should agree that P = C + I + S (everything that is produced either goes to consumption, investment (capital) or stocks).
Now, what happens if C goes globally down, because everybody becomes a wise little worker person? In the immediate, S goes up - the "wise little worker ant" effect, if you will. But soon after, companies that create consumption goods reduce production - because nobody needs big stocks of consumption goods. Now, that could be compensated by increased production by companies that create investment goods - but who is going to request those investment goods, if it looks like people globally want to consume less?
So, what will actually happen is that C goes down, I stays the same or goes down, and after a little time P goes down. And our wise little worker person will lose his job, because less production + increased productivity (technology) = less jobs.
Now, notice that this works on a global scale. On a local scale, it can happen that C + I + S > P - this is for example currently true for the US, and in the long run US citizens will have to decrease their consumption, because that is overconsumption is only compensated by a billion wise little worker ants somewhere else who are actually lending part of their production to the US, in exchange of fiat money. But the decrease of consumption in the US has to be compensated by an increase elsewhere - otherwise, our wise little worker people will discover that ant-economy doesn't work for them.
In case you weren't aware of this already, our economies are imploding behind the scenes, and completely unsustainable.
> In the immediate, S goes up - the "wise little worker ant" effect, if you will. But soon after, companies that create consumption goods reduce production - because nobody needs big stocks of consumption goods.
Again, people will - and should - buy things they need. They may also buy some things they want, if they can afford them. If people stop buying Company X's products, then it will decrease capacity, and possibly go bankrupt, etc. There's nothing wrong with that.
You may decide to start producing and selling buckets of feces, but even though selling three hundred million of them at 50 dollars each would have a positive effect on the economy, it doesn't mean buying one would make any sense for anyone.
Our economies can't keep "growing" exponentially for all eternity, and that's alright. Nothing has been fixed since 2008, and the Status Quo's attempts at whipping up another housing bubble and getting us spending-automatons to spendspendspend are increasingly ineffective.
Ok - if you subscribe to the "happy degrowth" theory, that changes everything. But that has nothing to do with fiat money or gold standards; on the contrary, I would argue that fiat (ie, government controlled) money would make it much easier to make a transition to that new way of life.
But the transition to a happy degrowth FOR SURE can't happen with simple market mechanisms. At least you need to limit the working hours. At worst you need a completely controlled economy. Technological innovation + free market + degrowth = massive and unsustainable unemployment, that's for sure.
I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing? Everyone would be happy to trade in such a currency.
Everyone would be happy to sell in such a currency, but why on Earth would anyone want to buy with such a currency? The only currency that is good for both sides of the equation is the one that is stable in value.
Also (to tie to a comment above this one) a currency which is gaining value quickly is highly regressive to the poor. The poor have to spend their limited means in such a currency - they have to spend substantial fractions of their working capital on consumables.
Conversely, the rich don't. In fact, above a key level depending on how quickly it gains value, the rich functionally never lose any money - they can hold such levels of it that the amount they spend on food is rapidly eclipsed by the increase in value in their wealth.
Of course, this sounds good and is somewhat true with normal currency via investment but there's the rub: with a deflationary currency you don't have to invest. You don't have to put your money in the bank, or loan it out or indeed engage in any type of productive activity to get wealthier. The poor are doomed to work all their lives because they can't get above the magic level of wealth where they don't have to, meanwhile those with the piles of wealth dispense tiny fractions to them to buy necessities. It entrenches a stratified society in a way an inflationary system does not (which is not to say that inflationary money puts us all in the free and clear, but it's better).
> The poor are doomed to work all their lives because they can't get above the magic level of wealth where they don't have to, meanwhile those with the piles of wealth dispense tiny fractions to them to buy necessities.
A historical example of how bad a too-valuable currency can be was the situation surrounding the Free Silver Movement, a Populist-Progressive plan to make the gold-based late-19th-Century American currency inflationary by increasing the amount of cheaper silver in circulation. This was popular because it would help deeply indebted farmers pay back their loans. William Jennings Bryan made a wonderful speech, the Cross Of Gold speech, on the issue: "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold."
In the extreme limiting case, the money economy based on the deflationary currency freezes to death: The rich are left holding money nobody else wants when the majority of society goes to some other currency that actually meets their needs.
In the non-Bitcoin world, the majority usually moves to another currency (a 'hard currency' like USD or Euros) when the local currency is hyper-inflationary toilet paper, but hyper-deflationary Super-Gold (Super-Duper-Super-Gold!) is, as has been explained, just as bad, and so would provoke the same reaction.
