> [T]he new rules stipulate that "a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter" and is therefore subject to these federal regulations.
That's a scary statement. The "money transmitter" moniker is a very pay-to-play scheme for which it isn't particularly easy for a common person to achieve licensing. If they start enforcing this, it'll stop pretty much all US involvement in Bitcoin something akin to the crackdowns on online gambling.
Would it be difficult to enforce? Sure. But then when you do get caught they'll throw the book at you.
If this really is the current legal status of Bitcoin, here's hoping they do in fact decide to regulate it in a way that preserves the average citizen's ability to participate.
Edit: I'm not a finance person, but I think this may also be a way for major financial institutions (existing licensed money transmitters) to seize control of the Bitcoin markets in the US. Essentially they would take the place of a Bitcoin exchange and pay on your behalf, but you would never have custody of your own bitcoin funds. This of course would somewhat (if not entirely) diminish the value of Bitcoin as a trading instrument, but preserve its value as a payment mechanism. The gov't would like this since it would remove most of the anonymity from the process as well.
This was discussed 2 or 3 weeks ago, when the government's position on bitcoin was first released. They consider exchanges and bitcoin transaction processors (i.e,. Coinbase) to be money transmitters subject to regulation.
Individual users (miners, bitcoin holders) are not money transmitters subject to regulation.
> This was discussed 2 or 3 weeks ago, when the government's position on bitcoin was first released.
The guidance on the "Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies" was released almost 2 months ago (March 18, 2013.)
> They consider exchanges and bitcoin transaction processors (i.e,. Coinbase) to be money transmitters subject to regulation.
True.
> Individual users (miners, bitcoin holders) are not money transmitters subject to regulation.
Less completely true. Per the guidance [1], anyone who "buys or sells convertible virtual currency for any reason is a money transmitter [...] unless a limitation to or exemption from the definition applies to the person", and more specifically with regard to miners "a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter."
If you read closely, he's only talking about regulating Bitcoin derivatives, not Bitcoin itself: "there is more than a colorable argument to be made that derivative products relating to Bitcoin falls squarely in our jurisdiction."
But yeah, the sarcasm is inappropriate a regulator. But not surprising..
My hope is that this will play out in the same way as the RIAA law suits:
Since law suits are expensive, they have to ask for 5K+ at a minimum in each law suit (or if they do criminal suits, 6 months plus of jail time)
However, the only people they can charge are P2P participants, so in the case of bitcoin, mainly a bunch of college students trying to be entrepreneurial. (Charging exchanges is another issue... in this post I'm talking about trying to directly go after the core bitcoin system.)
Charging a bunch of nice college kids with 6 months jail time for buying a bitcoin is the worst PR disaster imaginable. So I'm hoping this kind of crackdown is untenable, from a political standpoint, and that bitcoins remain effectively unregulated.
This is the US Government, not the RIAA. The US Government is not motivated by profit but limited by budgetary constraints.
It would not be implausible for the US govt to monitor packets for the BTC protocol and start tying transactions/wallets to IP addresses. At that point have the local PD walk around issuing citations and then go after the big fish with lawyers.
Also, who cares about PR here? No one running the crackdown would actually be an elected official, they'd all be appointed...
Again, I'm not a finance person, but I believe you could argue that the legendary item is a virtual good, rather than a virtual currency so long as it had in-game value aside from use as a monetary instrument.
The money transmitter regulations might (should) apply to sale of in-game currencies, however as these are only valuable as instruments of trade.
That said, it's probably totally legal if one were to use bitcoin to purchase a virtual good such as a legendary item, (allowable without restriction under the guideline) and then sell said virtual good for USD or another currency. Following that line of reasoning it wouldn't be too outrageous for commodities markets to open up trading in-game goods for the sole purpose of virtual currency exchange.
"If you guys want to be a shill for the financial industry and support a chattel currency that people use to purchase drugs and money with—have a party, man. My job is a regulator; I'm going to look after it."
