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Our favoured approach at the moment is that one asks whether the value functions like money, whether or not it is money in the more traditional sense.

It could mean any medium which, by practise, freely passes through the community in final discharge of debts and full payment for goods and services, being accepted equally without reference to the character or credit of the person who offers it and who in turn can tender it to others in discharge of debts or payment for goods or services, even though it may not be legal tender.

So Bitcoins could become money for the purpose of the PSD Regulations if and when they become widely used.

(emphasis mine)

My reading is that bitcoins are classed as money if and when they become mainstream. Note that the FSA is based on principals not rules...if something looks like a duck and quacks like a duck then it is a duck as far as they are concerned. They would not be interested in protestations about bitcoins merely being solutions to difficult maths problems.

The implication of this (again, by my reading) is that people processing transactions (ie miners) will be regarded as payment processors and subject to the payment services directive (PSD http://www.fsa.gov.uk/pubs/other/PSD_approach.pdf). This requires registration with the FSA if in UK (see section 3.2). If you process more than 3M EUR per month you need full authorisation (section 3.3), involving things like holding reserve capital and paying FSA upfront fee of > 1500 EUR (sec 3.13), otherwise you can get a lightweight authorization. In either case you would appear on a public register (section 3.6). In either case (sec 3.92), you must adhere to anti money laundering regulations and perform customer due diligence checks (sec 3.36).

TL;DR - If bitcoin becomes popular and FSA deems it to be money, legal mining will likely become impossible in the UK and presumably EU.

If you stand back a bit it makes perfect sense - regulators and governments don't want funds to be easily transferred to and from terrorists or organized crime, and that is exactly what bitcoin would enable. Note that I'm not saying whether AML regulation is a 'good' thing or not, just that it is a fact of life.

skubeedooo

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