For a bitcoin exchange, only half of the business is in bitcoin. The other half is in fiat, and I think that's why exchanges need a money transmitter license.
Nah, a business that's 100% bitcoin-based with no fiat on or off-ramps will still need a money transmitter license.
For example an exchange to trade one cryptocurrency for another (bitcoin to litecoin). So even a non-fiat company can indeed be a MSB.
It's completely true to say that the IRS deems it property, not currency, and Fincen deems it a money-like product or a money-substitute. It doesn't outright call it currency though, but the implication is there.
Well imagine the police arrests you because it says drugs are illegal, but the courts say they're not. But you still go to jail, because the police says it's illegal. That would be pretty strange.
Similarly, it's strange for the IRS to say you need to pay X taxes because the IRS says it's not a currency, but the courts say it is. But you still need to pay the taxes.
There are reasons for why this might make sense, sure, but it's also easy to see why some people find it strange or confusing.
Sure, but you can use anything a currency. And being able to avoid the laws just by using something that isn't officially recognized would be rather dumb.
You might as well be using cows as a currency, it'd be no different from bitcoins.
You might as well be using cows as a currency, it'd be no different from bitcoins.
Characteristics are much more important than arbitrary definitions because what we want to call something is mostly subjective, characteristics aren't so much. i.e. a fork can be called a utensil or a weapon, but its characteristics are the same: sharp, pointy, rigid etc.
For example, you could say 'anything is a weapon', and thereby we're not allowed to bring clothing on to an airplane, because someone could use a tshirt to strangle a person. That would be completely true, and there certainly will have been people who've been strangled by a tshirt in the past 20 years. But that doesn't mean we should ban it and call it a weapon, because it doesn't have the characteristics or use of a weapon ordinarily and is barely a weapon.
Same for cows. Yes you could use it as a currency, but it doesn't have the characteristics of a currency (fungible? no, divisible? no, portable? no, long term store of value? no, precise unit of account? no) while bitcoins are divisible (up to 100 millionth of a bitcoin), portable (obviously), precise unit of account (yes), store of value (possibly, in my opinion probably but time will have to tell). So indeed cows are treated very differently for the right reasons, as it's not a good form of money and thereby isn't used as money generally. If cows had good characteristics as money, it'd be used a lot, and we'd see people try to use cows to launder money on a massive scale naturally (because any legal money will be used illegally too, and that must find its way back into the system at some point), and then you'd see money transmission laws include cows as a 'money-substitute' just like bitcoin. But they aren't, because they aren't actually a money-substitute, because cows suck as money.
Sure, but you can use anything a currency. And being able to avoid the laws just by using something that isn't officially recognized would be rather dumb.
I agree which is why US institutions have moved to officially recognize bitcoin as a certain thing, so the laws that apply to those things apply to bitcoin, too. For the IRS that's taxation law on property, for Fincen that's money-like products.