What is a chattel currency in this context? It seems to refer to a "commodity as currency" arrangement but there is clearly some extra implied meaning that I'm not getting.
What does he mean about "shill for the financial industry?" Is he referring to sellers of bitcoin derivatives, or is he trying to claim that the "real" financial industry is involved? The colloquial nature of his tone almost suggests sarcasm. What's the deal?
He uses the word "chattel" because it's a term that was used in the slave trade, but he can get away with it because technically it's just another word for "currency".
It's a disgraceful smear. This is clearly going to get ugly.
EDIT: Some stats from Google search, since this is a sensitive point and people are questioning what I'm saying (quotes included in the search):
The level of perceived persecution in the bitcoin community is pretty humorous.
Chattel is just tangible personal property that is moveable and hard to value. [1][2]
Bart Chilton is probably most well known for his outing of the manipulation in the precious metals markets.[3] This guy is not bitcoin's enemy.
Edit:
From a writeup in which the EFF describes Trespass to Chattels in the context of digital goods[4]:
"A trespass to chattels occurs when one party itentionally uses or intermeddles with
personal property in rightful possession of another without authorization,"
Does that not sound entirely relevant to bitcoin exchanges?
Yes, this is what I wrote. Now type chattel into Google with autocomplete and tell me the first item that comes up for you as an autocomplete option...
> Interpreting a statement that uses a word with many definitions by looking at what Google's autocomplete comes up with is the height of fucktarded.
But it doesn't have many definitions. It has one definition. (Okay, two: one as a noun, and one as an adjective which essentially restricts the noun it modifies to the subset of the thing that noun refers to that also meet the noun definition of "chattel".) And what is being done (for which "fucktarded" may still be a valid description) isn't choosing a definition by autocomplete, its assuming that any other use of the adjective form is a reference to the use of the adjective form that is behind the autocomplete.
Which is about equivalent to assuming that any use of "green" as an adjective is a reference to "green acres" (which is what autocomplete suggests first for "green", at least when I use it.)
OK, so what methodology do you propose for determining whether the word "chattel" is more commonly used in the context of discussing slavery, or is instead used most often when talking about things unrelated to slavery?
What does this have to do with anything? "Chattel" is a basic legal term; it's used in every state of the US.
Rayiner, who is a lawyer, presumably typed his comment with his mouth wide open and his forehead bleeding from being pounded on the desk. There isn't a lawyer in the country who doesn't know what the term means. Presumably, your comments are to a legal professional what the guys who invent their own ridiculous substitution ciphers are to professional cryptographers.
I wouldn't expect many if not most people to know that 'chattel' is a basic legal term. I would generally expect most people not to commit the logical error of assuming that just because two words are commonly used together, whenever one word is used it must be in the context of the other word.
If I say: "I had to tape my rims back together so I could see" is it relevant that Google's first completion for the word "rims" is "rims and tires?"
It doesn't matter how it is used popularly, what matters is what this particular person meant--who is a financial regulator, a field which is full of jargon and terms of art.
The course of analysis you're following is like trying to prove programmers don't like allocated memory because they refer to it as "garbage" that needs to be "collected."
Oddly I get the Merriam-Webster definition which shows
n item of tangible movable or immovable property except real estate and things (as buildings) connected with real property. 2. : slave, bondman · See chattel ...
I wonder if past search history affects results, my second result was from the free online dictionary and referenced cattle.
I am not sure how I would take offense, perhaps certain groups are predisposed to do so?
Worse, google won't even autocomplete the word "currency" after you type "chattel" and a search for "chattel currency", with quotes, returns fuck all other than stuff about this article.
> Worse, google won't even autocomplete the word "currency" after you type "chattel" and a search for "chattel currency", with quotes, returns fuck all other than stuff about this article.
It actually returns quite a lot of things other than this article, though much of it is chaff (things where you have something like "... chattel. Currency, ..."). Quite a lot of it, though, is sites unrelated to this article using it as a reference to non-legal-tender currency, most of which appear to be goldbug conspiracy theorist sites [1].
