Silk Road forums
Discussion => Legal => Topic started by: ImAz on August 12, 2013, 08:46 pm
-
This has also been posted in Security
Wall Street Journal, 12 August 2013
Regulator Examines Bitcoin Practices
New York Issues Subpoenas to Firms Tied to Bitcoin
By
ROBIN SIDEL
New York's top banking regulator has issued subpoenas to roughly two dozen companies associated with bitcoin as part of a wide-ranging inquiry into the business practices of the fledgling virtual-currency industry, according to people familiar with the matter.
The subpoenas, from the New York Department of Financial Services, seek information on a range of topics, including antimoney-laundering programs, consumer-protection measures and investment strategies, according to the people.
Subpoenas were sent to firms backed by high-profile Bitcoin investors such as Cameron and Tyler Winklevoss.
The department, led by Benjamin Lawsky, also plans on Monday to issue a memo expressing concern that virtual-currency companies aren't complying with the state's money-transmission laws. As a result, the state is considering setting new guidelines that are specifically aimed at virtual currencies.
"We believe that—for a number of reasons—putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual-currency industry," wrote Mr. Lawsky in a draft of the memo reviewed by The Wall Street Journal.
Companies that received subpoenas include some of the best-known names in the nascent industry, including Coinbase Inc., BitInstant and Coinsetter.
Executives from Coinbase and BitInstant couldn't be reached for comment on Sunday. Jaron Lukasiewicz, chief executive of Coinsetter, said in an email that the information request is "an opportunity for companies in our space to open up a much needed dialogue with regulators."
He added, "They'll quickly find that most companies are working to legitimize Bitcoin and want to build bridges that help regulators understand and support these financial innovations."
The state agency also sent subpoenas to companies backed by high-profile Bitcoin investors, including venture capitalist Marc Andreessen, and twins Cameron and Tyler Winklevoss, who are best known for battling Mark Zuckerberg over ownership of Facebook Inc. FB -0.10% Mr. Andreessen and the Winklevoss brothers couldn't be reached for comment on Sunday.
Bitcoin, the best-known of a crop of virtual currencies, are created in a computer process called "mining." They also can be traded on a number of exchanges or swapped privately among users. Most bitcoin are traded on a Tokyo-based exchange called Mt. Gox, where one bitcoin was valued Friday at roughly $102.
A subpoena is a legal demand for information and doesn't signal wrongdoing by the recipient. The New York banking department sent the subpoenas late last week, according to the people familiar with the matter.
The subpoenas come amid heightened scrutiny from state and federal regulators into the world of virtual currencies. Because virtual currencies aren't backed by a central government like traditional ones are, regulators are worried they can be used for illegal activity or can violate laws involving money transmission.
Federal regulators earlier this year issued guidelines placing virtual-currency exchanges under the same comprehensive antimoney-laundering requirements as traditional money-transmission businesses such as Western Union Co.
Although a growing number of bitcoin exchanges have registered their businesses with the U.S. Treasury Department's Financial Crimes Enforcement Network, they have moved more slowly at the state level. In part, that is because the process of getting a license in each of the 48 states that require them is complicated and lengthy. In addition, states also typically require companies to put up a bond that could run as much as several million dollars.
New York has been one of a handful of states aggressively examining the industry. Mr. Lawsky has assembled a team to assess the issue and already sent a warning letter to BitInstant, a New York company that allows customers to buy and sell bitcoins.
"If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country's national security, but also the very existence of the virtual currency industry as a legitimate business enterprise," according to the memo.
The round of subpoenas also are aimed at gleaning information about how the companies are dealing with individual investors who may be attracted to the novelty of virtual currencies, but may not be sophisticated enough to understand the risk associated with them.
Write to Robin Sidel at robin.sidel@wsj.com
A version of this article appeared August 12, 2013, on page C3 in the U.S. edition of The Wall Street Journal, with the headline: New York Opens Probe of Bitcoin.
-
This is big trouble for Silk Roaders IMO. The feds just want full view of the transfer of fiat to bitcoin and bitcoin to fiat so they can tax capital gains and deanonymize bitcoins. How do you feel about buying bitcoins to buy contraband and having those bitcoins be able to be traced back to you?
-
The Fed can't stand not getting their cut!
Fuckin Gangsterz!
-
This is actually a good sign for Bitcoin. If it's going to take hold as a currency that is valid for widespread legitimate use, these are the kinds of growing pains it will have to go through.
-
No wonder it is NY leading the way. Home of Americas banks. The industry that is ruining this country.
-
Does anyone else immediately think of Dr. Evil when they see "mining" in quotes?
-
From Forbes...
CLEARNET: http://www.forbes.com/sites/kashmirhill/2013/08/12/every-important-person-in-bitcoin-just-got-subpoenaed-by-new-yorks-financial-regulator/
FORBES
TECH | 8/12/2013 @ 1:43PM |206,691 views
Every Important Person In Bitcoin Just Got Subpoenaed By New York's Financial Regulator
Things are getting serious for Bitcoin this month: a federal judge declared it real money, Bloomberg gave it an experimental ticker (XBT), and New York’s financial regulator announced an interest in regulating it. Declaring Bitcoin “a virtual Wild West for narcotraffickers and other criminals,” the New York State Department of Financial Services is stepping into the sheriff’s boots.
“We believe that – for a number of reasons – putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual currency industry,” said NYSDFS superintendent Benjamin Lawsky in a statement.
