Maker of Physical Bitcoin Tokens Suspends Operation After Hearing from Federal Government

The government's creeping encroachment into the world of bitcoin and bitcoin transmission claims a cool scalp, as reported in Wired:

Mike Caldwell ran a business called Casascius that printed physical tokens with a bitcoin digital key on it, key hidden behind a tamper proof strip. He'd charge $50 worth of bitcoin to print a bitcoin key you sent him via computer on this token. Cool stuff--a good friend of mine found one sitting unnoticed in her tip jar from an event at which she sold her artisan lamps from 2011 and was naturally delighted given the nearly 1000x increase in value of a bitcoin since then.

So, you're making something fun, useful, interesting, harmless--naturally the federal government is very concerned and wants to hobble you.

Just before Thanksgiving, [Caldwell] received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

Caldwell has stopped taking orders for his popular Casascius bitcoins....[he]argues that sending the coins through the mail is not a way of transmitting money. He thinks the coins should be viewed as collectibles.

But, clearly, that’s not how the federal government sees things. If he doesn’t verify or have a way of knowing whether the owner of the bitcoins is the same person he’s sending the coins to, that’s a problem....

Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

He's already been forced to spend $5,000 lawyering up since receiving that helpful letter from the feds.

I wrote back in May on FinCEN beginning to sniff around the world of bitcoin.

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  • Austrian Anarchy||

    OT: Brian, nothing on the big Cheap Trick court case?

  • CE||

    Ain't that a shame?

  • Austrian Anarchy||

    Made me cry.

  • SweatingGin||

    It's insane and scary. There's a million small-business things to do around Bitcoin, but it seems ridiculously dangers to do from the US / as a US citizen.

    The thing is, too -- there's ideas that would be very interesting to mess with, very legit, but if you didn't want to ask permission (that might take years, millions of dollars, and never come), you have to go completely underground.

    We'll end up seeing completely legitimate asset trading hidden like Silk Road was. That, or drive everything to be decentralized the way Bitcoin is.

  • Paul.||

    Good thing the government isn't interested in the viability of small business as much as it is in keeping it's monopoly over your wealth.

  • Austrian Anarchy||

    “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

    All those Bitcoin fans who were so giddy about an SEC ruling that BTC is money, or close enough, this is what you get.

  • SweatingGin||

    It'll be an interesting spot. Go ahead and buy Bitcoin, if your bank doesn't close your account for it. Go ahead and use it to buy alpaca socks. Enjoy. Don't start a business with it, or we'll smack you down for not complying with rules you can't possibly comply with.

    Maybe we'll get a "look at all these exciting things Bitcoin entrepreneurs (except the ones we shut down) are doing!" in the State of the Union address.

  • Austrian Anarchy||

    If you like your Bitcoin, you can keep it.

  • waffles||

    But if you want to do anything new and innovative with it we will investigate the shit out of you. FYTW.

  • Austrian Anarchy||

    No buts until the measure is passed so we can see what's in it!

  • Paul.||

    Never underestimate the government's ability to yadda yadda.

  • waffles||

    These financial regulations make may of the exciting, niche things bitcoin can be used for impossible to do legally. I don't think that bitcoin is problem. But i can imagine someone who does.

  • califernian||

    From the fed point of view, it's NOT harmless. There is a reason they are merciless about maintaining a currency monopoly and it's not to protect anyone from the headaches of dealing with currency exchange rates.

  • Sigivald||

    "He thinks the coins should be viewed as collectibles."

    Seriously?

    I don't blame the Feds for not falling for that.

    The law might be stupid and a waste (indeed, it is) ... but that's irrelevant to how completely bogus the "it's just a collectible, wink wink" argument is; if they were just collectibles, they wouldn't need to have the valid bitcoin signatures in a tamper-resistant area, would they?

    ("But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack", per Wired.)

    They're obviously and clearly designed, marketed, and sold as if they're a way to transfer money.

    The attempt to simultaneously claim they're just a novelty/collectible is risible.

  • kbolino||

    Because the most important thing about unjust and economically ignorant laws is that they are actively and precisely enforced.

  • CE||

    75% of poll respondents said Bitcoins were scary and should be taxed.

  • Canman||

    I wonder if bitcoin and it's competitors like litecoin could lead to a switch from an income tax to a consumption tax?

    I think the best way to defend bitcoin is to invoke the specter of foreign competition. WE MUST NOT ALLOW A BITCOIN GAP!

  • NL_||

    The idea being that it's easier to trace movement of goods from wholesale to retail rather than to trace salaries and employment? I'm not sure that's so clear.

    I think payroll taxes will be tough to undo, given how they are funding things like social security and medicare, and the widespread prevalence of withholding and payroll taxes at the state/local level.

  • Austrian Anarchy||

    Your article made the front page of Slashdot.

  • Shmurphy||

    If I've said it once, I've said it a thousand times.

    FUCK.
    ALL.
    GOVERNMENT.

  • NL_||

    "Government's just a word for things we're not allowed to do together."

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