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How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

lawfareblog.com

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Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#31

Post by losvedir »

I guess I can sort of see it for a cryptocurrency that exists solely to send tokens back and forth, but what about Ethereum where the miners are running some global VM, one function of which is to send tokens back and forth? There you're not paying a fee necessarily to the miner to transfer money for you, but to execute some opcodes and update the global ethereum state. Maybe you're registering a new domain in their DNS equivalent.

He mentions Ethereum offhand in the post, but I feel like that's a legally harder case to prove. Do the servers that transmit, say, wire transfer packets have to worry about KYC?

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#32

Post by cwmma »

okareaman wrote: post #6

How would this prevent scenarios such as refurbishing a nuclear powered Russian icebreaker to sit in international waters mining Bitcoin?

there are treaties that deal with crimes in international waters, so you'd probably get a visit from the navy of the country you pissed off the most. But they might just go after whoever is giving you internet instead as that would probably be easier.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#33

Post by CrazyStat »

dragontamer wrote: post #10
bko wrote: post #3

> All cryptocurrency assets, not just Bitcoin, are zero sum. So every dollar “made” in cryptocurrency was simply provided by someone else. Can't you say that about any other asset? If I sell my house for more than I paid for it, it's zero sum since someone simply provided me that money. But that's not how we determine value. It's positive sum because the buyer attributes a value higher than he had paid for it, otherw…

> If I sell my house for more than I paid for it, it's zero sum since someone simply provided me that money. No transaction between rational individuals is ever zero-sum. If Bob values a house at $300,000 and Alice values the house at $300,000, the house will __never__ be sold. Because by the time transaction fees come about, Bob would have lost money in the transaction. In reality, Bob values the house at $250,000,…

>This is called the Bid-Ask spread, and its always, always, always non-zero. Stocks have bid-ask spreads of a penny, but Pokemon Cards, Houses, Lumber, etc. etc. all have a spread in reality. There's never one price for things, there's a buyer's price vs a seller's price, the bid and the ask.

If a bid-ask spread can be positive (as in a stock where the bid is lower than the ask) and can be negative (as in your house example where the bid is higher than the ask), why can't it be zero?

It seems like you're conflating the bid-ask spread with consumer/producer surplus that arises from being willing to buy/sell at prices higher/lower than the market clearing price.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#34

Post by asah »

miked85 wrote: post #7
bko wrote: post #3

> All cryptocurrency assets, not just Bitcoin, are zero sum. So every dollar “made” in cryptocurrency was simply provided by someone else. Can't you say that about any other asset? If I sell my house for more than I paid for it, it's zero sum since someone simply provided me that money. But that's not how we determine value. It's positive sum because the buyer attributes a value higher than he had paid for it, otherw…

> it's zero sum since someone simply provided me that money By your definition, every transaction ever made is zero sum.

I think that's precisely his pointy: every transaction is "money transmission"... (not saying I agree with his motives)

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#35

Post by sedachv »

dragontamer wrote: post #10
bko wrote: post #3

> All cryptocurrency assets, not just Bitcoin, are zero sum. So every dollar “made” in cryptocurrency was simply provided by someone else. Can't you say that about any other asset? If I sell my house for more than I paid for it, it's zero sum since someone simply provided me that money. But that's not how we determine value. It's positive sum because the buyer attributes a value higher than he had paid for it, otherw…

> If I sell my house for more than I paid for it, it's zero sum since someone simply provided me that money. No transaction between rational individuals is ever zero-sum. If Bob values a house at $300,000 and Alice values the house at $300,000, the house will __never__ be sold. Because by the time transaction fees come about, Bob would have lost money in the transaction. In reality, Bob values the house at $250,000,…

> then there was at LEAST $60,000 of value created by the transaction.

That is not value creation, that is wealth transfer from Alice to Bob. Alice has to earn that excess $60,000 through labor, or exploiting labor.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#36

Post by gamblor956 »

The blog post is premised on a fundamental misunderstanding of what a "money transmitter" is for regulatory purposes, presumably because they based their understanding on FinCEN's overview page rather than reading the regulations themselves.

The definition of a money transmitter is a person or company that receives money (or other measure of value) from one party and sends that money/value store (sans any charged fees) to a third party. (https://www.law.cornell.edu/cfr/text/31/1010.100#ff_5)

Miners verify transactions, but crucially don't take custody of the money/value store at any point. Paypal and Venmo are money transmitters, because they do take custody of money in transit. (Stubhub and Airbnb are not money transmitters because the regulations exclude companies that only act as payment processors to facilitate the exchange of goods and services, see (ff)(5)(ii)(B) and (F) of the exclusions in the linked regulation)

So this blog post is much ado about nothing and will generally be ignored by the people who actually matter, i.e., FinCEN and other regulatory agencies with jurisdiction, because they generally tune out people who can't get the basic foundational things right.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#37

Post by sdenton4 »

aww_dang wrote: post #12
toomuchtodo wrote: post #5

Earlier quoted context omitted.

