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Bitcoin To Be Regulated Under US Money Laundering Laws

Posted by Soulskill on from the government-smells-funding dept.

Newsubmitter davek writes with news that the U.S. will be applying money-laundering laws to Bitcoin and other 'virtual currencies.' "The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU +0.17% They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies. 'I think it's inevitable that just like you have U.S. dollars used by thieves and criminals, it's sadly inevitable you will have criminals use a virtual currency. We want to work with authorities,' said Jeff Garzik, a Bitcoin developer. Still, law enforcement, regulators and financial institution have expressed worries about the hard-to-trace attributes of virtual currencies, helping trigger this week's move from the Treasury's Financial Crimes Enforcement Network, or FinCen."

44 of 439 comments (clear)

  1. They don't get it by lalena · · Score: 5, Insightful

    Bit Coin works even if there are no "firms" to issue or exchange. Therefore, there is no one to regulate.

    1. Re:They don't get it by Anonymous Coward · · Score: 5, Insightful

      They regulate entities that exchange bitcoins for dollars.

      If the average user can't exchange bitcoins for dollars, what good is it?

    2. Re:They don't get it by jandrese · · Score: 4, Insightful

      The regulation is clearly going to happen at MtGox or any other place that exchanges bitcoins for USD. Once you are sending $10,000 USD to someone, the money laundering provisions apply. This should work for as long as businesses don't accept bitcoins directly, which is still mostly the case. There are a small number of businesses that will deal directly in bitcoins, but not enough that you could spend $10,000 on them reasonably yet.

      --

      I read the internet for the articles.
    3. Re:They don't get it by Anonymous Coward · · Score: 3, Interesting

      No. You don't get it.

      The gold standard also works if there are no "firms" to issue or exchange it. People can do transactions person-to-person with no intermediary. Or, heck, cash transactions - me buying a truckload of goods in exchange for cash payment cannot be directly regulated.

      What CAN be regulated are transactions through banks and financial firms. You can sell a truckload of goods for cash no problem, but depositing $1,000,000 in cash will raise some eyebrows. Similarly, you can buy all the bitcoins you want. And you can exchange them directly with whoever you want. But if you want to exchange a large number of US dollars for them (or vice versa) via a financial firm, they're going to ask questions. The financial firm will have to track and report it.

      You can do whatever you like out in the shadows. It's when you hook things up to the "mainstream" financial markets that these regualtions apply.

      Which is why it's effective for money laundering. If you have a wadge of dirty cash, you can't really go out there and buy bitcoins "one at a time" through individual transactions until you've converted it all. You need to go through a large, organized market. Which requires an exchange. If you're doing very high value transactions, they want some reporting on where the "other side" of the transaction into/out of bitcoins came from and where it's going.

    4. Re:They don't get it by cayenne8 · · Score: 5, Insightful
      But why SHOULD it be regulated?

      For that matter, WTF should the US govt be notified if I do any transaction over $10K in cash, bitcoins or barter??

      How did we let it become the govts business what we do with our money?

      --
      Light travels faster than sound. This is why some people appear bright until you hear them speak.........
    5. Re:They don't get it by interkin3tic · · Score: 5, Insightful

      I suspect you are the one who doesn't get it. Government makes demands. If those demands aren't met, aren't countered through an internal process (like voting the pols who made those demands out), or if those demands aren't bluffs, there's an escalation. Eventually, force will be used.

      There are people to regulate. The government will identify them if the politicians, lobbyists, and special interests are determined enough. I'm not sure if they are. How many transactions over $10,000 in value are being done with bitcoins (the minimum for these rules applying)? I didn't read TFA too closely, but I couldn't see any estimates.

      Many slashdotters may disagree that the government isn't serious about stopping bitcoin use, but hear me out. Banks and law enforcement may have made statements "worrying" about it, but that doesn't mean they see it as a real threat due to how few people use bitcoins. Bitcoin proponents love to think that what they're doing will be a revolution, but bitcoins seem to be losing ground (if they had any to begin with.) I can't imagine banks or law enforcement spending much capital on a problem that is solving itself. The "I want taxes" bureaucrats aren't likely to pursue it either for the same reasons. They don't, after all, usually audit teenage babysitters for tax evasion. And I'd wager babysitting is a more lucrative economy than anything happening on bitcoin.