Value is the result of supply and demand. What is the demand for a medium of exchange? Why not just use monopoly money, or acorns, or lumps of clay?
For that matter, why do US citizens not use CAN instead of USD? What drives the citizens of a country to use the currency issued or authorized by that country's government?
"For example selling X widgets for Y bitcoins and exchange those for Z months use of a VPN."
Yeah, and what do you think the VPN provider is paying its bills with? When the government says, "Pay us the tax on your energy use," what does the VPN provider reply with? "Here are some Bitcoins?" Unless the government is accepting Bitcoin for tax payments -- which would effectively turn Bitcoin into a fiat currency -- your service provider is either going to need a way to convert their Bitcoin currency into some other currency, or they will require that you pay them with something other than Bitcoin.
1. Your economics are wrong. Value is not the market price. Value is subjective; the value of something to a given person is the maximum price the person is willing to pay. Value is not the same for each person.
2. BTC's unique feature is the instantaneity and anonymity of transactions.
That's the problem with HN. It is clear when someone's arguments have no foundation in modern economic theory and practice, yet these arguments get thrown around with a false sense of certitude. I cited the textbook definition for "value," and yet you argue that it's dependent on supply and demand, which ignored the fact that the definition of value that I cited is precisely what makes up demand.
Person A is willing to pay $200 for a watch. Yet the market price of that watch is $20. Just because that person saved $180 does not mean that value of the watch to person A suddenly and magically fell by $180. Clearly this person found $200 worth of utility in that watch, or else s/he wouldn't have been willing to pay for it at that price.
> "Instant" in the "10-30 minutes" sense, and anonymous in the "you can be tracked" sense...
"I cited the textbook definition for "value," and yet you argue that it's dependent on supply and demand, which ignored the fact that the definition of value that I cited is precisely what makes up demand."
If your textbook is telling you that value is equivalent to demand, perhaps you need a new textbook. It is easy to illustrate the effect supply has on value with the following thought experiment:
If I told you that I was charging $10 to step inside my house and breath some air, would you be willing to pay? Now imagine a world where breathable air is a scarce resource, and there are no other sources of breathable air for miles around my house; would you be willing to pay in that case?
You cannot seriously bandy about the concepts of supply, demand, and market (equilibrium) price, concepts which form parts of basic economic theory, and then throw out the standard economic definition of value.
> perhaps you need a new textbook.
That clause is utterly devoid of any logical content.
Your thought experiment demonstrates nothing except the basic concept of "people will buy whatever is cheapest." Let's say fresh air is worth $1 million to me. If you were charging $10, I would not pay because I can get it for free and gain a "consumer surplus" of $1 million. That does not change the fact that I would be willing to pay $1 million if air were a scarce resource.
"You cannot seriously bandy about the concepts of supply, demand, and market (equilibrium) price, concepts which form parts of basic economic theory, and then throw out the standard economic definition of value."
Your claim that value is nothing more than "demand" is not universally accepted among economists. I did not throw out any definitions; all I did was point out that value is affected by both supply and demand, which is a straightforward neoclassical interpretation.
Firstly, that eHow article you cite is hardly reputable, and it basically contradicts itself. It states that in neoclassical economics, value is a function of supply AND demand, yet it goes on to state that value = utility. That value=utility argument is what is I am trying to say. Utility has nothing to do with supply.
The other article only prove my point. Neoclassical economics is the "mainstream," "standard" economic theory, for both conservative and liberal economists alike. It mentions classical economics only for the sake of historical context (it was prevalent in the 19th century but is now outdated).
You don't even properly state my argument. I never said value = demand. I said value is what makes up demand. That is an important distinction, and it is one that makes sense (if you don't value something, you don't demand it. If you value something, you do demand it.)
Lastly, you ignored my response to your thought experiment.
The maximum price that people are willing to pay isn't "dependent on" demand, it is demand. In particular, it has nothing to do with supply; if something is available for much less than the maximum price someone is willing to pay, then that just means that they get it for a lot less, it doesn't change how much they are willing to pay in principle.
(There are a few subtleties here, such as that willingness to pay should be measured in terms of opportunity costs rather than dollars, but all this stuff can be found in an economics textbook.)
I think bitcoins real value to people is it's a P2P solution to the double spend problem.
