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Bitcoin Crime The Almighty Buck United States Your Rights Online

Bitcoin Token Maker Suspends Operation After Hearing From Federal Gov't 258

Posted by timothy
from the if-the-artifact-is-a-crime-why-not-the-system? dept.
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.'"
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Bitcoin Token Maker Suspends Operation After Hearing From Federal Gov't

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  • by Infestedkudzu (2557914) on Thursday December 12, 2013 @06:04PM (#45675491)
    the government is still just trying to maintain control. bitcoins going physical would be huge.
    • by Anonymous Coward on Thursday December 12, 2013 @06:15PM (#45675595)

      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.

      • by Okian Warrior (537106) on Thursday December 12, 2013 @07:20PM (#45676103) Homepage Journal

        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 [rollingstone.com].

        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).

        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?

        • by brainboyz (114458)

          Basically, the government hates that money laundering gives drug dealers a way to take "drug money" and give it a legit source.

        • by tomhath (637240) on Thursday December 12, 2013 @08:22PM (#45676431)

          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.

      • by stenvar (2789879) on Thursday December 12, 2013 @07:52PM (#45676279)

        What he is doing is, in fact, money transferring. He takes money and transfers it

        OMG! The horror of it! People transferring money! What is the world coming to!

        But this guy has found a way of anonymously transferring bitcoins without explicit money laundering. That means he needs to keep records.

        Perhaps we should be rethinking this; it seems to have gone too far.

        • by rtb61 (674572)

          Dictators slaughtering their countries citizens and bleeding their countries treasury dry and retire to a tax haven after having laundered their citizens money. Political corruption, straight up bribes laundering and cleaned. Assassination payments laundered while you wait. Tax evasion at, well, economic collapse levels. Illegal arms sales to enable the killing of millions, all facilitated and laundered spotlessly clean.

          OMG! The horror of it! People 'ANONYMOUSLY' transferring money! What is the world com

      • by mysidia (191772)

        No. He is not "transmitting money". He is selling physical bitcoin tokens.

        Collectible commemorative coins that have things printed on them such as "1 Bitcoin".

        These tokens have artistic features such as gold plaining, or construction with fine silver.

        The coins have a public key / QR code printed on them of a bitcoin wallet that has the specified number of coins, and a tamper-evident seal. Inside the seal is a piece of paper with the corresponding private key.

        However, the bitcoin amount that had b

    • Re: (Score:3, Insightful)

      by gatfirls (1315141)

      Exactly. Why would we want this currency that only moves in value only .5% a month. We want a currency that moves 20-50% in hours.

      Imagine the fun of grocery shopping with it by the time you get done shopping you have to either take out 1/2 of it or you get 50% off!

      • by mythosaz (572040)

        Since money is fungible, if you've got more in bitcoins than your average grocery bill, then you're already doing this every time you shop.

        • by gatfirls (1315141) on Thursday December 12, 2013 @07:24PM (#45676131)

          Yes, my cashier usually spot checks forex to see how many bags of cheetos I can afford because the dollar value fluctuates wildly due to its nature as a purely speculative vehicle.

          • No, he just overprices the cheetos to accommodate currency fluctuations (or someone upstream does that).

            • by gatfirls (1315141)

              Good point. But wait...why don't my cheetos cost 1400$ a bag then?

              Ohh yea, there is a regulatory body in place to make sure that wild valuation swings don't happen minute to minute.

              It amuses me that people think they have a new idea about currency when in such a short time it has exampled the pitfalls of every single unregulated on before it.

    • the government is still just trying to maintain control.

      But that's impossible! How will the government maintain control without the bureaucracy?

      The regional governors now have direct control over their territories. Fear will keep the local currencies in line. Fear of this treasury.

      bitcoins going physical would be huge.

      Don't underestimate traditional currency. The ability to deliver money electronically around a planet is insignificant next to the power of the federal mint.

  • by ElementOfDestruction (2024308) on Thursday December 12, 2013 @06:10PM (#45675551)
    Karma be damned. Artisan Lamps? What the fuck good is that without an Artisan light bulb, an artisan table, or an artisan fluffy hipster cat to sit next to it? Artisan lettuce with my heirloom artisan tomatoes and my artisan bacon with some artisan cheese on my artisan bread. Shove that artisan BLT down my artisan throat and wash it down with my artisan spring water.
  • by gatfirls (1315141) on Thursday December 12, 2013 @06:10PM (#45675555)

    ....That it took this long for the feds to come in to play. No matter how neato your new currency is; if it's heavily used to electronically launder money and/or buy illegal items the days are numbered. Bitcoin -> Currency has and always will be the choke point the government(s) control. Unless they somehow setup a 100% bitcoin society but I don't know how that would work.

    • by DrXym (126579)
      It's probably why various governments are shutting down exchanges. What good is a bitcoin if you can't change it for real money? The answer is not much for legit users, although it might become an underground currency for criminals the same way the Liberty Reserve became. There would still have to be something akin to the Liberty Reserve or Silk Road to put people looking to buy Bitcoin or cash out in contact with local dealers though.
  • by earlzdotnet (2788729) on Thursday December 12, 2013 @06:11PM (#45675559)
    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
    • Of course, the idea that government can't spend more than it takes in strengthens those ties. The way out is for us, the voters, to realize that government can and should empower its people with direct payments, instead of giving money to corporations. Create a basic income, and fund it with govt bonds bought by the Fed which can expand its balance sheet to pay for them, and return the interest to the Treasury so that the govt's borrowing costs are zero. The best way to fight corporate power is to provide i

      • by gandhi_2 (1108023)

        So to each according to his needs?