      Anyway, the target here probably isn't bitcoins, it's probably the other alternative currency mentioned in the article: corporations with virtual currency. Amazon coins. There's obviously someone to regulate there.

      Forget about bitcoins. They're not the story here despite the headline. Amazon or various other entities attempting to avoid sales taxes IS.

    6. Re:They don't get it by Anonymous Coward · · Score: 5, Funny

      If the average user can't exchange bitcoins for dollars, what good is it?

      Finally someone gets it, and explains why the EU is failing. All those people earning and spending euros, never converting them to dollars, wasting their time, getting nothing out of it. Don't they understand? If they don't convert to dollars, they're useless. Fortunately for the euro, they can convert to dollars, but so few europeans take advantage of this to validate to the euro. Thus, it never gains legitimacy.

    7. Re:They don't get it by h4rr4r · · Score: 4, Informative

      I call bullshit on that.
      Amazon does not take bitcoin. Someone is converting that to pay amazon USD. They will regulate the one doing the conversion.

    8. Re:They don't get it by hedwards · · Score: 4, Funny

      Not really, USD are taken by anybody in the US that lends money as well as for taxes. BTC are basically just useful by a small number of people that aren't very good at math. The rest of us stick to currency and barter of things that actually exist.

      Now, if BTC was a mandatory option for payment and was likely to continue that way into the future, then it would be a closer analogy. But, even there with the fixed maximum supply and the curve at which they're being introduced, being what they are, even then it would be a stretch.

    9. Re:They don't get it by SerpentMage · · Score: 4, Insightful

      They will comply because if they don't it means that they can never have a US account, ask for US dollars, trade US equities, etc, etc, etc... If you are willing to 100% forgo every and any tie to the US, go for it! The US is even for us foreigners a part of our daily lives, directly or indirectly.

      --

      "You can't make a race horse of a pig"
      "No," said Samuel, "but you can make very fast pig"
    10. Re:They don't get it by h4rr4r · · Score: 4, Informative

      The Euro is another currency that millions of people accept and pay taxes with. Bitcoins are not.

    11. Re:They don't get it by hedwards · · Score: 3, Insightful

      They don't have to, but if you go into a dealership and try to buy a new car with cash, they're probably going to see that as suspicious. Very, very few people pay cash in the literal sense for a vehicle, those who do have the money will usually pay by cash, because carrying around $24k in unrefundable currency is pretty risky. Not to mention a real PITA to count and carry.

      I used to get paid monthly in cash at a job I worked, and the 6500 would be a stack of hundreds about 2" high IIRC.

    12. Re:They don't get it by Anonymous Coward · · Score: 5, Informative

      Yes, BitPay are converting buttcoin to USD and will be the ones regulated. Shouldn't be too big a deal; presumably they already have customers' addresses so they can ship stuff to them.

    13. Re:They don't get it by serviscope_minor · · Score: 5, Funny

      The Euro is another currency that millions of people accept and pay taxes with

      Except the Greeks!

      --
      SJW n. One who posts facts.
    14. Re:They don't get it by h4rr4r · · Score: 3, Insightful

      WTF are you trying to say here?

      You cannot buy from amazon with bitcoin directly. Instead bitpay handles that. If you want to buy from amazon, someone has to turn that into USD at some point. They will be the regulated party. If amazon takes bitcoins, all that would change is amazon would be regulated as a money changer.

    15. Re:They don't get it by Anonymous Coward · · Score: 3, Funny

      I'm in eastern europe,

      There's your problem right there. You should move to a more civilized and stable area, like Somalia.

    16. Re:They don't get it by Anonymous Coward · · Score: 3, Interesting

      What happened to things like the 4th amendment or innocent until proven guilty? If the govt. has a reason to belive someone is involved in crime, then they can get warrant to then have the bank notify them if that person is making large transactions. It should not just be a big fishing expedition where people have to prove their innocence every time they make a transaction over an arbitrary amount.