The department is starting out by subpoenaing 22 digital-currency companies and investors to get a lay of the Bitcoin land. They sent letters to the major Bitcoin players asking them to hand over information regarding their money laundering controls, consumer protection practices, source of funding, pitch books (for Bitcoin start-ups) and investment strategies (for Bitcoin investors). The recipients of the subpoenas are nationwide and include everyone on the “people making real money on Bitcoin” list, such as Bitcoin exchanges and processors, “ mining equipment” maker Butterfly Labs, and major investors, such as the Winklevosses, Marc Andreessen & Ben Horowitz, and Google’s venture fund. (Full list below.)
A subpoena doesn’t mean criminal activity has taken place. A person familiar with the matter says the two-year-old department wants to make sure Bitcoin isn’t a conduit for illicit activities and is gathering information in order to decide whether to issue regulation for virtual currencies. The department has the authority to create regulation if there is no other primary regulator. Liberty Reserve — a virtual currency recently taken down by the feds for its use in money laundering and child porn rings — is on the mind of the department as it investigates Bitcoin.
In addition to rooting out illegal activity, the department says it wants to make sure Bitcoin company customers’ funds are “safe and sound,” expressing concern about consumer complaints “about how quickly virtual currency transactions are processed.” On the same day the inquiry was announced, some Bitcoiners with Android wallets for their digital coins discovered their banks are not so sound: they are at risk of theft thanks to a flaw in a number of Android apps, reports BBC News.
The virtual currency Bitcoin has already been getting lots of attention on the federal level. The IRS has been encouraged to make sure people pay tax on it. The FBI realizes it’s useful as a currency for illicit activity. The SEC has argued that it is indeed money and that people should go to jail for using it in Ponzi schemes. And the Department of Treasury has issued guidance for Bitcoin money transmitters. State regulators paying attention will help to further legitimize the currency, but it will also increase the start-up costs for Bitcoin money transmitters. The NYSDFS notes in its statement that “virtual currency exchangers may be engaging in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS.” That means ponying up bond money, as pointed out in the Wall Street Journal:
Although a growing number of bitcoin exchanges have registered their businesses with the U.S. Treasury Department’s Financial Crimes Enforcement Network, they have moved more slowly at the state level. In part, that is because the process of getting a license in each of the 48 states that require them is complicated and lengthy. In addition, states also typically require companies to put up a bond that could run as much as several million dollars.
“We look forward to working with the virtual currency industry and other stakeholders as our inquiry proceeds, and we move to put in place appropriate regulatory guardrails to protect consumers and our national security,” said NYSDFS superintendent Benjamin Lawsky in a statement.
In addition to responding to the subpoenas, a few of the Bitcoin companies below are likely going to need to register as money transmitters in New York. And New York is not the only state paying attention to Bitcoin businesses. Earlier this summer, California sent out at least one warning letter to the Bitcoin Foundation.
That will be a hassle but it’s better than being a Bitcoin business in Thailand. According to a Bitcoin exchange based there, the country’s central bank has declared the virtual coin illegal for now.
List of companies subpoenaed by the New York State Department of Financial Services
BitInstant
BitPay
Coinabul
Coinbase Inc.
CoinLab
Coinsetter
Dwolla
eCoin Cashier
Payward, Inc.
TrustCash Holdings Inc.
ZipZap
Butterfly Labs
Andreesen Horowitz
Bitcoin Opportunity Fund
Boost VC Bitcoin Fund
Founders Fund
Google Ventures
Lightspeed Venture Partners
Tribeca Venture Partners
Tropos Funds
Union Square Ventures
Winklevoss Capital Management
-
Bluto,
Thank you for posting that!
Fucking crazy.
I am happy that I do not deal with anyone in the US for my coins...
-
Some of those companies have NO DIRECT TIES to moving coins at all...
These fuckers are going balls-deep my friends.
-
Excellent post. +1 to you sir.
-
what does this mean for people that have used any of these people in the past?
any information risk?
-
if there is a way to buy and use it btc, i'm going to transact. :)
the gov hate bitcoins, they can't shut it down, and the people can use craigslist to trade if they wanted too, fuck the exchanged, i love it.
-
Localbitcoins would still be very valuable then. Because the transactions would still be anonymous correct?
Ryno
-
Localbitcoins would still be very valuable then. Because the transactions would still be anonymous correct?
Ryno
That's what I was wondering, is localbitcoins gonna be hit with some shit like this as well?
-
I'm sure they're simply not aware of them yet, as with any other company NOT on the list.
It's only a matter of time friends. >:(
-
Not at all trying to rub it in but it seems Canada has taken a totally opposite approach to all this as a few weeks ago (I wish I could find the link) the Canadian Government said it is NOT concerned about virtual currencies at the present time, they do not consider it to be "legal tender" and they say anyone making money off bitcoins legally/legitimately is free to do so as long as they declare the income and pay the proper taxes like any other business....Now, Canada has been known to kind of follow America's footsteps and I know if Canadian exchanges make it possible for Americans to easily aquire coins I am sure the USA would not like that but most of the Canadian exchanges (actually all of the ones I dealt with) only deal with Canadians as they have no way of American's to pay them but even though the exchanges in Canada may not sell to people directly, there will always be friendly people up here in the North willing to purchase coins and send them to USA clients for a small fee I am sure....It will ALWAYS be possible to trade btc amongst once another and use it to buy drugs so no one freak out :)
-
They just couldnt sit by and watch a potential goldmine slip through their fingers...They are tightening their grip!
-
don't worry bros and sisters. I'm still working on a solution. lets just say I hit a major road block.. some bad stuff happened. some people are on vacation for a time and it has complicated some of these start up ventures we had planned. None the less I'm still working at it because in our particular group (the one I'm involved in) I believe this to one day be a strong pillar in the foundation that keeps us living the dream.
In the mean time carry on, be safe, have some faith.