        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), putting you in a cage for taking pictures, or forcibly taking everything you own because they decided they have the power.

        What YOU are talking about is the antithesis of free agency and liberty.

        • by maxwell demon (590494) on Thursday December 12, 2013 @07:07PM (#45676025) Journal

          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.

        • by dryeo (100693)

          You need to read some history, perhaps start with the Pinkerton Detective Agency. 150 odd years ago it was larger then the US army and mostly sold its services to private industry for various services including strike breaking which included shooting pregnant woman, putting people in cages for holding signs and such. Then industry discovered it was more cost effective to pay to get their guy elected so their guy could sick the police on whoever was disturbing their businesses.

      • Of course, the idea that government can't spend more than it takes in strengthens those ties.

        And the proof of that statement is what exactly? Because that has not been true of the U.S. for a LONG time.

        Indeed the simple truth is the less control federal government exerts, the less interest corporations have in using money to gain some of that control. What you propose would draw corporations to the government like flies, to a vastly greater extent than you see now.

  • by Anonymous Coward on Thursday December 12, 2013 @06:14PM (#45675585)

    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: (Score:2, Funny)

      by Anonymous Coward

      bcuz government is evil and takn' away ma freedums!!!!!

      END THE FED RAWWWW
      BITCOINS R DA FUTURE

    • by Charliemopps (1157495) on Thursday December 12, 2013 @06:51PM (#45675905)

      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: (Score:2, Insightful)

        by Anonymous Coward

        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.

        So your large money movements need to be tracked to make sure you aren't in a cash business and trying to avoid taxes.

        If you don't buy into that idea, stop posting on the internet that was created with... taxes.

        • by lgw (121541) on Thursday December 12, 2013 @08:16PM (#45676391) Journal

          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.

    • by Okian Warrior (537106) on Thursday December 12, 2013 @06:55PM (#45675943) Homepage Journal

      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.

      Apropos of nothing, should Amazon expect to be regulated for making Amazon gift cards?

      This "I'd expect to be regulated" is, quite frankly, astonishing. It brings to mind a sea of humanity, all going about their daily lives while intoning the phrase "I expect to be regulated".

      If I'm doing something that lots of other businesses do unregulated(*), and assuming that the practice doesn't infringe on someone else's rights, my first impression is that I expect *not* to be regulated.

      I wonder how you came to believe that particular mantra.

    • by pla (258480) on Thursday December 12, 2013 @07:11PM (#45676049) Journal
      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!
      • by mythosaz (572040) on Thursday December 12, 2013 @07:24PM (#45676133)

        [ 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.

      • by DrXym (126579)

        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).

        No, he laundered money. He is acting as a break in the chain where potentially laundered money stops at his door and new, clean money is issued to the customer for a fee. It would be akin to me buying your dye pack stained dollars and giving you clean dollars for a commission and not bothering to keep records or conform to any regulation.

    • by Kogun (170504) on Thursday December 12, 2013 @07:58PM (#45676309)

      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.

  • by maxwell demon (590494) on Thursday December 12, 2013 @06:18PM (#45675623) Journal

    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! :-)

  • Couldn't he simply print the bitcoin given to him (no transaction, though it does require you trust him not to spend it) and take payment from another bitcoin transaction? That way, he isn't actually taking control of the BitCoin he's printing off (no transaction, no laundering) and his business is straight up printing?
  • by DaveAtFraud (460127) on Thursday December 12, 2013 @06:34PM (#45675757) Homepage Journal

    Choice one: BitCoins are a legitimate currency and are recognized as such by the U.S. government. What he's doing isn't illegal unless they are.

    Choice two: Physical BitCoins are novelties sort of like the commemorative coins minted by Franklin Mint. What he's doing isn't illegal unless what Franklin Mint does is illegal.

    You can't have it both ways.

    Cheers,
    Dave

    • Choice one: BitCoins are a legitimate currency and are recognized as such by the U.S. government. What he's doing isn't illegal unless they are.

      If they are charging him, then they are admitting that BitCons are a legitimate currency. Bad for him, good for the rest of us?

      Choice two: Physical BitCoins are novelties sort of like the commemorative coins minted by Franklin Mint. What he's doing isn't illegal unless what Franklin Mint does is illegal.

      The Franklin mint may have already gone through all the necessary legal loopholes, since it was a functional mint at one point.

    • Might want to find out what these folks are doing- they will take your scrap and send you coins. I bet you they keep records....

      http://www.midwestrefineries.com/ [midwestrefineries.com]

    • by obtuse (79208)

      This is incorrect, as his bitcoins have value beyond the coin itself. He is buying and selling financial instruments (bitcoins) and packaging them. When they were a few bucks each, nobody cared. Now that they're around a grand each, it makes a difference.

      He doesn't just package your bitcoins, he takes yours and gives you one in a nice brass or silver package, minus fee.

      Franklin mint coins have trivial precious metal value, and no other value (their "collectible" value is borderline fraudulent.)

  • Accept credit cards, use the money to buy bitcoin and send people their coin... doesn't have the free market appeal like what he was doing but would get people the product they want.

    • by gatfirls (1315141)

      Trying to sidestep the feds when it comes to possible financial crimes is never a good idea. If they tell you to knock something off be glad that's all it was and move on.

  • The government doesn't care when you trade bitcoins amongst yourselves, but if you *exchange* them either way for government currency, there are problems. In this case, you can trade USD for Bitcoins, and that's a big red flag.

  • Why not just print bitcoin blanks that allow the bitcoin digital key to be written once to it then it becomes read only. Selling blanks with no value beyond the novelty wouldn't be an issue.

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