      Why not just randomly raid the houses of people in rich neighborhoods to make sure they aren't doing something illegal? Or pull over every other car and search it to see if they have drugs or weapons? If your not doing anything illegal what are you worried about right?

    17. Re:They don't get it by Ghostworks · · Score: 5, Informative

      First, a small point: the laws apply to ALL transactions. The laws for MANDATORY reporting are at $10,000. If a financial institution suspects something weird -- which can mean a $9,999 transaction, 100 transactions of $100 each, a $5000 transaction where a teller noticed the customer also has another $5,000 in cash that he's not doing anything with yet, or a transaction where a customer said, "oh, wait, let me take that cash back and deposit a little less so I am below the $10,000 mandatory reporting limit" -- then they can, should, and probably will still file a report. This applies at banks, airports*, and numerous other places.

      * Side note: ever wonder why you can't travel with more than $10,000 cash? Well, you can. Ever wonder why some people act like you can't? Because it means paperwork. It's perfectly legal to walk through an airport with $10,000 and say, "I'm going to Las Vegas to bet the farm." It just means at some point customs, your bank, and the casino cashier will have forms to sign saying they saw $10,000. Unless you actually are driving to the Nevada desert for a drug deal, it's really no skin off your back.

      Second, I'm going to make this an, "I told you so," to posters on previous threads who seemed to believe that U.S. money laundering laws only applied to U.S. currency. It's most easily enforced at large, brick and mortar companies actually doling out greenbacks, but it's applicable always and everywhere something is a currency. If enough people were in a mood to transfer all of their cash in to WoW gold pieces, it would apply. It applies equally to Americans and in American jurisdictions to: U.S. dollars, mostly-defunct financial instruments like Bank promissory notes, to proxies like casino chips (and WoW gp), and non-federal currencies like Ithaca Hours, Chinese Yuan, and BitCoins.

      Third, on a larger scale, let this be a reminder that there is no "cyberspace". The internet is not something apart from the rest of the world. The internet is just something the whole world is "doing" right now. There is no cybercrime, just crime. There is no cyberlaw, only law. The internet is not regulated differently than any other aspect of our lives, except that special provisions are necessary to disambiguate jurisdiction and to enable law enforcement to cope with the realities of the situation, much in the way "wire fraud" was created as a federal crime to allow enforcement agencies to cope with the jurisdictional questions of a crime committed in one state by a perpetrator in another. The internet is not special. All laws still apply.

    18. Re:They don't get it by cayenne8 · · Score: 4, Insightful

      so go make your own society, where such controls don't exist

      and after you get ripped off, by... get this... criminals... learn your lesson the hard way

      criminality exists in this world. i'm sorry this bothers you, and i'm sorry in your naive rage you blame those who pursue criminality rather than criminality itself

      Like another poster said, what about "innocent until proven guilty"?

      I mean, if you're in the US, that's the way it is supposed to be.

      If you suspect wrongdoing, then get a warrant, investigate....what's wrong with that?

      --
      Light travels faster than sound. This is why some people appear bright until you hear them speak.........
    19. Re:They don't get it by cayenne8 · · Score: 3, Insightful

      Anyone can playact a childish form of appearing intelligent by asking stupid questions. Real intelligence appears in the form of making a case for one's positions.

      Well, not so much in the US. The Constitution and the govt and the courts do NOT grant us our rights, we are born with them inherently. Therefore, it is the proper thing to do to question any time the govt starts to assert new authority or set limits on your free to do activity.

      Also, there is nothing wrong with questioning laws already on the books...as that they might not should be there to regulate you.

      We're not here to serve the US govt, they are here to serve us...although, they often seem to be forgetting this.

      --
      Light travels faster than sound. This is why some people appear bright until you hear them speak.........
    20. Re:They don't get it by Anonymous Coward · · Score: 4, Insightful

      But... you can have no connection to the U.S, but If you start selling your oil in bitcoin your country will get invaded.

    21. Re:They don't get it by rahvin112 · · Score: 3, Insightful

      Are you a fool or just trying to make a point?