"monopoly money, or acorns, or lumps of clay" can be created almost indefinitely. Of course BTC can too, but must be done by forming consensus amongst the majority of the P2P systems. Lumps of clay you don't need consensus. Just more clay.
"What drives the citizens of a country to use the currency issued or authorized by that country's government?"
Legal Tender law. If a debt is offered to be paid in 'legal tender' and the debtee refuses to accept it, the debtor can have the court discharge the debt under the law.
""monopoly money, or acorns, or lumps of clay" can be created almost indefinitely"
Make an acorn for yourself in that case. Acorns are pretty similar to Bitcoin in that regard: you need Oak trees to produce acorns, just like you need CPU time to produce Bitcoin.
"Legal Tender law. If a debt is offered to be paid in 'legal tender' and the debtee refuses to accept it, the debtor can have the court discharge the debt under the law."
Not all countries have such laws. There is, however, another important category of law that gives fiat currencies their value: taxes. The fact that law-abiding citizens must pay their government periodically creates a large demand for whatever the government accepts as a tax payment. Typically, governments accept a currency they issue, or else they authorize the use of some other currency.
People accept a medium of exchange in exchange for their goods and services because they trust that they can later exchange it for something they want.
The "demand" for a medium of exchange lies in direct bartering being inconvenient, because whoever wants something you have, might not have something you want, right then and there. In this case, instead of a trade not happening, you can just accept a medium of exchange, and use it later to get what you want.
> Why not just use monopoly money, or acorns, or lumps of clay?
If people knew they could exchange lumps of clay for goods and services, they would accept them as payment for goods and services.
> What drives the citizens of a country to use the currency issued or authorized by that country's government?
Actually, it's value as a medium of exchange is limited, as the creators of Bitcoin have placed arbitrary limits on their creation; limits put in place to prop up Bitcoins' ability to be used as a store of value.
"Bitcoin's only real value in its ability to ultimately be sold for a fiat currency"
You have that backwards, a fiat currency's only real value is in its ability to ultimately be exchanged for goods and services that you need or want, for things of actual value. So if bitcoin is not directly exchangeable for dollars but it is exchangeable for other things, it doesn't ultimately matter. The no arbitrage conditions of financial markets guarantees that even if bitcoin is not tradeable for dollars directly, it will preserve its value if it is easily tradeable for something of actual value.
"You have that backwards, a fiat currency's only real value is in its ability to ultimately be exchanged for goods and services that you need or want"
The value of fiat currencies lies in their ability to pay taxes, and in general the legal structure that surrounds them. The USD would be worthless if you could not at least use it to pay your taxes in the United States.
Your entire theory is predicated on the idea that currencies are valuable simply because they exist. Supply is not sufficient to create value; demand must exist also, and your theory does not make it clear why anyone would demand any particular currency. Why is CAN not used in the United States? Why are Euros not used in Japan? Why would the citizens of the United States almost all use USD, when so many other currencies exist? Why don't people just use monopoly money?
Take the exchanges away, and you take away the demand for Bitcoin. With the exception of a few cryptoanarchists, the demand for Bitcoin is really the demand for secure and anonymous electronic payments. Claiming that Bitcoin can exist in a vacuum is like claiming that Paypal can exist in a vacuum -- in other words, it is delusional, because people are engaging in electronic transactions for the purpose of spending and receiving their nation's currency.
Not necessarily taxes, it's "legal tender" to settle all debts, public (taxes) or private (any private contract). You can pay any debt in the equivalent amount of USD. If I owe you bitcoins I can choose to pay you in USD and you have to accept it.
Agree with Gormo here -- I spent some time looking into this on the occasion of a previous Bitcoin thread.
If you have incurred a debt, and have not previously negotiated around the specifics of that debt, than the creditor must accept payment in dollars.
However, if there is no debt, for instance if you're walking up to a cash register in a store to buy a candy bar, there is no requirement that they accept any particular form of payment, at least not in the USA -- other countries, like Canada, seem to have stricter interpretations of "legal tender"
And, within limits, any two business entities can contract to trade just about anything for anything else. If you want to get paid in Twinkies in return for making someone a web site, that's up to you. Employee salaries are a different matter -- the way I read the law, you have to pay minimum wage in USD.
> If I owe you bitcoins I can choose to pay you in USD and you have to accept it.
That's not true at all. Legal tender laws mean that an offer of US dollars is legally recognized as an offer to fulfill a debt obligation; i.e. if the issue ended up in litigation, the court would treat your offer of dollars as a settlement of the debt.
