California Sends a Cease and Desist Order To the Bitcoin Foundation

An anonymous reader writes in with bad news for the Bitcoin Foundation. "California's Department of Financial Institutions has issued a cease and desist letter to the Bitcoin Foundation for "allegedly engaging in the business of money transmission without a license or proper authorization," according to Forbes. The news comes after Bitcoin held its "Future of Payments" conference in San Jose last month. If found in violation, penalties range from $1,000 to $2,500 per violation per day plus criminal prosecution (which could lead to more fines and possibly imprisonment). Under federal law, it's also a felony "to engage in the business of money transmission without the appropriate state license or failure to register with the US Treasury Department," according to Forbes. Penalties under that law could be up to five years in prison and a $250,000 fine."

Comments

Uh

[Anonymous Coward]

When did the foundation become a money transmitter? Oh yeah, it didn't.

Re:Uh

[sFurbo]

Don't think they thought it through? The foundation is theoretically unable to comply, so they have no way to avoid being closed and the executives put in jail. What part of that seems not thought through?

Re:Uh

[Osgeld]

"Hemp is of first necessity to the wealth & protection of the country." – Thomas Jefferson

"What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not that his plans may be rendered unlawful before they can be executed?" -James Madison

dont fucking pick and choose, it makes you look like a nut

Re:Uh

[Kell Bengal]

Actually, I'd argue both Jefferson and Madison are talking sense here. Jefferson points out that a valuable commercial product should be exploited. Madison says that risk amelioration is important to encouraging business innovation.

How does failing to mention them (valid statements, if unrelated to the GPs point) constitute picking and choosing?

Re:Uh

[Anonymous Coward]

It's Slashdot, the truth tends to piss people off around here.

Re:Uh

[Kell Bengal]

And if the Bitcoin Foundation actually transmitted monetary value you might actually have a point.

Re:Uh

[Anonymous Coward]

the foundation doesn't transfer any money or bitcoins. The exchanges like mt gox do but that's a whole other story.

Re:Uh

[Jawnn]

Uh, yeah, it did, the moment it became responsible for enabling the transactions. You can't have it both ways. It's either currency, or it is not. Jeezuz, what kind of geek fantasy world must one live in to think that bitcoin would actually become some legitimate alternate currency and then not end exactly the way it appears to be ending.

Re:Uh

[king neckbeard]

So, is Smith & Wesson responsible for people in certain areas using guns as a currency? Whether or not bitcoin is a currency has nothing to do with whether or not the Bitcoin Foundation is engaging in money transmission.

Re:Uh

[Archangel Michael]

Do you realize, that inadvertently THIS legitimizes Bitcoin as "money".

Future regulation

[cold fjord]

As Bitcoin grows more successful, there will be increasing interest in subjecting it to regulation, just like any other financial instrument.

Re:Future regulation

[icebike]

But its not an institution.

You might as well enjoin the wind from blowing because it transports things without a license.
The foundation does not handle or transfer funds any more than meteorologists control the winds.

Re:Future regulation

[Macthorpe]

No it's not. Only an idiot actually believes that. In order to be a real currency, you kinda have to have a lot of people use it to directly buy and sell things.

You can already buy and sell things with Bitcoin. Example: Bitlasers. So where is the line? How many items have to be sold before it becomes a currency? The logical answer would probably be "one".

Re:Future regulation

[Teancum]

That is like saying the author of "The Anarchist Handbook" is liable for somebody building a bomb after being "inspired by" the book. Or similar kinds of actions. I suppose some guys in Hollywood have had lawsuits over various suicides and other nonsense.... and those lawsuits just get thrown out as well.

Your comment about the 3D printed guns is hardly a good reference as well since that has yet to work its way through the judicial system. While it is a "roll of the dice" in terms of what the final outcome might be, there have been numerous situations where the law meets new disruptive technologies. California is in a slightly better situation than most in terms of having to cope with advanced technology and its impact upon legal principles, but there still are a whole bunch of Luddites that lurk in the shadows trying to jump onto anything that seems new or innovative.

In regards to Bitcoins, I think the big deal may be for those who are users of the software and may be liable under this particular law. I have a feeling that would just introduce a sort of Barbara Streisand effect into the debate with thousands of Californians who will purposely download the software just to "stick it to the man" and open the whole thing into a major political debate that will ultimately need to be resolved by the state legislature (with consequences at the ballot box for missteps). I can only imagine the 1st amendment issues alone that might be brought up if a particular piece of software is declared illegal simply because of its protocol. The Federal government tried that with calling some types of software as a "munition" and therefore couldn't be exported (like PGP and the related GPG), but in the long run ordinary citizens weren't prosecuted either, certainly not on a widespread basis. I have a hard time seeing that happen in the case of Bitcoin being something new.

Re:Future regulation

[F.Ultra]

So if I charge you with a fixed EUR rate but with a varying EURUSD rate (due to me living in Europe and thus having my prices set in EUR) this makes the USD not a currency?

Fear... and Control...

[Vapula]

Like the US attacked the Irak when it began to accept payument for Petroleum in Euro instead of dollars, it's attacking Bitcoin as it becomes a viable alternative to dollar...

When did bitcoin(tm) become a currency

[Anonymous Coward]

These bitcoin things are a commodity similar to a mineral so it should really be known as a virtual mineral rather than a currency as you mine the stuff and label it same as other commodities.

Before they tackle BitCoin

[Ghjnut]

I'd like to see what a fine-toothed comb turns up after running through the legalities of PayPal's business practices.

Bitcoin hasn't gone away yet?