      The drug war ship sailed a long time ago and 80% of Americans were out there cheering their loss of freedom. Cash reporting, private property seizure by suing the property, drug dogs, highway checkpoints, etc are all casualties of the war on drugs and almost no one in America was ever concerned about it.

      You want to stop the insanity? Become an activist for total legalization and a rollback of all drug war inspired legislation.

    22. Re:They don't get it by Ambiguous+Coward · · Score: 3, Funny

      We don't need fiat USD. We can purchase the ever growing number of products&services with BTC without the use of USD

      Haha, yes, I've seen the videos. "Watch me buy gas with bitcoins!" *transfers bitcoins to friend, waits 20 minutes, friend buys gas with USD*

      --
      Their may be a grammatical error, misspeling, or evn a typo in this post.
    23. Re:They don't get it by witherstaff · · Score: 3, Interesting

      I would like to see anyone try to take on such a huge network. A bank couldn't afford to do it. Perhaps with the NSA's budget they may have some crypto chip that could outhash anything out there. Otherwise I simply don't see how to take over 51%.

      Right now the bitcoin network is using 58.710 T/hashes. Everything is gauged in Mhashes so that is 58 billion 710 million M hashes. Top GPU does 1200 Mhash so you'd need about 49 million in GPUs of them running. At $777 each that's 38 billion to duplicate the network, doubling it. Not including anything else on a computer.. no boards, no CPUs, no electric to run them. I think my math is right.

      Total value of all bitcoins if bought outright is 10,936,000 BTC * $72 = 787 million. Sure an entity could try to buy every coin out there. That'd be interesting to see if that would shoot the price even higher. I'm not sure how that would play out. But BTC can go 8 decimal places so even if they get very expensive people can use small portions of them.

      Shutting down the peer to peer network is about the best that would be doable. Outlaw bitcoin, shut off anyone using it, and perhaps. But there is an estimated $2 million USD done on the silk road every month so people are fine doing illegal things.

      This is all about control. Bitcoin was created to avoid the banks. There is no way to "print" more USD to buy treasury bonds like we're doing now. The banks with direct ties with the government is probably fearful this idea of being able to avoid banks entirely actually catches on. That would not be good for business.

    24. Re:They don't get it by Darinbob · · Score: 3, Insightful

      You can take a handful of dollars and spend them just about anywhere in the US, plus many parts of the world. Retail stores, gas stations, even to give to the kid who mows your lawn. A flash drive with some bitcoins on it is essentially useless almost everywhere, and only slightly less useless on the internet (it's country of origin). If you have a handful of Euros, or Yen, or whatever, at least in the US you can go to any bank and have them exchanged. I don't know of any bank that will exchange bitcoins. I can take my visa or mastercard (eurocard) and use it most places in the world and pay in the local currency but get billed at home in USD (with an extra fee). I can not use a visa/mastercard to buy anything that takes only bitcoins.

      Bitcoins are pointless everywhere except for a very tiny number of places on the internet.

      Now the idea of a digital currency is not a bad idea by itself. However the currency should be tied to something tangible at the start, and not generated from nothing by "mining". The people pushing bitcoins the most are the speculators who have a significant chunk of mined bitcoins that they got for free, and they are hoping that the value goes up so that they can cash out. The people wanting a true digital currency are not necessarily bitcoin fans.

    25. Re:They don't get it by shaitand · · Score: 3, Insightful

      Exactly. People are always looking for what they need Bitcoin for right now. Bitcoin fortunately has managed to find enough answers for that so far but the benefits if Bitcoin gains critical mass are astounding.

      Bitcoin has the potential to be a universal currency that no government and can seize or freeze. No company can trick you into a subscription with fine print and make you pay. No vendor can force you to put a debt before buying food for your family because the bank or government supports them over you.

      This is all good for the people. No more charge backs, and no more ability for merchants to pull funds from your account without getting authorization every single time. No more US creating money through hidden inflation. No more China artificially reducing the value of it's currency.