Though a couple of them [2], the use happens to reference the use of humans as "chattel currency", so I guess that's the closest thing to actual support to the "chattel currency" = "slavery" meme that is being peddled upthread. But even these uses actually are using "chattel currency" precisely as a something which is not legal tender used as a medium of exchange.
That is what I meant by "fuck all". Aside from standard background search noise, the phrase "chattel currency" is virtually unused.
I am guessing, as suggested by others, that he actually said "shadow". Still loaded language (bitcoin is hardly shadow; the blockchain is public..) but it makes far more sense in the context.
> That is what I meant by "fuck all". Aside from standard background search noise, the phrase "chattel currency" is virtually unused.
Its used prior to the article at issue here, numerous times, in the exact sense used in the article (a derogatory reference to non-legal-tender currency), by a community that it has been widely observed overlaps with the bitcoin enthusiast community, and which it would be quite likely to expect that the speaker quoted in the article at issue here would, therefore, be likely to be directing his comments at.
That's not "background search noise", that's directly relevant to the usage in the quote in the article.
I didn't say it was never used. I said it was virtually never used. That those few usages are all that you can find is my point.
It is not a common term by any means. I find it extremely plausible that it was incorrectly transcribed in this instance.
Barring that, I find it plausible that it was picked for it's loaded connotations (If so many people have found this term objectionable, and the term is not in common usage otherwise, I find it plausible that all of the usages that you have found were picked with the common usage of "chattel" in mind. Were this a term that actually seemed to be in common usage, I would not find this to be plausible.)
The later was my knee-jerk interpretation, but I think I was wrong and my money is now on the former.
> I find it extremely plausible that it was incorrectly transcribed in this instance.
I don't. The context it is used in in the article (not just the reference to "chattel currency" but the reference to the user of such a currency being a "shill for the financial industry" is pretty dead on the the criticism by the subculture in which you find "chattel currency" used prior to the article makes of US Federal Reserve Notes as a scam that was promoted by the banking giants that are members of the Fed to get people to hand over their "legal tender" gold for not-legal-tender (as they claim) Federal Reserve Notes, the commissioner has just dropped bitcoin into the place of Federal Reserve Notes and the network of bitcoin miners in place of the banks that make up the Federal Reserve system.
Its not particularly plausible that the commissioner meant to say something else and it was conveniently "mistranscribed" into an attack on bitcoin that specifically uses both the terminology and the substantive logic of a attack by a subculture that has substantial overlap with the pro-bitcoin community against the trustworthiness of the US dollar and the system supporting it.
Yes, the sites that show that a particular use is common in a relevant conspiracy theorist community are, well, often somewhat unhinged sites. This should be unsurprising.
(And clicking the link works for me, don't know why it seems broken to you.)
> He uses the word "chattel" because it's a term that was used in the slave trade, but he can get away with it because technically it's just another word for "currency".
No, its not another word for currency. "Chattel" is a widely used legal term for personal property; its used as an adjective with "slavery" to specify a particular kind of slavery (the one in which slaves are legally treated as chattel, which while its probably the most familiar kind to most people is not the only thing considered "slavery"), but the term "chattel" itself isn't particularly associated with the slave trade.
More relevant, "chattel currency" is a term for things used as currency that are not legal tender (its not exactly commonly used because there isn't a lot of need to discuss that particular class of things.)
However, there is one place its pretty commonly used, and that's among the kind of conspiracy theorists (often goldbugs) who think (for example) that Federal Reserve banknotes aren't legal tender and are a scam to get you to surrender your "real" money (which these conspiracy theorists seem to think is still real legal tender) for "chattel currency".
Given that a not-insignificant number of those conspiracy theorists seem to have flipped from being goldbugs to "bitbugs", I wouldn't be surprised if it was the use of the term "chattel currency" was calculated, but it certainly wasn't a slave trade reference.