But that doesn't mean that anyone is actually obligated to accept your offer of dollars, or that the agreement that generated the debt wouldn't give you a strong incentive to pay in BTC as opposed to USD.
Is this not taking a literal interpretation of his words a bit too far? Is your scenario really that because someone can stick their hands in their pockets and refuse to take the US dollars (and then a court declares that the debt has been paid), they didn't actually HAVE to accept US dollars because they can just stick their hands in their pockets? By that reasoning, I don't HAVE to not murder people, you can't make me, it's just that the courts will put me away for life. The whole conversation becomes meaningless.
Well, no; the point is that the legal tender status of US dollars is only relevant if and when an outstanding debt becomes the subject of litigation. How often does that happpen?
Further, an agreement could say something to the effect of "borrower will repay lender the sum of $1000, or 50 BTC", stipulating an effective exchange rate that makes repayment in dollars entirely unrealistic.
Given that it's not a currency according to the government, you probably don't need to pay taxes when you earn a profit in it. When you receive goods and services in exchange for it, you may need to take those as income (since you didn't pay for them) and pay real taxes on the dollar value of that.
There are probably ways bitcoin could survive without being convertible, but there would be major inefficiencies.
In general, currencies must be convertible to other currencies to be widely accepted. You can't deposit foreign currencies that are not convertible because there is no value to a bank.
Unclear whether the virtual currency itself would be considered of value by the government. If not, the person paying in bitcoin would probably have to pay income tax on the fair value of the goods or services.
> in an ideal Bitcoin economy people wouldn't need to convert to USD
You're describing a situation in which the economy is split into two parts: a dollar economy and a Bitcoin economy. (I will assume that the Feds will come down hard on any "hacks" that make it easy to convert between the two without a license, like they did on offshore gambling sites and AllofMp3.) Experience proves that kind of situation just isn't tenable. Cuba and North Korea just about manage it, but only because there are lots of other barriers separating the two economies.
And anyway, we're talking about the here and now. Do you think the Bitcoin speculators and Silk Road traders are in it for the lols? Dream on.
What no one, the bitcoin community included, anticipates is hundreds and thousands of competing cryptocurrencies around the world.
For time eternal, government has risen among traders to enforce commercial rules.
Currency is like electrical current. It flows and the total currency system--all users--seeks equilibrium on it's own. When you've got currency you have to fend against spouses, family, friends, external competitors, the state, lawyers and nature itself to maintain your position.
> What no one, the bitcoin community included, anticipates is hundreds and thousands of competing cryptocurrencies around the world.
No one anticipates it because it makes no sense. Nobody _wants_ hundreds of thousands of cryptocurrencies: Metcalfe's law and the inherent costs of currency fluctuation risk tell us that the number of cryptocurrencies will remain small.
You definitely do owe taxes even is your whole income is in bitcoins and there is no official way to tie bitcoin to usd.
First, you'll have to pay taxes based on the USD value of the goods/services/whatever for which you got that bitcoin income.
Second, you'll have to justify how you got to that value.
Third, if IRS doesn't like your justification and think that you're underestimating the income, they'll charge you a fine for the difference if they think it's a mistake; or prosecute you with tax evasion if they think that it was intentional.
After all that you'll pray for Feds to issue official guidelines on how to tie bitcoin value to USD, since it will make all of this simpler and safer for you.
My point was - if US government will make hard or impossible converting bitcoin into usd, they can't claim you owe them any taxes if sole income you get is in bitcoins. Or they have to accept it in bitcoins.
As an analogy - let's say you made business where whole income is produced via bartering and in goods, not currencies. Let's imagine that us government made some law which prevents you from exchanging these goods to USD which is the only tax payment option. How you can pay taxes and from what amount?
They can make you pay because they're the government. They would make you pay taxes on the fair market value of the goods. http://www.irs.gov/taxtopics/tc420.html The prohibition of exchange most likely would not enter into it, because that would be a completely separate law from the tax code..
There was a recent case involving the imposition of inheritance taxes on artwork that, because it contains bald eagle feathers, cannot be sold to pay the taxes. So theoretically the result of that case could give us some idea of how the courts would treat a situation where someone solely had bitcoin income but no way to exchange it. Plus, there is a certain amount of US-centric moaning in this thread (and I am not criticizing eurleif). Just because the US says "no" doesn't mean that another country won't say "yes." And in that case bitcoin can be converted to that country's currency and then back to USD.
