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Martin Owens

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  • 1. Virtual Currency What It Is, What It Isn’t, And How to Use It Legally
  • 2. Presented by Martin Owens Internet and Interactive Gaming Law Sacramento, CA ▪Nothing in this presentation should be taken as direct legal advice. For your particular needs, be sure to consult a qualified professional
  • 3. First Surprise: Electronic Virtual Money Is Nothing New ▪Money was first reduced to a transmissible abstraction in ancient Sumeria, 5000 years ago. ▪The first letters of credit
  • 4. ▪ And virtual money went electronic as soon as the electric telegraph could send bank wires, in 1871
  • 5. BUT▪ Just because something is called money or virtual currency, doesn't make it so. ▪ It may or may not fit the legal description of money
  • 6. So, What is Money? Something Which Fulfills Four Functions ▪ Medium of exchange ▪ Unit of accounting ▪ Stable store of value ▸ Substantial Fluctuation NOT welcome ▪ Legal tender- MUST be accepted ▸"All debts public and private" ▸ Central control- third party validation
  • 7. Further characteristics of money ▪Uniform ▸ Identical appearance ▪Divisible ▸ prescribed sub units: $ 100, $50, $20, $10 ▪Durable (relative) ▪Portable ▪Relatively scarce▸authority regulates generation & release
  • 8. So..... What about online gaming? Points, Chips, Bonuses, “Gold Pieces”, In-game currencies ? ▪ Are they money, legally speaking? ▪And why do you care?
  • 9. Answers: ▪They may be, depending on circumstances, and ▪You care very much because if something is considered money, special procedures and licenses are needed to transfer it, especially internationally.
  • 10. ▪Money launderingdisguising the source, control, or object of transfers involving the proceeds of illegal activity-is a very heavy felony (18 USC §1956)
  • 11. In addition: ▪ US residents must report on tax returns all income they receive, whether or not it comes in the form of actual US currency ▸"Recognition event"
  • 12. So, how do you know if your in-game currency/points/whatever is considered to be "money" ? ▪Is it instantly convertible back into cash ▪(as with casino chips in Vegas?)
  • 13. ▪ If it's only usable within the game - can't be converted back out- then it won't be much of a problem.(World of Tanks) ▸"Gold farming" is so far not seriously considered as money laundering –So long as you declare the income
  • 14. The cashing out problem ▪ Have you just “ parked” your money for a brief time in an online game or virtual market? ▸No real participation? –No profits, losses, transactions? – “ HIT AND RUN”
  • 15. Are you a Commodity Exchange? ▪November 2012: US Commodities Futures Trading Commission forces Irishbased Intrade to close American accounts ▸Not only positions/options on actual commodities futures, but "proposition bets" on political eventualities and even show business trends – registered exchanges only ▸Many virtual currencies are themselves commodities –They can be bought, sold, held, and traded, but are not a stable store of value
  • 16. Avoiding Trouble ▪The game’s the thing ▸Focus of the site is on actual games and gaming, not payment system conversions ▪Transparency ▸Source and ownership of the money are properly tracked ▪ Value recognition point: ▸Especially for "mixed" payment systems, value of virtual currencies used in ADW applications must be established and fixed.
  • 17. For issuing virtual currency or something like it: ▪ Terms and conditions of membership ▸Customer solely and exclusively responsible for legal use ▸Abuse and lawbreaking as grounds for termination
  • 18. And Finally, ▪The best way to avoid trouble is don't go looking for it. ▸Avoid boasting and defiant language
  • 19. Why Aren't There Better Maps? ▪Because you are the pioneers, and you're still making them
  • 20. Thank You