> Some stats from Google search
Counting search results isn't a substitute for knowing what you are talking about. I'm actually surprised that "chattel property" (which is a redundancy) has that many results, but that doesn't change that "chattel" means personal property, and that its use to refer to that is the most common use.
It is also true that "slavery" is a common context in which "chattel" is used as a modifier, and that use -- because specific discussion of that form of slavery as a class is much more common than specific discussion of non-legal-tender currency as a class -- is vastly more common than reference to chattel slavery.
But that doesn't mean that "chattel currency" is a reference to chattel slavery, any more than the fact that "green" is far more frequently used as an adjective to modify "eyes" ("green eyes" -> "about 500,000,000 hits") than "grocer" ("green grocer" -> "about 1,840,000 hits") means that the phrase "green grocer" is a reference to "green eyes".
I felt this deserved a separate response since it's attracted so much attention. It is immensely unhelpful to pretend to be offended by a phrase since you personally have only ever encountered it while reading Frederick Douglas.
The concept of trespass to chattels is a very import question in digital law. It would serve the community to understand it better since the theory is largely where the CFAA gains legitimacy.
You could certainly be right that the phrasing was intended in this manner. Clearly though Mr. Chilton was falling over himself to use the terms "money laundering" and "drugs" as much as possible. He was trying to use the nastiest, dismissive language he could to describe bitcoins, and given that the use of the term "chattel currency" is virtually unprecedented on the entirety of the internet it certainly seems worth raising an eyebrow at the use of this phrasing.
A fundamental advantage of BTC is that it's supposed to be free of government regulation or other forms of centralized control. The correct response to this is to (be absolutely sure that the government can't regulate it, and then) just ignore whatever the government says.
More realistically what would happen is that the government would start imposing huge fines and tracking down those that evade them (such as tax cheats, except easier because tax cheaters are smarter than the average BTC user at fooling government regulators).
Considering the context: "a chattel currency that people use to purchase drugs and money with"
And the what turns up if you start looking around at what there is out there for "shadow currency":
"Shadow currency: how Bitcoin can finance terrorism" (from two days ago)
And from "The US Regulatory Vice Closes On Bitcoin" (from one day ago): "Chilton's remit to regulate this "shadow currency" is predicated on it becoming a basis for derivative contracts as opposed to purely transactional (akin to the monitoring of physical oil transactions that can influence crude futures.)"
...I would say you are correct with almost without any doubt.
Maybe he just got out of the bed with JPM and DB, or is looking for a job there after he done "doing his service"?
But I think the dismissive tone is kind of moot because the fact that he's even talking about Bitcoin in the context of regulation (aka taking it seriously now) already speaks louder than anything.
Then again people purchase drugs and swap currencies with USD and the financial industry is already a shill floating on the back of CB's that have to keep printing to keep this balloon inflated, so I had laugh at that quote .
"I don't want to regulate everything under the sun," Chilton added in the CNBC interview. "If you guys want to be a shill for the financial industry and support a chattel currency that people use to purchase drugs and money with—have a party, man. My job is a regulator; I'm going to look after it."
“The bank that is storing my money is highly regulated by federal regulators and backed by a government with a huge army behind it,” James Angel, a business professor at Georgetown University, told Ars last month.
As long as people need to use USD for most purchases, then yes. As long as businesses are required to keep track of and report their earnings, then yes.
As long as the government could easily afford enough hardware to takeover the blockchain, then yes.
The laws are primarily enforced with businesses, not individuals. That's why there are so few US-based bitcoin startups: operating legally means you have to become a money-transmitter and follow a ton of rules which are expensive and nullify many of Bitcoin's benefits.
The beautiful thing about BitCoin and governments is this 'dammed if they do, damned if they don't' dynamic. If they try to regulate Bitcoin, the legitimise it as a currency and invite the masses to use it, thus diminishing the power of their fiat currencies, which is what they were trying to avoid in the first place...
Bitcoin is already pretty painful to use. I don't think regulating it would encourage use in any way. If anything, it would remove the primary reason most people have for using it, independence from the government.
