Bitcoin
Regulatory Considerations
2014 Ohio State Entrepreneurial Business Law Journal
Symposium - February 21, 2014
Jim G...
1 | Bitcoin | Regulatory Considerations
What is Bitcoin?

 Decentralized, virtual currency protocol

 Pseudononymous
 Peer-to-peer
 Generally irreversible
 N...
How Does Bitcoin Work?

Acquisition

Mine
Purchase via exchange
Accept for goods/services

Storage

Wallet
Web-based

Tran...
Categories of Entities

 Users - a person that obtains virtual currency to purchase
goods or services (on their own behal...
Enforcement Actions

 Mt. Gox

 Silk Road
 BitInstant
 Miami – money laundering case

5 | Bitcoin | Regulatory Conside...
Does Bitcoin Need Regulation?

Guns don’t kill people…people do!

Bitcoins don’t buy drugs … people do!
Regulation not so ...
Existing Regulatory Framework
Federal
• Federal Anti-money Laundering/Bank Secrecy Act
• MSB
• record keeping/transaction ...
Federal Regulatory Activity
November 2013 Congressional Hearings
 "there are many legitimate uses. These virtual currenci...
State Regulatory Issues

Silicon Valley v. Wall Street?
Tech v. Finance?

9 | Bitcoin | Regulatory Considerations
NY Hearings

 Jan 28-29, 2014 - Public hearings held to consider whether to
regulate virtual currency (including Bitcoin)...
California Pending Bill

SECTION 1. Section 107 of the Corporations Code is
amended to read:
A person shall not issue or p...
International
 Germany - Bitcoin should be considered as “private money”
 EU – warning re fraud, tax evasion, crimes

 ...
Russia on Virtual Currency

NYET!


The Central Bank of Russia released a notice clarifying the treatment of
virtual curr...
Other Regulatory Issues
 FinCEN
 March 18, 2013 Guidance
 administrative rulings
 to the extent a user creates or “min...
More information?

for Bitcoin Legal Resource Guide

email me at
james.gatto@pillsburylaw.com

15 | Bitcoin | Regulatory C...
Upcoming SlideShare
Loading in …5
×

Bitcoin regulatory issues

790 views

Published on

legal and regulatory issues with bitcoin

Published in: Social Media
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
790
On SlideShare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
19
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Bitcoin regulatory issues

  1. 1. Bitcoin Regulatory Considerations 2014 Ohio State Entrepreneurial Business Law Journal Symposium - February 21, 2014 Jim Gatto Pillsbury Winthrop Shaw Pittman LLP Leader – Social Media & Games Team Leader – Open Source Team Tel: 703.770.7972 Email: james.gatto@pillsburylaw.com
  2. 2. 1 | Bitcoin | Regulatory Considerations
  3. 3. What is Bitcoin?  Decentralized, virtual currency protocol  Pseudononymous  Peer-to-peer  Generally irreversible  Not legal tender in US (but not necessarily illegal) 2 | Bitcoin | Regulatory Considerations
  4. 4. How Does Bitcoin Work? Acquisition Mine Purchase via exchange Accept for goods/services Storage Wallet Web-based Transactions Public ledger of transactions 3 | Bitcoin | Regulatory Considerations
  5. 5. Categories of Entities  Users - a person that obtains virtual currency to purchase goods or services (on their own behalf)  Exchangers - a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency  Administrators - a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency  Retailers/others  Banks/Financial Institutions/Payment Processors? 4 | Bitcoin | Regulatory Considerations
  6. 6. Enforcement Actions  Mt. Gox  Silk Road  BitInstant  Miami – money laundering case 5 | Bitcoin | Regulatory Considerations
  7. 7. Does Bitcoin Need Regulation? Guns don’t kill people…people do! Bitcoins don’t buy drugs … people do! Regulation not so much about use…. but  consumer protection  anti-money laundering  anti-tax evasion 6 | Bitcoin | Regulatory Considerations
  8. 8. Existing Regulatory Framework Federal • Federal Anti-money Laundering/Bank Secrecy Act • MSB • record keeping/transaction reporting • SARs • KYC • Securities Laws • CFTC • IRS • DHS State International 7 | Bitcoin | Regulatory Considerations
  9. 9. Federal Regulatory Activity November 2013 Congressional Hearings  "there are many legitimate uses. These virtual currencies are not in and of themselves illegal"  "Innovation is a very important part of our economy," …premature regulation could stifle Bitcoin innovation  Law enforcement has tools to get the bad guys 8 | Bitcoin | Regulatory Considerations
  10. 10. State Regulatory Issues Silicon Valley v. Wall Street? Tech v. Finance? 9 | Bitcoin | Regulatory Considerations
  11. 11. NY Hearings  Jan 28-29, 2014 - Public hearings held to consider whether to regulate virtual currency (including Bitcoin) The question is what type of licensing, examination, and collateral requirements for the virtual currency industry will provide appropriate guardrails to protect consumers and our national security without stifling beneficial innovation.  BitLicense?  Strong Set of Consumer Disclosures Rules 10 | Bitcoin | Regulatory Considerations
  12. 12. California Pending Bill SECTION 1. Section 107 of the Corporations Code is amended to read: A person shall not issue or put in circulation, as money, anything but the lawful money of the United States. Nothing in this section shall prohibit the issuance and use of alternative currency that is redeemable for lawful money of the United States or that has value based on the value of lawful money of the United States but a person shall not be required to accept alternative currency. 11 | Bitcoin | Regulatory Considerations
  13. 13. International  Germany - Bitcoin should be considered as “private money”  EU – warning re fraud, tax evasion, crimes  UK – not treated as money …but subject to VAT  Belgium – no regs  France – no action  Finland – issued regulatory guide and capital gains tax  Sweden – bitcoin a means of payment; registration for exchanges  Slovenia – pro bitcoin; not currency or financial instrument; taxable  China – prohibitions on financial institutions/payment processors  Singapore - pro bitcoin; taxable 12 | Bitcoin | Regulatory Considerations
  14. 14. Russia on Virtual Currency NYET!  The Central Bank of Russia released a notice clarifying the treatment of virtual currency, including Bitcoin, within the financial industry  Declared that Article 27 of the Law on Central Bank of Russia prohibits production of alternative monetary products.  Warned the public and financial industry that virtual currency is not regulated, and due to its anonymous nature, may be used to launder money and finance terrorism. Virtual currency also carries a high risk of loss of value.  The notice advised that any legal institution that or professional who provides services to exchange virtual currency to national or foreign currency, including to goods or services, will be treated as if they are potentially involved in suspicious activities, money laundering, or terrorism financing. 13 | Bitcoin | Regulatory Considerations
  15. 15. Other Regulatory Issues  FinCEN  March 18, 2013 Guidance  administrative rulings  to the extent a user creates or “mines” a convertible virtual currency solely for   a user’s own purposes, the user is not a money transmitter under the BSA. a company purchasing and selling convertible virtual currency as an investment exclusively for the company’s benefit is not a money transmitter producing and distributing software that facilitates the sale of virtual currency , in and of itself, does not trigger MSB under BSA  SEC  Investor alert on fraudulent investment schemes  Investment funds – Winkelvoss Bitcoin Trust registration statement  IRS – May 2013 GAO request for guidance 14 | Bitcoin | Regulatory Considerations
  16. 16. More information? for Bitcoin Legal Resource Guide email me at james.gatto@pillsburylaw.com 15 | Bitcoin | Regulatory Considerations

×