[KaLeVR1]

The way I translate this is that the US Gvt waited patiently for this to fold under its own weight and collapse. Now it looks like it's catching on so they've decided to try to kill it. Good Luck. I guess the creator remained anonymous for a reason.

This doesn't surprise me

[jonwil]

Any time someone invents a way of moving value/wealth around, its going to be subject to regulation by governments looking to prevent its use by criminals and bad guys to move their ill-gotten gains and hide where their money came from.

Doesn't matter if its Bitcoin, US dollars, Second Life currency or cute cat pictures, if it can be used to buy stuff in the real world and has a real-world value, the governments of this world are going to want to regulate it.

Re:This doesn't surprise me

[Anonymous Coward]

So naïve... Governments will want to regulate it, but not for the reasons you say, but because, as one Rostchild famously said: "Give me control of a nation's money and I care not who makes it's laws"

Fallacies

[gd2shoe]

dont fucking pick and choose, it makes you look like a nut

Oh give me a break. This is an attacking-the-messenger fallacy. If you want to accuse him of appeal-to-authority, that's fine, but your quotes in no way invalidate his.

Further, everyone says something crazy at some time in their lives. If you try hard enough, you can find a crazy quote for anyone famous. Unless everyone, ever, have all been insane, you've got to give some lee-way.

(Besides, your James Madison quote actually makes sense. Sometime the only progress we've achieved have been from visionary merchants, and not prudent ones. It has also been said that you can only count the number of businesses that have been created, but can never count the ones that could have been, but were dissuaded by inept or corrupt governance.)

XBox Live Points

[Anonymous Coward]

Next up they'll send a Cease and Desist order to the makers of the Bittorrent protocol. That will stop piracy dead in its tracks!

Are XBox Live Points money?

http://www.xbox.com/en-US/Live/MicrosoftPoints
"Microsoft Points are the coin of the Xbox LIVE Marketplace realm. Microsoft Points is a universal system that works across international borders, and is even available if you don't have a credit card. "

Re:Server farms in Ecuador

[Anonymous Coward]

You're joking right?
I just came back from Ecuador a few weeks ago after spending 6 months.

Ecuador has a nationwide network of highspeed fiber optic connections to every major city, it's a ring around the entire country.
Major cities have STM256 and DS3 is the norm in town to town connections. They also have microwave and satellite linkages to back haul in case of a fiber cut.

Even rather minor towns like Salinas offer Fiber Optic broadband to the home.
I had 4G LTE service from Claro in Montanita (a small backwater on the coast that's famous for surfing).
Telconet has Tier III & Tier IV datacenters sitting right in the middle of major cities like Guayaquil & Quito.

CNT the national telephone company has DSL available everywhere and while it's not exactly reliable, the fact is it is there.
HughesNet offers Satellite broadband for the same price there as it is in the USA. CNT is the primary reseller.

All the cities bigger than about 10k people (most of them), also have Cable internet on par with Comcast or Cox.
You do need to be a resident to take advantage of most of these options, but be advised they are there.

That's just Ecuador BTW,

Peru is currently in the process of deploying a nationwide highspeed fiber optic system called Dorsal Red.

My experience in SA is that at least in Ecuador you can expect to get internet services on par with USA services from about 5 or 10 years ago especially pricing wise. It's not the best in the world, but it certainly beats living in rural USA and the options available are much better than rural USA offerings.

Context is everything

[Camael]

"Hemp is of first necessity to the wealth & protection of the country." – Thomas Jefferson

Jefferson was right, and that statement far from painting him as a cokehead actually shows that he was a shrewd businessman.

These are the facts :-

1) Botanically, marijuana equals hemp. These are basically two names for the same plant.

2) Hemp was historically useful for rope, paper, and clothing, and was long promoted in Virginia as an alternative cash crop.

3) Jefferson farmed grew hemp on his Virginia farm commercially.

4) No great social stigma was attached to smoking pot in the late 1700s and early 1800s — pot use wasn't considered a problem until the early 1900s.

So, what was the problem with Jefferson's comment again?

Re:Context is everything

[Anonymous Coward]

Hemp could still be a very useful resource if that stigma did not exist. It is not only good for its fibers, but also a very good protein source

Re:Context is everything

[Archangel Michael]

"newly created "Federal Bureau of Narcotics" (precursor to the DEA) which had been created partially to fight illegal alcohol, had precious little left to do"

And people expect the IRS to disappear if/when we get rid of Income taxes. Once created, no government entity willingly disappears. Which is why we should be VERY careful about assigning new powers to a government agency. That beast will never cease to eat.

Re:Context is everything

[skovnymfe]

No, it was "banned" in 1937 because it was in direct competition with the oil, timber and chemical industries. Hemp didn't have the same kind of lobbying powers the others did.

Re:Context is everything

[argStyopa]

This is usually the sort of argument that's far more credible if it wasn't always made by someone who's basically just a pothead trying to make scoring weed simpler, usually with a sort of vapid 'Woody Harrelson'-stoned sort of look on their face.

Seriously, the points may be entirely credible, but the message is badly corrupted by the typical source.

Re:Context is everything

[Algae_94]

Why shouldn't it be easier for a pothead to score weed? It's not like it's particularly hard for them now; it's just illegal. I'd rather them be a minor drain on society by playing video games at home all day, instead of a major drain on society by being in prison all day.

Re:So that's it then

[lxs]

Remember what happened to Jesus after he kicked around the Money Changers?

No but I do remember what happened to Wesley Snipes after he refused to pay his fair share of taxes.