I think you'd have a better chance getting a response from Obama on the issue before the CFTC chimed in. The limited experience I've had with the CFTC (and other financial regulatory entities) implies that they want to maintain the broadest reach possible and will rarely, if ever, offer clarifying statements.
We have literally asked for clarification on sections of regulations before and offered several scenarios asking which interpretation was correct. The response : "we can't offer an opinion on that." Even though they would be the ones enforcing it.
“The bank that is storing my money is highly regulated by federal regulators and backed by a government with a huge army behind it,” James Angel, a business professor at Georgetown University, told Ars last month.
The irony is that:
1. Bitcoin doesn't need a highly regulated financial institution to securely store your money (but it does require highly secure technology).
2. Acknowledging that the only thing backing legal tender post gold-standard is coercive force (you could even argue that implied force is the main driver behind market demand for $USD - i.e. petrodollars, the EURO, the Federal Reserve, government agencies that only accept payment in $USD, etc.).
> 1. Bitcoin doesn't need a highly regulated financial institution to securely store your money (but it does require highly secure technology).
Only if you don't consider protection from theft an attribute of secure money storage.
If somebody compromises my bank account credentials, it will be annoying and time consuming but I will ultimately get my money back. If somebody steals my bitcoin wallet, I am shit out of luck.
Bitcoin is like cash. If someone steals a bunch of cash from you, you're likely to be out of luck.
You could build a complicated banking system on top Bitcoin too, that could do things like reverse unauthorized transactions, but that would get rid of the reason some people are really interested in Bitcoin.
Someone could build the banking system for those who would like the warm fuzzies it gives them, and others could still choose not to use it, keeping their bitcoins in their own wallet in their own house. Again, just like cash. The cool thing is that, unlike cash, you can send and receive bitcoin to and from anywhere in the world electronically without that big banking system's help!
Right, which is the point. No one same would argue that cash is a secure form of money storage. It's got some selling points, but security is not one of them.
What I'm trying to get at is that a bank is only as secure as it's regulators say it is. The Government is what insures all depositors money up to $100,000, as well as theoretically stops it from taking too great of risk and losing your capital.
The other purpose a bank serves is to protect your money; A bank at it's most basic level is physical security: steel vaults doors, security deposit boxes, security processes, guards, etc. All ancillary (and highly profitable) services flow up from providing this primary need for it's depositors.
Because BitCoin relies on technology to secure your money, so long as users could find an acceptable level of security to replicate this with "high"-technology, there wouldn't be a need for traditional banks to store your money.
It could be either but for ease of prosecution they'll probably dump it into the commodity category because (I believe) it gives them more regulatory leeway in their efforts.
I don't believe that the CFTC [1] regulates currency transactions but they definitely regulate commodities.
I think it is great news for BTC. This sort of coverage can only legitimize it. It is a complete fantasy if people think the USG will not wet their beak in the BTC trough. If they find themselves unable to tax and regulate BTC transactions then they will probably find it necessary to destroy it instead.
That's a scary statement. The "money transmitter" moniker is a very pay-to-play scheme for which it isn't particularly easy for a common person to achieve licensing. If they start enforcing this, it'll stop pretty much all US involvement in Bitcoin something akin to the crackdowns on online gambling.
Would it be difficult to enforce? Sure. But then when you do get caught they'll throw the book at you.
If this really is the current legal status of Bitcoin, here's hoping they do in fact decide to regulate it in a way that preserves the average citizen's ability to participate.
Edit: I'm not a finance person, but I think this may also be a way for major financial institutions (existing licensed money transmitters) to seize control of the Bitcoin markets in the US. Essentially they would take the place of a Bitcoin exchange and pay on your behalf, but you would never have custody of your own bitcoin funds. This of course would somewhat (if not entirely) diminish the value of Bitcoin as a trading instrument, but preserve its value as a payment mechanism. The gov't would like this since it would remove most of the anonymity from the process as well.