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Every important person in BitCoin just got subpoenaed by NY financial regulators

forbes.com

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Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#11

Post by gamblor956 »

aspensmonster wrote: post #2

Well, my own submission just got [dead]ed --no indication as to why-- but I'll paste my comment here as well: I know very little about Bitcoin or money transmission laws. Unlike other currencies it does not seem to have fundamental dependence on any centralized arbiter, though the practicalities of large exchanges like Mt. Gox seem apparent to me. That lack of dependence on a Fed-like body appears to me like its bigg…

The government doesn't want anything with the currency. It couldn't care less. The government is concerned with the businesses that transmit or transact the currency.

Money transmittal laws vary from state to state and country to country. The exact requirements thus depend on the very specific circumstances of the business at issue.

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#12

Post by rayiner »

pnathan wrote: post #6

Unpopular opinion of the day: bitcoin is real money, and the government will regulate it and control it as such. In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just…

I don't know why this should be unpopular, except among people who see the Internet as a new Wild West. The basic advantage of Bitcoin, that its controlled by an algorithm rather than a central bank, exists whether or not financial regulations apply to Bitcoin. Does it destroy the utility of a crypto currency for exchanges and processors to be required to detect e.g. money laundering?

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#13

Post by phreeza »

runarb wrote: post #5

Looks like the price of Bitcoins just made a good jump at https://www.mtgox.com/ . Are speculants thinking that if the us government are geting involved it validates Bitcoin further? Edit: Screenshot of the jump: http://i.imgur.com/G5Dk7Nh.png

possibly also something more along the lines of 'anything that keeps bitcoin in the news is good news', keeping up the influx of new people wanting to try bitcoin.

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#14

Post by antitrust »

rayiner wrote: post #12
pnathan wrote: post #6

Unpopular opinion of the day: bitcoin is real money, and the government will regulate it and control it as such. In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just…

I don't know why this should be unpopular, except among people who see the Internet as a new Wild West. The basic advantage of Bitcoin, that its controlled by an algorithm rather than a central bank, exists whether or not financial regulations apply to Bitcoin. Does it destroy the utility of a crypto currency for exchanges and processors to be required to detect e.g. money laundering?

> the Internet as a new Wild West

I thought that idea died, was buried, exhumed, and reburied back in 1996.

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#15

Post by DougWebb »

pnathan wrote: post #6

Unpopular opinion of the day: bitcoin is real money, and the government will regulate it and control it as such. In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just…

A bitcoin address is just a container for some amount of BTC. Holding an amount of currency isn't taxable, and exchanging currency often isn't taxable either. (I'm generalizing across jurisdictions, but I think what I'm saying is true for most of them.)

If you move money from one pocket to another, or one savings account to another (that you own), that's not taxable. Very many transfers between bitcoin addresses is just like that: the 'change' from a transfer goes to a new address owned by the same person.

Even when the addresses are owned by two different people, the transfer often isn't taxable. You don't pay a tax when you pay a bill, but that's a currency transfer between two parties. Even when you buy something it isn't necessarily taxable; in many jurisdictions many products are sold tax-free based on either the type of product or where the buyer and/or seller are based.

I don't think there's a way to enforce taxation on bitcoin that's not already being used to enforce cash sales taxes and cash income, despite the tracability of the coins, because the address owners may not be identifiable, and the nature of the transfer is definitely not identifiable from the blockchain.

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#16

Post by rayiner »

antitrust wrote: post #14
rayiner wrote: post #12

Earlier quoted context omitted.

I don't know why this should be unpopular, except among people who see the Internet as a new Wild West. The basic advantage of Bitcoin, that its controlled by an algorithm rather than a central bank, exists whether or not financial regulations apply to Bitcoin. Does it destroy the utility of a crypto currency for exchanges and processors to be required to detect e.g. money laundering?

> the Internet as a new Wild West I thought that idea died, was buried, exhumed, and reburied back in 1996.