      The current schemes burn honest consumers, merchants, banks, traders, and even governments. For every advantage gained by manipulating the system in some way there is somewhere else they get burned. A value exchange medium that isn't controlled by anyone, is global, can't be seized, can't be manipulated, and can be exchanged instantly and easily is ultimately a good thing for everyone.

  2. What about gold mining in WoW? by Anonymous Coward · · Score: 4, Interesting

    People exchange cash for the virtual currency, and exchange the virtual currency in the game all the time. Will Blizzard be subject to book-keeping and regulations?

    What about other games with credits and item trading?

  3. This is meant to kill Silkroad by Xemu · · Score: 5, Interesting

    They will use this law to strike against Silk Road.

    Remember, Capone was convicted on federal charges of tax evasion.

    --
    Tell your friends about xenu.net
  4. Pot...kettle... by ProZachar · · Score: 5, Insightful

    "I think it's inevitable that just like you have U.S. dollars used by thieves and criminals..."

    Unfortunately, the worst thieves and criminals (the government and the banks that have bought the government) will be the ones doing the regulating.

    1. Re:Pot...kettle... by IamTheRealMike · · Score: 4, Informative

      I think you have to separate the question of whether X/Y/Z things are bad from the question of money laundering. AML is an extremely complex, expansive and vague set of laws that more or less attempt to fight crime by creating a systematic network of surveillance and control over the financial system. That's why you read about people having to automatically file paperwork for transactions that are "suspicious" (what this means is not well defined). That's why anonymous banking is illegal - the assumption is anyone could be a criminal so everyone has to monitored, all the time. And in fact, it appears that parts of the USG have created a system in which not only are such reports dumped, but all records of all financial transactions ever (this is the TFTP).

      One may question whether systematic surveillance is the right way to fight crime ... whether the costs are worth the benefits. Most western societies instinctively reject widespread surveillance - we wouldn't accept government controlled security cameras in our homes despite the obvious application to crime fighting. However without anyone really noticing this is what's happened to finance.

      The other scary thing about this system is that with the ability to track every transaction comes the ability to veto them too. Consider the case of the US citizen who got on the wrong side of Israel and was put on the sanctions list for 17 years. He was finally removed (and they agreed he was not a terrorist) after the Treasury was sued, 1 day before the law stated they had to respond. This kind of rampant abuse of power comes due to the ability to punish people without going via the courts, a power made possible by extensive AML controls.

  5. Translation: Here Comes Big Brother by Uberbah · · Score: 4, Insightful

    Same as when banks started having to report transactions of a few thousand dollars to the feds, because it could be "money laundering". If it's not the mob, it's terrahrists or pedos.

    Same shit from both parties, different day.

  6. Bit coin is growing up! by Mabhatter · · Score: 5, Insightful

    Yea! Bitcoin is growing up! That means enough people are using it that the government is noticing. And of course the first thing the government does to show its appreciation is to start regulating it. Did they at least get a "Baby's first regulation" card?

  7. Much better article by SteveFoerster · · Score: 4, Informative

    For the few, the proud, the article readers: Pelle Braendgaard of PayGlobe wrote a much better article on the same topic.

    --
    Space game using normal deck of cards: http://BattleCards.org
  8. Inline stock quote by necro81 · · Score: 5, Insightful

    The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU +0.17%

    Sigh. Inline, updating stock quotes in business and finance articles are annoying enough in their own context. When taken out of that context by a lazy and sloppy copy-paste, as had happened with this article summary, is just plain disappointing. Does nobody bother to copy-edit these things before they go live? I thought this was /., not reddit.

  9. Re:Good For Them by jamstar7 · · Score: 3, Insightful

    I guess we really need to keep FinCrime busy now that all those bankers and investment brokers are in jail. Oh, wait...

    But foolishly, folks, this looks like a way to puff up the arrest numbers and make for some easy convictions to justify their shrunken budget (FinCrime got seriously defunded the instant they started looking at the big banks and investment houses) to Congress. The prevailing metric of any police force is their arrest record and conviction rates. Go after small fish you can steamroller cause the whales fight back.

