Bitcoin Token Maker Suspends Operation After Hearing From Federal Gov't

First time accepted submitter Austrian Anarchy writes with this story via Reason (and based on a report at Wired) about a maker of physical Bitcoin tokens. Quoting from Reason's take: "Mike Caldwell ran a business called Casascius that printed physical tokens with a bitcoin digital key on it, key hidden behind a tamper proof strip. He'd charge $50 worth of bitcoin to print a bitcoin key you sent him via computer on this token. Cool stuff--a good friend of mine found one sitting unnoticed in her tip jar from an event at which she sold her artisan lamps from 2011 and was naturally delighted given the nearly 1000x increase in value of a bitcoin since then. So, you're making something fun, useful, interesting, harmless--naturally the federal government is very concerned and wants to hobble you. 'Just before Thanksgiving, [Caldwell] received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. "They considered my activity to be money transmitting," Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn't jumped through.'"

Comments

Far from harmless fun... but

[Infestedkudzu]

the government is still just trying to maintain control. bitcoins going physical would be huge.

Re:Far from harmless fun... but

[Anonymous Coward]

What he is doing is, in fact, money transferring. He takes money and transfers it. That defines his activity. Which means he needs to keep records. Why do people involved in money transferring need to keep records? To prevent money laundering.

When a bitcoin moves from one wallet to another, a public record is made. Bitcoins are the least anonymous money system imaginable; the morons who claimed that bitcoins are anonymous because money laundering would be legal with bitcoins are morons.

But this guy has found a way of anonymously transferring bitcoins without explicit money laundering.

That means he needs to keep records.

If instead he was a 7-11 and handing out those things as change from transactions, he would not be engaged in money transferring, and would not need to keep records.

Re: Far from harmless fun... but

[TerryMathews]

Selling "things" for money is not transferring money.
Selling stored value cards, like gift cards (which I think is the closest physical analogy), is transferring money and monitored by FinCEN.

Re: Far from harmless fun... but

[Mitsoid]

If he sold wallets, he wouldn't have issues. He's selling wallets with other peoples money in it, or could be (the no one knows, there is no oversight... and that's the problem). And he's not keeping track of who gave him the money, or where it's going, and he's not providing the information to authorities. It's possible he's pre-loading these coins with values (e.g. $25, 50), and mailing them to people after he takes his fee.

It's basically the formula for money laundering, as the bitcoin trail ends with him, and 'clean' money can come out.

Written in a biased way

[earlzdotnet]

This summary is written as if the government does nothing but enforce/give monopolies and is only out to serve the big companies... oh wait

Re:Written in a biased way

[maxwell demon]

I know it's fun to bitch about corporate power, but corporations won't be shooting a pregnant wife in her own house (ruby ridge),

If there were not a government making sure that such an action would be punished, I'd not be sure about that. After all, illegal corporations (also known as organized crime) are known to have no qualms to do such things.

putting you in a cage for taking pictures,

They don't need to because they know they can just call a government agency to do it for them. Otherwise, see my previous point.

or forcibly taking everything you own because they decided they have the power.

Oh, they do so as much as they can (see statuatory copyright infringement). Also, see my first point.

This isn't money transmitting how?

[Anonymous Coward]

If I make giftcards to Amazon, say (I mean stupidly duplicating what Amazon already has in gift cards but you pay me and I sell you an Amazon gift code,) I'd expect to be regulated.

If I take your $50 bill and give you $100 british pounds, that's actually changing of money, but you can bet I'd expect to be regulated.

If you give me $25 and I give you a physical wood plaque with a bearer bond attached to it...I'd expect to be regulated.

If I manufacture casino chips suitable for trade in a casino and sell them, I'd expect to be regulated.

So, tell me again why this guy doesn't think what he's doing falls under any kind of regulatory enforcement?

Re:This isn't money transmitting how?

[Charliemopps]

Because he doesn't believe any of the stuff you just said. Neither do I. Why do I need to be regulated? Why, when I got to the bank and deposit over $10,000 to I have to explain to the government how and where I got it? Why is that any of their business? This idea of money laundering is ludicrous. The idea that year after year, we need to give up more and more of our rights and privacy just to make the feds job of catching criminals easier baffles me. If we want to trade dollars for pounds or goldfish, fuck the government. They do not have a need to know about our transaction. And before you start talking about tax collection, there are a lot easier ways to collect taxes that are completely unavoidable. But if they implemented them, people would quickly become aware of just how much they were paying in taxes and likely revolt. This diffuse mess we have now serves to obfuscate just how much of your paycheck the feds end up with, and they like it that way.

Re:This isn't money transmitting how?

[pla]

So, tell me again why this guy doesn't think what he's doing falls under any kind of regulatory enforcement?

Because if you take my $50 bill and give me two $20s and a $10, we call that "making change", not "money laundering".

Casascius exchanged Bitcoins for other Bitcoins, plus a small fee for the cool novelty token. He didn't exchange BTC for USD, or vice-versa, or anything even remotely similar to that. He made frickin' change (albeit more literally than normal).


That said - I still have one first- and one second-gen Casascius 1BTC coins somewhere around here. They already traded at a good premium over their exchange rate, this news should send their collectable value through the goddamn roof! Thanks, FinCEN - I still hope you all choke to death on a bowl of hyena semen, but this time, you've really done me a solid!

Re:This isn't money transmitting how?

[mythosaz]

[ SUPER: "When you do only one thing, you do it better" ]

Customer #1: I needed to take the bus, but all I had was a five-dollar bill. I stopped by First Citiwide, and they were able to give me four singles and four quarters.

