Regulation – Page 4

Linden Lab changes terms of service prohibiting third-party trading of Linden Dollars

Julia Dixon on May 15, 2013

Update: Linden Lab changes its mind and allows third-party exchanges with some conditions. Details here.

The online world SecondLife comes with its own currency, Linden Dollars. A number of virtual currency exchanges make a significant portion of their income buying and selling Linden Dollars. Third party exchanging of Linden Dollars has been happening for years and is an important service particularly to SecondLife players outside the States who otherwise do not have a means of purchasing Linden Dollars.

Last week Linden Lab, the SecondLife operator, changed their terms of service to prohibit third-party trading of Linden Dollars.

CFTC to regulate Bitcoin?

Julia Dixon on May 8, 2013

Bitcoiners, Bart Chilton is here to protect you. In a Monday interview on Bitcoin with the Financial Times the CFTC’s lead commissioner Bart said “It’s not monopoly money we’re talking about here – real people can have real risk in these instruments, and we need to ensure that we protect markets and consumers, even in what at first blush appear to be ‘out there’ transactions.”

Another regulator with their eye on the currency can only add to the headache that US based Bitcoin businesses are already experiencing as they try to sort through the implications of FinCEN’s recent guidance and deal with scared banks closing their accounts.

As Bitcoin is a global, non-political currency the obvious question is will heavy regulation simply move Bitcoin businesses off shore? This possibility isn’t lost on the Financial Times who discussed this with Bitcoin entrepreneur Roger Ver. The Bitcoinstore.com founder said that he knew of a few Bitcoin entrepreneurs who had moved to Panama to look into basing their businesses outside the US adding “Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency,”

Chilton is head of the CFTC, that’s the Commodity Futures Trading Commission. As Bitcoin is not a traditional commodity one might not think of the CFTC as a Bitcoin regulator. However, the regulator has broad authority and certainly Mr. Chilton sees his organization as having authority. Reuters is reporting him as saying “Here’s what I know for sure: we could regulate it if we wanted. That is very clear,”

It’s not just US banks; Canadian banks are refusing Bitcoin businesses

Julia Dixon on April 29, 2013

After a string of US banks closing the accounts of Bitcoin businesses, it seems that Canadian banks are following suit, well at least the Royal Bank of Canada, or RBC.

Two Canada based exchanges, VirtEx, and Canadian Bitcoins, have both had their RBC accounts closed…no explanation given.

Banks too scared to work with Bitcoin businesses

Julia Dixon on April 24, 2013

What was an incident now appears to be a trend. Banks are refusing to work with Bitcoin businesses…It would seem out of fear. In the latest example TransferWise, a business that offers low fee international money transfers, has announced that they will no longer be processing transfers to Bitcoin exchanges as their banking providers are “not comfortable with Bitcoin”.

Mises.org: Cyprus and the Unraveling of Fractional-Reserve Banking

Julia Dixon on March 31, 2013

The Cyprus “bail-in” model of bank rescue, which seems to be gaining popularity, is simply frightening. Fractional reserve banking is built upon depositors trust in their banks, “for fractional-reserve banking can only exist for as long as the depositors have complete confidence”. Financial regulators are destroying their own system by making depositors fear for the safety of their money… they’re either that stupid or that desperate. Frightening.

Joseph T. Salerno sees the silver lining here arguing that Cyprus may bring about the unravelling of the current banking system and expose “the true nature of fractional-reserve banking for all to see.”

Will FinCEN attempt to regulate virtual currency exchanges outside the US?

Julia Dixon on March 27, 2013

We’ll just have to wait and see, but it looks like they might try. In a ‘guidance’ issued in February last year FinCEN believes that a business may qualify as a Money Services Business “based on its activities within the United States, even if none of its agents, agencies, branches or offices are physically located in the United States.”

Bitcoin & The Banking System: Not Just Different, But Entirely Incompatible

Julia Dixon on March 22, 2013

Commercial banking is a money making endeavour; literally. Sure there’s a complex set of rules, but the short story is commercial banks create money. A button is pressed and congratulations, your loan has been approved and $50k of brand new digital Dollars are now sitting in your bank account.

As you might imagine, creating new money is a very handy little trick for banks. In fact, the commercial banking business model is dependent on the variable nature of national fiat currencies which makes this possible. But this trick only works on fiat currencies, replace the US Dollar with Bitcoins, and the banking system as we know it today ceases to exist.

What FinCEN’s guidance could mean for Bitcoin

Julia Dixon on March 21, 2013

As you would expect the Bitcoin world is abuzz with commentary and speculation about the consequences of the FinCEN paper. Some of the more interesting theories on its implications are below…

FinCEN’s guidance may lead to Bitcoin businesses being required to obtain separate money transmitter licenses in 48 states; a difficult and very expensive task. Payment Source.

Could FinCEN’s target be Bitcoin’s anonymity? Might they target Bitcoin mixing services? The Ümlaut.

The guidance may imply that every person who has ever had any virtual currency and exchanged it for ‘real’ currency can now be considered a money transmitter. The Bitcoin Foundation.

FinCEN Issues “Guidance on Virtual Currencies”

Julia Dixon on March 19, 2013

This guidance was issued to “provide clarity and regulatory certainty for businesses and individuals engaged in an expanding field of financial activity.” Or put another way, FinCEN explains who exactly they intend to regulate.

FinCEN covers their bases here discussing “users, administrators, and exchangers… persons creating, obtaining, distributing, exchanging, accepting or transmitting” virtual currencies, both centralized and de-centralized, e-currencies and e-precious metals.

FinCEN sees those dealing in virtual currencies as their regulatory responsibility
Users, and Bitcoin miners seem to be exempt from regulation for the moment
Buying or selling virtual currencies for “any reason” can make you a money transmitter and subject to FinCEN regulation
Virtual currency dealers are NOT necessarily foreign exchange dealers
FinCEN rules can also apply to those dealing in e-precious metals
However, Prepaid Access rules do NOT apply to virtual currencies

Summary below.

Matonis: Government Ban On Bitcoin Would Fail Miserably

Julia Dixon on January 29, 2013

Jon argues that Bitcoin was designed to operate ‘underground’ and that any ban would only draw a large amount of attention to the currency serving to strengthen it. “The demand for an item, in this case digital cash with user-defined levels of privacy, does not simply evaporate in the face of a jurisdictional ban.”

After all, since when has banning things actually worked??