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I have a service where the end user sends me their bitcoin private keys and I send it back out to a new address when a condition happens (ex. if the weather is raining).

Is this still considered as a money transmitter in the US or NYC? And how is this different from a bitcoin wallet application like blockchain.info that also has your private keys but you also have it too?

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    This seems like a risky system to build! If someone intercepts the private keys, or hacks into your server, all of your customer's funds will be compromised. This is a lot of risk for your users, and a lot of risk/liability for you. – chytrik Sep 12 '18 at 22:57
  • That goes for any company working with user private keys or passwords. – Patoshi パトシ Feb 2 at 19:53
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That's not a very secure system.

You should set up a 1-of-2 multisig address with the user instead and have them send funds to that address. They're still placing a lot of trust in you but they don't have to expose their private key.

As far as your original question goes: I don't think so since they're still technically in control of their funds (just you are as well), it's more like a jointly owned bank account. Of course, I am not a lawyer.

Or better yet (updating this later after thinking about it a bit): Instead, have the user sign a bitcoin transaction, specifying the destination address but have them give it to you without actually publishing it until the condition has been met. That way you don't have control over their funds at all, but you can still pull the trigger on sending a transaction. This has the benefit of only requiring a single tx to complete the whole process.

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It depends. Typically as a money transmitter, you are neither the owner of the transaction nor the beneficiary. You are acting as an intermediary. Whether the funds are pushed to you, or the funds are pulled by you, via authorization, the fact remains the same, you are acting as an intermediary to execute the transaction. In this case, the 'authorization' is being passed to you, voluntarily by the user by providing you with the private keys (security debate aside). If you had done this perhaps one time, you might not be considered a money transmitter. But if you do this as a business or repeatedly, even if you have no charges or a de minimis charge, you might be considered a money transmitter on a federal &/or on a state level.

Do remember, the laws are vague so as to be able to net you in, should the prosecution so decide and the government will tilt (always) with the prosecuting attorney.

When the funds traverse through you, regardless of the 'if-then-else' conditions, and these funds belong to someone else, you've stepped on murky waters.

  • So that means a bitcoin wallet like blockchain.info is a money transmitter as they are sending the transaction on your behalf. Also that goes for any wallet company based in the USA. Is this true? – Patoshi パトシ Feb 2 at 19:50
  • The answer is, it depends. In the case of Blockchain.info they are not classified as an MSB, because they do not have access to your funds. 5.1.1 The Wallet is provided to you exclusively by Blockchain Luxembourg S.A. At no point will Blockchain ever take custody or control over Virtual Currency stored in your Wallet. The Wallet is only capable of supporting certain Virtual Currencies. Under no circumstances should you attempt to store Virtual Currencies in your Wallet that the Wallet does not support. The Wallet does not store, send, or receive Virtual Currency. – Faisal Khan Feb 21 at 15:29
  • Source: blockchain.com/legal/terms So, in view of the above. They would not be a money transmitter. If other wallet providers also, behave the same way, then no money transmitter license is required. – Faisal Khan Feb 21 at 15:29

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