[ SUPER: "At First Citiwide Change Bank, We just make change" ]

Paul McElroy: We will work with the customer to give that customer the change that he or she needs. If you come to us with a twenty-dollar bill, we can give you two tens, we can give you four fives - we can give you a ten and two fives. We will work with you.

Customer #2: I went to my First Citiwide branch to change a fifty. I guess I was in kind of a hurry, and I asked for a twenty, a ten, and two fives. Their computers picked up my mistake right away, and I got the correct change.

[ SUPER: "Correct Change" ]

Paul McElroy: We have been in this business a long time. With our experience, we're gonna have ideas for change combinations that probably haven't occurred to you. If you have a fifty-dollar bill, we can give you fifty singles. [ SUPER: "We can give you fifty singles" ] We can give you forty-nine singles and ten dimes. We can give you twenty-five twos. Come talk to us. [ SUPER: "We can give you twenty-five twos" ] We are not going to give you change that you don't want. If you come to us with a hundred-dollar bill, we're not going to give you two-thousand nickels.. [ SUPER: "We're not going to give you two thousand nickels" ] - unless that meets your particular change needs. We will give you.. the change.. equal to.. the amount of money.. that you want change for!

[ SUPER: "At First Citiwide Change Bank, Our business is making change" ]

Bank Representative: That's what we do.

Re:This isn't money transmitting how?

[Kogun]

In each of these scenarios, what regulations do you expect, specifically, and for what purpose? Please explain as you offer nothing but your expectation as opinion. Regulation is not the default expectation any of us should have. It must be justified in all cases.

Re:This isn't money transmitting how?

[lgw]

Because you drove there on a road that requires taxes, and have a reasonable amount of saftey, that requires taxes, and the bankers are regulated to not steal from you, which takes taxes.

Always with this straw man. Enough with it - the strawman is dead, bereft of life it rests in peace. It has shuffled off this mortal coil and joined the straw choir invisible!

The amount of taxes needed to fund roads and regulate banks an such is a trivially small and unobjectionable fraction of current taxation. The majority of taxation is money collected from less-politically-favored groups and mailed directly to members of more-politically-favored groups, plus the military.

No one is trying to take your roads. No amount of cuts to road build and regulation could possibly balance the budget in the first place. That's not what the debate is even about.

Financial Crimes Enforcement Network?

[maxwell demon]

So if it is named "Financial Crimes Enforcement Network", then obviously its aim is to enforce financial crimes. So, not only does it not fight crime, nor does it simply ignore crime, it isn't even just promoting crime, no, it enforces crime! :-)

Re:You can't have your cake and eat it too....

[bazmail]

Why does it automatically follow that the exchange of trust, which is what currency essentially is, between willing participants must involve some self appointed middle man with the power of veto?


Bitcoin users are not against regulation per se, but the regulators must be able to explain why they should have that power.

Is money laundering the problem?

[Okian Warrior]

What he is doing is, in fact, money transferring. He takes money and transfers it. That defines his activity. Which means he needs to keep records. Why do people involved in money transferring need to keep records? To prevent money laundering.

HSBC laundered hundreds of billions of dollars and admitted as such, yet the justice department decided to forego criminal prosecution.

After much public outrage and senate hearings, the justice department settled on a $1.92 billion penalty (against HSBC $18 billion annual profits).

How strongly do you agree with the federal government's stance on money laundering? From over here, it seems that the money laundering laws are only applied to the small players, used as "discretionary enforcement" as a tool of oppression. It's rule by thugs.

What's so bad about money laundering then?

Re:Is money laundering the problem?

[tomhath]

After much public outrage and senate hearings, the justice department settled on a $1.92 billion penalty [crainsnewyork.com] (against HSBC $18 billion annual profits).

A $2 Billion fine is hardly trivial. And comparing it to the bank's annual profit is irrelevant, they do lots and lots of legitimate business. Their crime was not monitoring some money transfers, same as this guy. But he was just told to stop instead of being fined a couple of billion.

Re:Artisan Lamps?

[ElementOfDestruction]

Mayonnaise on a sandwich? What are you, a French? The correct lubricant to put on a bacon sandwich is more bacon.

It's not even to the stage of 'stocks'

[Taco Cowboy]

Bitcoin, until now, is still an UNREGISTERED and totally UNRECOGNIZED entity, according to the laws of the United States of America (since it's the US treasury we are talking, let's limit the discussion to the US laws).

Stocks, on the other hand, are items that are recognized under the United States' laws, and the issuance of stock, the printing of stock certs, and so forth, have to abide by the LAWS, as they were written when the certs were being printed.

In other words, the authority actually has NO JURISDICTION WHATSOEVER to interfere with the activities of that maker of Bitcoin Token since what he did was akin to making some toy coins, use for arcade machines.

It's true that he has less lawyers than the stock cert printers, but still, the authority just does not have ANY RIGHT to interfere with an LAWFUL ACTIVITY (making toy coin) of a LAWFUL COMPANY (which is dully registered according to the laws where the company is located).

The United States of America of today is becoming more and more like the China that I ran away from, back in the early 1970's.

Back when I first reached the U. S. of A., it was a country in which the LAWS were still obeyed.

Back when I ran away from China, it was a country where LAWS WERE MEANINGLESS.

Now it looks like the United States of America is trying very hard to change role with that of China.

While China is getting more and more civilized (they still have a VERY LONG WAY TO GO), America is behaving more and more rogue.

It saddens me a lot watching my adopted country slowly turns into the country where I was born.