Of course there's a way to give the item value - pass it to someone who is willing to pay for it with dollars. Likewise, the value of your bartered goods can be calculated on a dollar basis by examining what other people for the same goods. Really, how dumb do people think the IRS are? These are like middle school pranks for getting out of doing your homework.
> Of course there's a way to give the item value - pass it to someone who is willing to pay for it with dollars.
The previous posts said there would be no possible way to transfer the item into dollars. By definition, that makes the value equal to zero dollars. There is no transaction that can possibly made to demonstrate the fair market value being any greater. Of course the IRS will find some loophole to fabricate some value above zero, but that doesn't change the real market value.
It's a false premise. If the goods are worth accumulating then they're fungible. Bnning teh exchange of something as a means of sidestepping currency transaction rules does not destroy inherent value.
Suppose, for example, you have a scheme where people use goats as currency. The goats are all kept on a big farm somewhere, and when one person wants to transfer money to someone else who is a member of the scheme the farm operator updates the notional total of goats owned by each party. If there are enough members in the pool to provide a variety of goods and services to each other, it could be a tax avoidance scheme. You could proscribe that trade, while estimating liability by looking at the number of goats owned by the individual members and/or the $ value of goods and services exchanged, even if it were impractical to realize that money by selling the goats (because they all had a disease or because the nominal value had become wildly inflated compared to the going rate in agricultural markets).
That, my friend, is your problem, and I don't mean that facetiously. You owe U.S. taxes (sales, income, property) in U.S. dollars, regardless of what medium you choose to accept payment in. They don't have to accept the payment in BTC, the law is very specific that the only currency that they must accept is USD.
And, to be very clear, the government is not, in any way, saying thst you can't trade your BTC for dollars. What they ARE saying is that you might have to disclose your identity in return to make that exchange ...
> You owe U.S. taxes (sales, income, property) in U.S. dollars
To pick a nit, sales and property taxes aren't, strictly speaking, U.S. taxes, and the actual taxing authorities - usually municipal governments - could theoretically accept payment via some alternate means.
Of course they are - simply if you can prove the deals, then usually you can convict them of harsher crimes and ignore the tax issue.
However, if their defense proves that the stuff they sold was legal (as some new party drugs might be temporarily), then they can still be prosecuted for tax evasion. And, of course, there is the historical case of Al Capone.
That's not true. You're taxed on the value of your income, regardless of the form it takes; the IRS will treat the market dollar value of the BitCoins at the time you acquired them as the dollar value of your income. If someone gave you a free house worth $200,000, or forgave you of a debt of the same amount, that'd be equivalent to earning $200,000 in cash income for tax purposes.
Sure, but frankly I don't think the United States Department of the Treasury or any federal judge cares about the ideal Bitcoin economy. This letter addresses the real economy we live in today and for the foreseeable future, and it gives enforcement agencies a very bright green light to seize assets and put people in jail.
"..if you run a Bitcoin exchange in the United States..."
It doesn't just apply to the United States. See http://www.fincen.gov/statutes_regs/guidance/html/FIN-2012-A... for info on how entities located outside the US will qualify as MSBs (and be subject to the registration and reporting requirements of the Bank Secrecy Act) if they "offer MSB services in the United States from foreign locations."
None of this is at all surprising and won't have come as a surprise to anyone with an ounce of common sense. The same principle of extra-territoriality has been applied to foreign banks that deal in USD or accept deposits from US citizens, and to online gambling sites that accept payments from people located in the US.
It seems that participating in the bitcoin economy, using bitcoins to procure goods and services, as well as accepting bitcoins for providing goods and services is okay, but a service for allowing conversion of bitcoins to USD will require a license (Is that true for every other currency?).
If I read it right, it makes sense. If not, please correct me, in addition to the downvote.
That is correct, and even if you are a bitcoin miner and you only use the coins you mine to procure goods you aren't subject. However if you are an exchange, or it would seem an escrow agent see this:
"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."
Which would cover a service where, for a small fee, you accept bitcoins from party A, wait for you to acknowledge a transaction in some way, and then release those bitcoins to party B. As I understand what is written this would apply to Silkroad itself, but not the buyers or sellers on silk road.
It is entirely unclear to me if you are regulated if you trade bitcoins for Laundry Detergent and buy laundry detergent from others for Bitcoins. (see previous discussion of how Tide became a currency for drug dealers)
That's mostly right to my reading, but FinCEN letters are not laws. They're clarifications about regulations published in the Federal Register which are themselves clarifications about laws.
