Regulation – Page 3

Bitcoin and the IRS

Julia Dixon on June 20, 2013

Last month the GAO, Government Accountability Office, produced a report on ‘Virtual Currencies’ and tax compliance. The report urges the IRS to look into the use of virtual currencies and release guidelines on taxation of income earned via these currencies.

The report correctly notes that virtual currency transactions are similar to cash or barter transactions. There are no third parties involved whose responsibility it is to report the transaction and transactions of this sort making “underreporting, mischaracterization, and evasion” much easier.

This does signal that the IRS will be keeping a closer eye on the Bitcoin economy, but there is nothing terribly surprising here; the IRS wants a share of your income…however you earn it.

Can you trust an anonymously run business??

Julia Dixon on June 20, 2013

US authorities have begun to enforce regulation on Bitcoin businesses making some Bitcoin related services illegal or simply not feasible. Regulators have also expressed, and demonstrated, a willingness to prosecute off-shore financial businesses who do not adhere to their policies.

In this situation many Bitcoin businesses are faced with a choice, comply or go underground. But how can you run a business ‘underground’? How do you establish trust when there is no authority to give you a stamp of approval? How do you gain customers when your users know that you can simply disappear with their money?

Ukraine freezes WebMoney bank accounts

Julia Dixon on June 17, 2013

Late last week the Ukrainian Ministry of Incomes and Fees froze bank accounts of WebMoney in the Ukraine.

A search of WebMoney’s Keiv office allegedly revealed a number of regulatory violations. It seems authorities are concerned that WebMoney was issuing electronic money without authorization from The National Bank of Ukraine.

Authorities seized computer equipment and “Over 60 million Hryvnas ($7.5 million) held in the bank accounts of companies which were part of in the illegal system,” according to the Ministry of Incomes and Fees.

Update: WebMoney Ukraine resumes transactions.

CoinDesk: Bitcoin exchanges need to grow up fast

Julia Dixon on May 31, 2013

CoinDesk does an excellent job of pointing out the very different standards that entrenched TBTF financial institutions are held to as compared to those outside the system. Those choosing to operate alternative financial businesses are going to face many challenges. In fact, if you’re considering running a digital currency exchange you have only 3 choices…

Find some damn good security experts and operate anonymously
Forget about privacy for yourself or your customers and jump through any and all regulatory hoops
Go to jail

Indeed it is time for digital currency businesses to grow up and make some tough choices.

Via CoinDesk

The relationship between big banks and their regulators is pretty dubious, to put it mildly. But expecting federal investigators to give Bitcoin exchanges the same free ride is childishly naive.

When HSBC got caught laundering money for drug dealers and terrorists, it promised regulators it would improve controls.

It didn’t.

The Liberty Reserve Indictment

Julia Dixon on May 30, 2013

The Defendants

Liberty Reserve S.A., Arthur Bodovsky (owner), Vladimir Kats (left the business in 2009), Ahmed Yassine Abdelghani (left the business in 2009), Allen Esteban Hidalgo Jimenez, Asseddine El Aminr, Mark Marmilev, Maxim Chukharev.

The Charges

OKPay stops working With Bitcoin Businesses

Julia Dixon on May 30, 2013

Via BitcoinMagazine

One year and two months after heralding “the ultimate integration of bitcoin” into their system, the ecommerce company OKPAY has announced that it is suspending its “complete Bitcoin integration.”

Bitcoin selling out?

Julia Dixon on May 21, 2013

The 2013 San Jose Bitcoin Conference has proven to be rather controversial. While it is considered to have been a success, being well attended and attracting high profile speakers, it has brought up a very divisive topic in the Bitcoin community…regulation.

Freemans Perspective: Bitcoin – The Tyranny Test

Julia Dixon on May 21, 2013

By Paul Rosenberg, FreemansPerspective.com

An increasing number of people have complained about governments and central banks in recent years, even using the word “tyranny” to describe them. They are, of course, called names in the establishment press: conspiracy theorists, mainly.

Calling someone a name, however, does not erase their argument (at least not among rational people) and both the governments and the big banks stand accused.

Up till now, however, these accusations were never accepted by the general public. The average guy really didn’t want to hear about the evils of government money. After all, that was the only thing he had ever used to buy food, clothes, gasoline, cars, and so on. He didn’t want to acknowledge the accusations because he feared what might happen to him without his usual money.

Now, however, we have a brand new currency (called Bitcoin) available to us: something radically different. This gives us a new way to directly address the subject of monetary tyranny, providing a clear test for the governments and money masters of the world:

The Mt. Gox Warrant

Julia Dixon on May 18, 2013

The problem here is that Mt. Gox is operating as an unlicensed money transmitter.

With their recent guidance, FinCEN decided that virtual currency exchangers are money transmitters.

“An administrator or exchanger that (1)accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations.”

Mt. Gox is not a US company; however, it does a lot of business in the States and is not registered with FinCEN.

An informant working with a Homeland Security agent signed up for both Mt. Gox and Dwolla accounts. After making a few transactions, he was able to determine that his funds had gone through a Wells Fargo bank account owned by Mt. Gox and opened by the exchanges’ CEO Mark Karpeles. The account was opened by Mark in May 2011 who at the time signed a Wells Fargo form declaring that his business was not a Money Services business or a Money Transmitter. Of course this was almost 2 years prior to FinCEN’s guidance on the issue.

The Warrant states that Mt. Gox is in violation of 18 U.S.C. section 1960. The punishment for this can include fines and up to 5 years in prison.

Ars Technica obtained a copy of the warrant which can be read here.

Homeland Security orders Dwolla to cease payments to Mt. Gox

Julia Dixon on May 15, 2013

Via BetaBeat

The Department of Homeland Security appears to have shut down the ability to use Dwolla, a mobile payment service, to withdraw and deposit money into Mt. Gox, a Bitcoin trading platform. A Dwolla representative confirmed the move to Betabeat.

A representative for Dwolla told Betabeat that the company is “not party” to this matter and encourages those with questions to reach out to Mt. Gox or the DHS.

“The Department of Homeland Security and U.S. District Court for the District of Maryland issued a ‘Seizure Warrant’ for the funds associated with Mutum Sigillium’s Dwolla account (a.k.a. Mt. Gox),” he said. “In light of the court order, procured by the Department of Homeland Security, Dwolla has ceased all account activities associated with Dwolla services for Mutum Sigillum while Dwolla’s holding partner transferred Mutum Sigillium’s balance, per the warrant.”