I derive significant utility from my government, and prefer it to continue to function, despite its flaws that need addressing. Less needless wars, for sure, but also less crypto please (if the crypto evades democratic government regulations and laws). If this is a path to applying more regulatory pressure on crypto, by all means, full steam ahead.

Much of cryptocurrency's value comes from the lack of regulation. People are not satisfied with the existing solutions, thus the need for innovation. BTC emerged after the US destroyed LibertyReserve and eGold. Government could eliminate the some of the needs for cryptocurrencies by removing regulatory barriers to transact. As an example, compliance costs prohibit PayPal from efficiently processing 25 cent arcade or…

"People are not satisfied with the existing solutions"

s/People/Criminals and twenty jackasses on hacker news/

Actual people are sick of completely unchecked scamming taking over every interface of their lives. Ransomeware is out of control. This week I'm personally dealing with some credit card fraud which ended up with $18k stolen and spent on a cryptocurrency exchange. Phone networks are nearly useless because they are overrun with endless phishing attempts, meaning I miss calls from doctors, etc.

Cryptocurrency is money laundering as a service: it's enabling and exacerbating the whole ball of terrible. A few people have gotten rich off it, and will loudly try to defend it. Cigarette company executives did the same. It's a net drag on society, and needs to be dealt with.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#38

Post by whiddershins »

sedachv wrote: post #35
dragontamer wrote: post #10

Earlier quoted context omitted.

> If I sell my house for more than I paid for it, it's zero sum since someone simply provided me that money. No transaction between rational individuals is ever zero-sum. If Bob values a house at $300,000 and Alice values the house at $300,000, the house will __never__ be sold. Because by the time transaction fees come about, Bob would have lost money in the transaction. In reality, Bob values the house at $250,000,…

> then there was at LEAST $60,000 of value created by the transaction. That is not value creation, that is wealth transfer from Alice to Bob. Alice has to earn that excess $60,000 through labor, or exploiting labor.

Untrue. This is a huge misconception.

Value could have increased for many reasons having nothing to do with labor effectuated by either party.

The neighborhood might have changed, and now there are more restaurants. Or maybe it’s just considered more fashionable for intangible reasons.

The house could be on the beach, and Alice has decided to take up surfing, so values the location more than Bob ever did in the past.

And so on.

There can be an almost infinite combination of reasons why Alice may find more value in the property than Bob.

Edit: my previous version of this comment had Alice and Bob reversed.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#39

Post by jjk166 »

Bitcoin is legally an asset. Processing the transfer of bitcoin is legally no different from processing the exchange of baseball cards. Transferring $100 worth of baseball cards might be a money transmission, but transferring a signed Barry Bonds card regardless of its value is not. Likewise, sending $100 dollars in the form of bitcoin might be money transmission, but sending 0.03 BTC regardless of the dollar value is not. And those are exactly the sort of transfers processed by miners. To subject miners to FinCEN rules, the US would have to recognize bitcoin (and any other cryptocurrency one wanted to so regulate) as a legal currency.

Further the idea that removing a transaction, which is functionally equivalent to moving funds back, is not a money transmission while the original movement of funds is a money transmission is absurd. Otherwise it would be trivial to create a cryptocurrency where initial payments are never validated and you simply rely on removing the superfluous transactions to achieve the same effect.

Re: How to Start Disrupting Cryptocurrencies: “Mining” Is Money Transmission

#40

Post by cainxinth »

aww_dang wrote: post #12
toomuchtodo wrote: post #5

Earlier quoted context omitted.

I derive significant utility from my government, and prefer it to continue to function, despite its flaws that need addressing. Less needless wars, for sure, but also less crypto please (if the crypto evades democratic government regulations and laws). If this is a path to applying more regulatory pressure on crypto, by all means, full steam ahead.

Much of cryptocurrency's value comes from the lack of regulation. People are not satisfied with the existing solutions, thus the need for innovation. BTC emerged after the US destroyed LibertyReserve and eGold. Government could eliminate the some of the needs for cryptocurrencies by removing regulatory barriers to transact. As an example, compliance costs prohibit PayPal from efficiently processing 25 cent arcade or…

> People are not satisfied with the existing solutions, thus the need for innovation.

IMHO, that describes maybe a tenth (maybe) of crypto buyers. Everyone else is just speculating on volatile new assets that are gaining value rapidly.

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