FinCEN has published other letters that distinguish between money transmitters and "payment processors," the latter being companies that work exclusively on behalf of merchants to facilitate payments. Even though this interpretive ruling has the effect of a federal regulation, state agencies such as the California DFI choose to actively ignore these rulings and make up their own.
So, what is California's interpretation? We don't know, because as Commissioner Barnes pointed out last Monday, the DFI hasn't issued any of its own interpretive rulings about the Money Transmission Act, ever, and before it does--even though it plans to--the legislature will likely amend the law, which means they'll delay some more.
Now multiply this mess by 47. That's how clear it is.
If you really want the details, my comment letter to the legislature is a good place to look.
"If you own Bitcoins, you should prepare for the very real possibility that one day, depending on arbitrary state or USDOJ enforcement actions, you may never be able to convert your Bitcoins back to dollars"
Very unlikely. There are, today, many exchanges that run outside of US jurisdiction: btc-e, btc.de, btcchina, virwox, cavirtex, bitcoin-central, etc. Anybody in the world can sell bitcoins for something on one of these exchanges, then convert that something to USD.
It is pretty much impossible to take down all bitcoin exchanges. If some are taken down, others will pop up. Decentralized systems like Bitcoin are very resilient. This the same reason why the Internet has not found a way to "take down illegal peer-to-peer file sharing".
By the time this happens (if it happens), I postulate that Bitcoin will be too mainstream to be stopped. And in the history of man, when people want something illegal (drugs, weapons, prostitution, etc), no law will "destroy the value" of these things and even less stop people from wanting them.
Actually yes, "people can get high from bitcoins". Bicoin is the exclusive currency of payment on Silk Road (illegal drugs, weapons, etc). If Bitcoin is ever made illegal, it will continue to be used precisely to buy illegal products that people will always desire.
I doubt it. No one will use bitcoins anymore because they won't have the network effect required to extract value from currency. You can say you have Six Bajillion Bonkers Bucks, but unless a critical mass of others accept Bonkers Bucks as a valuable currency, it's worthless.
People want money because it's a token by which they can gain control and power over things. If bitcoin stops becoming this, no one will want it anymore. Bitcoin is nothing by itself, and if you can't get it into dollars, no one will want it anymore because there won't be enough people with enough respect for an independent bitcoin to yield up the control or power currency holders are trying to acquire.
Drug dealers use bitcoin because it facilitates online transactions without requiring the endorsement of a credit card company, payment processor, merchant bank, and so forth, and because they can cash that currency out for U.S. dollars, which they use to give themselves control and power.
No one wants bitcoins of themselves. I run a software firm and have tried to offer my employees partial payment in bitcoins, and none of them wanted it. If these guys don't even want to get into that game, what do you think the normal person will say?
This would restrict BTC to the black market though.
The black market would be a niche use and probably a sustainable one but nowhere near the size of mainstream use people seem to be hoping for. If (for instance) the US government decides the businesses can't accept it, online or offline, then it would severely limit the growth potential for BTC in the US.
In some ways I'm surprised someone hasn't already gone after the exchanges for allowing people to convert back and forth between BTC and then gamble with it.
Local currencies are a mess of jurisdiction, but generally legitimate currency, or for the purposes of this document, 'real'.
Linden Dollars (along with WoW gold, EVE ISK), are owned by the respective developers. That database entry denoting your Titan isn't yours per se, you're just allowed to have it rendered as long as you abide by the terms of service.
> If you own Bitcoins, you should prepare for the very real possibility that one day, depending on arbitrary state or USDOJ enforcement actions, you may never be able to convert your Bitcoins back to dollars.
You mean USD. Bitcoins can be converted to other currencies outside the United States.
>If you own Bitcoins, you should prepare for the very real possibility that one day, depending on arbitrary state or USDOJ enforcement actions, you may never be able to convert your Bitcoins back to dollars.
There are potential loopholes here. You can still buy liquid assets with bitcoins and sell those assets for cash. For example, you can have a provder that sells gold for bitcoins, and buys gold for cash.
How about Bitcoin exchanges get around the 47 licenses issue by sticking together and performing tit-for-tat trades with other transmitters. If every transmitter has licenses for 4+ states, then it should be possible to break up trades into small chunks and send them along the network to other transmitters.