Quote from: xf2_org on June 10, 2011, 07:51:50 PM

Since bitcoins are "stored value" and not directly money, there is a FinCEN ruling that is relevant:
http://www.fincen.gov/statutes_regs/guidance/html/fin-2009-r001.html

OK lets me see if I'm understanding this ruling a la stored value thing correctly...

Cast:
The Company == Point of sale terminal service provider
The Arranger == Visa, Mastercard (the brand on the pre-paid cards)
The Bank == Stores the currency value in a bank account linked to the card
The Issuer == The Arranger "and/or" the Bank

From the ruling:

Quote

"The Company contracts with sellers or issuers of stored value products to process the sale of these products through the Company's POS terminals. The Company also serves as the processing conduit among purchasers, retailers, issuers, and/or issuer's banks, through its POS terminals and transaction processing platform, for the sale of stored value products.

You additionally represent that the Company has entered into a distributorship agreement with the Arranger in which the Company serves as a service provider for the Arranger in connection with the sale of stored value cards ("Cards"), issued by [] (the "Bank") and bearing the Arranger's brand, by retailers operating as the Arranger's sales agents. The Cards can be loaded with up to $1,000 per day and $2,500 per month."

Applying to bitcoin, the system operates so differently, it is difficult if not impossible to make a direct comparison between the actors. Meaning this ruling can't be relied on for much, except to confirm that bitcoin is operating in a gray area of law. Let me explain:

The Company - The bitcoin miners and mining pools add blocks to the block chain, which confirms the transactions. This processes transactions. They get rewards from the bitcoin open source project (determined by the code written by and voted on project members) in the form of transaction fees and bitcoins. However, the transactions are from one wallet to another.

wallet1 --> confirmation --> wallet2.
|----> add to block chain

In the ruled on pre-paid card system, the transaction is more complicated with more actors and steps involved, as described in my earlier post on this ruling.

The Arranger - The bitcoin open source project. Insofar as bitcoin is a brand maintained by them, I suppose. And the miners provide a service to them. This is the closest to a direct comparison we get out of all the actors.

The Bank - If there is any central "store" of the value, it is in two types of places. 1) Individual wallets and 2) the block chain database. But a block chain database is just a data file (100s of MB and growing). A bank is so much more than that I need not elaborate. And for anyone to use their bitcoins, they or a 3rd party intermediary has to use the client, which downloads a copy of the database. Similarly, at its most basic, a wallet is just a collection of numbers - cryptographic keys. It is also worthless without the client.

The Issuer - Any internet source where you can download the client and the block chain database. They just provide the bandwidth.

With the lack of comparability between the actors in the ruled-upon transactions, I'm not
sure what to make of this FINCEN ruling except that it is far from directly on point. I do agree that it is relevant and helpful to consider.

/end apples-to-oranges analysis

"bitcoins are "stored value" - OK I agree that if prepaid cards are stored value then so are bitcoins, you have the keys stored in your wallet file, numbers that allow you to send/spend the bitcoins in combination with the client. Just like a pre-paid card, which has a number encoded on the magnetic stripe that allows you to spend money in combination with POS terminals. You can email the wallet to someone else to use. You can mail the prepaid card to someone else to use. Prepaid card can add $1,000 to $2,500 a month. Have to pay a fee to the payment processor for this service. Bitcoin wallet can "add" (by other wallet(s) sending to it) ANY AMOUNT of btc in a matter of minutes or hours, depending on confirmation times. Optional "fee" to "payment processor" for faster processing.

Stored value currency that is "not directly money" - yet another answer to the question "What are bitcoins?" I'm just trying to get up to speed here.