    --
    Understanding the scope of the problem is the first step on the path to true panic.
  10. Money monopoly = wealth transfer by moeinvt · · Score: 5, Insightful

    Money laundering? BS. If they cared about money laundering then they'd go after the bankers who are laundering millions of dollars in drug money for the cartels.

    What this is really about is a banker-government that will do anything and everything possible to prevent alternatives to their fiat + fractional reserve monopoly on money. These parasites absolutely can't have us serfs using a money supply which they can't control and manipulate in order to enrich themselves at the expense of everyone else.

    "Let me issue and control a nation's money and I care not who writes the laws." Mayer Amschel Rothschild

    1. Re:Money monopoly = wealth transfer by markass530 · · Score: 3, Informative

      they did go after them, you didn't hear about that especially brutal slap on the wrist they got?

    2. Re:Money monopoly = wealth transfer by DerekLyons · · Score: 3, Insightful

      What this is really about is a banker-government that will do anything and everything possible to prevent alternatives to their fiat + fractional reserve monopoly on money.

      The problem with your thesis is this - it's utterly and completely wrong. Subject to a few simple rules, the government doesn't give a shit whether you conduct your business in dollars, bitcoins, or mason jars full of hamster poop.

  11. Re:Good For Them by QRDeNameland · · Score: 3, Insightful

    All these financial instruments must be regulated and monitored for our safety.

    Yes, I remember the paralyzing fear and chaos of the days of a primarily cash economy, too. /sarcasm

    --
    Momentarily, the need for the construction of new light will no longer exist.
  12. Re:Money Laundering is a Non-Crime by DerekLyons · · Score: 4, Insightful

    The problem with all this is that "money laundering" generally comes from activities which are victimless crimes, and are therefore not a crime because they don't affect anyone but the person doing them.

    Yeah - that money from a protection racket or from running a prostitution ring or from embezzling... no victims there. Or to put it another way, if you think ill-gotten gains only come from money that appears from thin air, you're either *very* innocent about how the world works or utterly and completely clueless.

  13. Your solution to the Scrabble Problem of the day by Sloppy · · Score: 5, Funny

    Problem: Someone just placed a W tile. You have these tiles available to play: H, O, O, S and H.

    Your proposed solution: spell the word "HOHOWS".

    Analysis: That's not a real word.

    --
    As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
  14. Re:Money Laundering is a Non-Crime by dkleinsc · · Score: 4, Insightful

    Drugs besides alcohol and prescribed pills are illegal because they circumvent a distribution apparatus.

    That's not the reason why drugs are illegal. Harry Anslinger, who led the effort to outlaw pot in the 1930's, explained his motivations:
    "There are 100,000 total marijuana smokers in the US, and most are Negroes, Hispanics, Filipinos, and entertainers. Their Satanic music, jazz, and swing, result from marijuana use. This marijuana causes white women to seek sexual relations with Negroes, entertainers, and any others."

    That why the drugs favored by white people back in the day (tobacco and alcohol) are legal, but the drugs favored by non-white people at the same time (marijuana, opiates) are illegal.

    The next major round of prohibitions was very explicitly because Richard Nixon wanted an excuse to lock up the hippies, who he saw as a threat to America.

    --
    I am officially gone from /. Long live http://www.soylentnews.com/
  15. Re:Good For Them by QRDeNameland · · Score: 3, Insightful

    I wasn't talking about before currency was regulated by governments (no one is that old), I'm talking about before any transaction greater than $10,000 became subject to Federal scrutiny, like maybe 40 years ago, which I *do* remember, and yes it was a "primarily cash economy". How you took that mean "prior to gov'ts to controlling their currencies" is beyond me. My point was that the idea that we need these regulations "for our safety" is rather ludicrous when our society functioned just fine without them in recent memory.

    --
    Momentarily, the need for the construction of new light will no longer exist.
  16. Re:three rocks by Darinbob · · Score: 3, Informative

    No matter what you're paid with, you still need to pay the taxes to the IRS if you are a US citizen, and in almost all cases they must be converted to USD. Having income in bitcoins does not exampt you from tax obligations on that income. Even if you are paid in teddy bears you need to be reporting this.