As seen in recent news, FinCEN has issued a statement on its classification of virtual currencies: http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html
Hypothetically suppose I mine BTC and sell it on MtGox for USD. Do I need to register with FinCEN as a Money Transmitter(MT)? My interpretation of the above document indicates yes, I do; but I could also see MtGox (which is registered with FinCEN) maintaining my regulatory compliance, via proxy.
No, the fincen guidance you posted has it in plain english that you do not. A miner is simply a user.
c. De-Centralized Virtual Currencies
A final type of convertible virtual currency activity involves a
de-centralized convertible virtual currency (1) that has no central
repository and no single administrator, and (2) that persons may obtain
by their own computing or manufacturing effort.
A person that creates units of this convertible virtual currency and
uses it to purchase real or virtual goods and services is a user of the
convertible virtual currency and not subject to regulation as a money transmitter.
By contrast, 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....
On the exchange you are buying/selling bitcoins. The exchange carries the burden of giving you legal tender or a different cryptocurrency. The exchange carries the burden of regulation, according to the FinCen regulations. In the US, the equivalent of real currency is only treasury bonds.
Also, Fincen regulations only take affect at certain dollar amounts, if you feel you need to be concerned about them.
You can also try to get even further clarification from the Treasury yourself, because on this matter it doesn't matter what kind of legal counsel you ask, nobody knows all the semantics until an issue comes up that is actually decided in the courts.
Maybe - check with a lawyer
You don't have to register if
You use a website (MtGox or Coinlab) to buy coins
You use coins to buy "stuff" (Namecheap, alpaca socks, etc)
You might have to register if:
The FINCen law requires people to register if they
Are a mixing service
Participate in the Bitcoin OTC market and issue one on one trades with people for cash (or cash substitute)
Run an online trading site (MtGox, or similar)
I suspect the same requirements apply for Money Orders:
However, I do understand your concern in this sentence:
By contrast, 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
So what does a Bitcoin miner actually do?
It performs a service for the Bitcoin network and gets paid for it in the form of transaction fees.
This value increases over time.
It is hardware that competes to solve a math problem and wins new coins for that block.
This value decreases over time.
Here is an example of a Miner that probably MUST register: A solo miner is configured to not broadcast Tx to other hosts. The miner accepts a Tx with a huge fee. This money substitute in exchange for a service is covered not by the FinCEN note in the OP's post, but implied by this link.
I think it's a grey area that isn't well described, and we should look for more guidance.
Aside:
I don't like saying mining "creates units of this convertible virtual currency". I think the actual creation occurred in 2009 when the Bitcoin Protocol was launched. I would argue that the protocol "creates" the coins, and USA based miners are just claiming them.
"A person that creates units of this convertible virtual currency and uses it to purchase real or virtual goods and services is a user of the convertible virtual currency and not subject to regulation as a money transmitter. By contrast, 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. In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency."
A person is defined as this, even if they are an MSB:
"FinCEN’s regulations define “person” as “an individual, a corporation, a partnership, a trust or estate, a joint stock company, an association, a syndicate, joint venture, or other unincorporated organization or group, an Indian Tribe (as that term is defined in the Indian Gaming Regulatory Act), and all entities cognizable as legal personalities.”
So, yes, you have to register as a money transmitter if you sell your bitcoins after you have mined them. There is no designated threshold for money transmitters.
I think the case of mining as part of a pool is, in reality a very special case of providing a cloud based server farm service. Essentially, those operating such a server farm are having its use contracted to the pool for an hourly (or shift) fee. The fact that the payment for the service is done in bitcoin does not make the server farm operator a miner, nor do they actually create any currency.
Even the pool itself is not creating a real currency, instead they are creating (or locating) a commodity which other people believe has a particular value. This is no different than pumping oil out of the ground or mining for silver or gold. No one would claim that a gold or silver miner or a farmer selling their crops is actually an MSB when they take their product to market would they? No, they are simply selling their commodity at the market price. What difference does it make whether they use a drill, a tractor or a computer to prepare the commodity for the market?
That said, it will be interesting to see what happens if/when any of the assumptions here are challenged in a court case. My supposition is that it will first happen with a true criminal enterprise (drugs or gangs for instance) since that will blur the distinctions and allow the case to set a supposed precedent and cause more confusion which is the best way to discourage general use by the under-educated majority.
FMI on bitcoins as a commodity : http://blog.bitcointitan.com/post/17789738826/what-u-s-regulations-apply-to-bitcoins-as-commodities
I would argue that mining pool participants don't have to worry, because they are not actually mining (creating Bitcoins) - only performing a computational service as a subcontractor to the mining pool operator, namely computing hashes. (This is illustrated by the fact that a pool participant gets paid for their shares regardless of whether their own computer actually found a nonce whose hash had sufficient 0's to qualify as a new block at the current difficulty.) The only entity which could be said to be "creating Bitcoins" would be the mining pool operator, since they are the only entity that knows the private key needed to claim the actual block reward on the newly mined blocks. Then they just distribute a "contracting fee" or payout to the pool participants, in exchange for their help producing hashes. Thus, a pool participant is not creating Bitcoin, only being paid for a computational service.
Caveats: IANAL and I'm not currently mining myself (neither solo nor pool).
The bottom line is that if you mine BTC and sell them, you are a money transmitter and will be required to register with FinCEN and seek appropriate licenses in your state.
Why do you think all this volatility happened? NSA is watching and all you who traded BTC for Dollars are in a heap of crap. You have to file and get a Money Transmitter license at a cost of around 1 million dollars in California. If you try to license in all the states it is around 10 million dollars for the licenses. It's the same licensing Visa or Mastercard needs to transmit money in America. I predict all mining will go off shore to avoid this taxation. They are serious about cleaning up this industry and they will come after Dwolla and a host of others that don't have the proper licenses. Fincen has a list of all the unlicensed brokers that it is going to go after on it's site. They will do anything to slow this effort down. They don't want free banking, this is a capitalist society and everyone wants to make a profit on everything.