I don't think it's dead. I think a lot of people romanticize things like Bitcoin as being part of a world that's lawless relative to the real one. And as hackers, it's one where the lack of order favors them, just as the lack of order in the Wild West favored those with the most horses and guns.

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#17

Post by [deleted] »

DougWebb wrote: post #15
pnathan wrote: post #6

Unpopular opinion of the day: bitcoin is real money, and the government will regulate it and control it as such. In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just…

A bitcoin address is just a container for some amount of BTC. Holding an amount of currency isn't taxable, and exchanging currency often isn't taxable either. (I'm generalizing across jurisdictions, but I think what I'm saying is true for most of them.) If you move money from one pocket to another, or one savings account to another (that you own), that's not taxable. Very many transfers between bitcoin addresses is j…

[deleted]

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#18

Post by Thiz »

DougWebb wrote: post #15
pnathan wrote: post #6

Unpopular opinion of the day: bitcoin is real money, and the government will regulate it and control it as such. In my opinion, the end-game is this: bitcoin addresses are taxable, with occasional tax agents spot-checking large accumulations of bitcoin to determine if said addresses fall within their jurisdiction. Bitcoin has the unusual ability to have a very tight trace on where a given virtual coin goes: that just…

A bitcoin address is just a container for some amount of BTC. Holding an amount of currency isn't taxable, and exchanging currency often isn't taxable either. (I'm generalizing across jurisdictions, but I think what I'm saying is true for most of them.) If you move money from one pocket to another, or one savings account to another (that you own), that's not taxable. Very many transfers between bitcoin addresses is j…

Great explanation.

Ignore my ignorance in crypto stuff, so, what's stopping us from creating a hundred accounts in one computer and having a couple of bitcoins in each one of them?

Or even spread in one hundred shared peer-to-peer bank services?

Re: Every important person in BitCoin just got subpoenaed by NY financial regulators

#20

Post by A1kmm »

pkinsky wrote: post #9
lubos wrote: post #7

Earlier quoted context omitted.

ehm, no. you can create brand new wallet for each transaction and wallet on its own is not connected to your real identity in any way. it's more like government's worst nightmare.

As I understand it, if you want to receive bitcoins with wallet A and send those same bitcoins with wallet B, you would need to transfer said bitcoins from wallet A to B. And each transfer is recorded in the blockchain.

This is correct. However, it is difficult to prove that A and B (or perhaps every wallet in some long chain) are owned by the same person, especially if everyone has a large number of wallets and doesn't reuse them when they are empty.

Let's say the blockcoin shows a transfer of 1 BTC to a new wallet A, and then to a new wallet B, and then from B to a wallet owned by a registered BTC-USD exchange C; to comply with government regulations and protect themselves against fraud, C checks the ID of the owner of the wallet B. A government can now determine the identity of B (and might even force C to provide the information on all transactions in real time, so they know who B is even without an investigation), but they cannot automatically infer the identity of A. There are two possibilities: Perhaps A is owned by a different person, who earned BitCoin for doing some work, and then purchased another service from B. Or perhaps A and B are owned by the same person.

In reality, this might not be the only piece of information available, and governments will probably want to use statistical techniques to estimate the probability that a particular address is owned by a particular person, combining all evidence. They will likely take into account all points where money comes into or leaves a wallet with known identity (e.g. in USD -> BTC transactions or BTC -> USD transactions), and the structure of the network between those transactions. For example, suppose wallet A, B, and C are known to be owned by the same person, and someone moves money from all those wallets into wallet D. Then governments will probably infer that D is owned, with high probability, by the same person as wallet D (because multiple low probability pieces of evidence can combine to give a higher probability). Of course, the transactions are not independent, because the owner of A, B, and C might just be a regular customer of D - timing evidence might be taken into account, along with other evidence about the identity of D (for example, does D only receive money from the owner of A, B, and C, or from other sources? Where does the money go after that)?

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