California Sends Bitcoin Foundation Cease and Desist Order

Credit: CASASCIUS/wikimedia

California's message to Bitcoin supporters: if you "may be" doing the crime, we'll tell you what you'll do in hard time.

The California Department of Financial Institutions' cease and desist order dated May 30 wasn't as explicit in implicating the Bitcoin Foundation, a nonprofit with a mission to standardize and promote the Bitcoin technology, of any legal wrongdoing as it was in outlining punitive consequences if the electronic currency advocacy group was to be transmitting money without licenses or the state's authorization. Jon Matonis, who sits on the Board of Directors for Bitcoin Foundation, brought California's order to attention in a column for Forbes published yesterday.

It has come to the attention of the Commissioner that BitCoin Foundation may be engaged in the business of money transmission without having obtained the license or proper authorization required by the California Financial Code.

YOU ARE HEREBY WARNED TO CEASE AND DESIST FROM CONDUCTING THE BUSINESS OF MONEY TRANSMISSION IN THIS STATE. FAILURE TO DO SO WILL RESULT IN APPROPRIATE ACTION BEING TAKEN.

Any person who violates Financial Code § 2030 is subject to civil money penalties of $1,000 for each violation or $1,000 per day under Financial Code § 2151 and/or criminal prosecution under Financial Code § 2152. Conviction under Financial Code § 2152 could result in a fine and/or imprisonment. The California Attorney General may also institute suit pursuant to Business and Professions Code §§ 17200, 17205 and 17206, which can result in imposition of penalties of up to $2,500 per violation of statutory law (that is, per day or per transaction).

In addition, under § 1960 of Title 18 of the U.S. Code, it is a felony violation of federal law to own, control, or conduct the business of money transmission which is operated without the appropriate State license, or which fails to register with the U.S. Treasury Department… Violations of § 1960 are punishable by up to 5 years in prison and a $250,000 fine. 

The DFI's allegations that the Bitcoin Foundation "may be" engaging in money transmission has supporters of the stateless currency skeptical about the ability for businesses' ability to comply with state and federal regulations. The Bitcoin Foundation, like other private interests, does not transmit Bitcoins as a business as that "would be against the original charter of the foundation," wrote Jon Matonis in his column. Regulators' aggressive enforcement has cost businesses money and some have given up as a result, Patrick Murck, general counsel for the Foundation has said.

Check our extensive coverage of the Bitcoin protocol here and read the DFI's cease and desist letter in full below:

Comments

[Live Free or Diet]

Legally speaking, is Bitcoin actually currency?

[alan_s]

It's whatever the government needs it to be to point a gun to their head. Terms to be defined as needed.

[Matrix]

what about monopoly money, or online game currencies?

[Paul.]

Online game currencies may be subject to these rules.

[Matrix]

look out, WoW! Better pay Californistan tribute!

[Live Free or Diet]

Online game currencies may be subject to these rules.

So Bloons TD5 for me is an act of resistance to tyranny?
Cody Wilson ain't nothing! Rev. Dr. King's gonna hafta catch up!

[np]

Currency? Yes
Fiat currency? No

[Archduke Pantsfan]

Can you pay the fine with bitcoin?

[Mr Whipple]

+1

[Hyperion]

All of those regulations that were quoted... those are all to protect the people, right? And Bitcoin is obviously, a potential menace to society, right???

So what is bad about all of this?

[Ken Shultz]

California is making an ass of itself.

They look almost as silly as Obama throwing a tantrum at Russia and China over Snowden.

[Matrix]

California is making an ass of itself.

Also, the Sun came up today.

[darius404]

Before, I thought that Florida was the Ass of America. Figures that our country has two Asses.

[Finrod]

Perhaps California is the asshole and Florida is the armpit.

[aix42]

ALL CAPS MEANS BUSINESS

[Palin's Buttplug]

They look like casino chips.

Which are legal tender with me, by the way.

[SweatingGin]

Oooh, my turn to complain about lack of a hat tip. Posted it yesterday.

[SweatingGin]

On another note, my favorite part of the print edition is the three or so blog comments they'll include. Just waiting to see a really terrible name on it. Usually just Fluffy and Ken Schultz, though.

[Brett L]

They walk a narrow line. I mean, imagine how insuffrable SF and Episiarch would be if they could point to their quotes in print.

[A Serious Man]

I got mentioned in the print magazine once. Of course I don't subscribe so I had to look at the issue when they put it up online.

[Brett L]

OT: Can active duty military carry Glocks as part of their, whatever you call BDUs now? Because I've now seen a couple Glock ads on H&R where some random dude is wearing cammies and tac gear with a Glock strapped to his waist with an APC-style transport in the background. And if its supposed to be the Po-po, they should really not run that ad here.

SLD: Reason should totally take their money and people who tell me to use AdBlock should pre-emptively fuck right off.

[Brandybuck]

I think AdBlock would be more effective if they would advertise their services.

[Matrix]

"Want to get rid of annoying ads like this? Use our program!"

[AlmightyJB]

I think they now give quite a bit of descretion as what you can carry as a handgun. Ceratinly that's the case for spec ops.

[AlmightyJB]

To clarify, they can use a pesonally owned weapon if they prefer.

[Agammamon]

Regular military can only use their issued weapons - spec-ops guys, and if you have enough rank, can get around this.

[Rrabbit]

Maybe scary letters should be sent to all Members of Congress and high ranking government officials describing the penalties they could theoretically face for breaking the law.

[AlmightyJB]

They can't technically break the law.

[Suthenboy]

I have no idea how bitcoin works. I have never paid attention to it.

I am gonna take a guess here that californistan's complaint is that they arent getting paid in the course of bitcoin doing business.

[AlmightyJB]

"engaged in the business of money transmission without having obtained the license or proper authorization required by the California Financial Code."

"it is a felony violation of federal law to own, control, or conduct the business of money transmission which is operated without the appropriate State license, or which fails to register with the U.S. Treasury Department"

So how do you get the State license and how do you register with the U.S. Treasury Department? Or are those requirements for which there is no solution?

[Agammamon]

Oh there is a solution - the solution is to register as a money transfer service and only transfer officially recognized currencies.

Otherwise we'll shoot your arse for endangering our monopoly on money production.

[np]

How about we send a cease and desist letter to the California Department of Financial Institutions instead?

[np]

But this isn't just a Californian problem. "Texas is pretty strict as well," said Murck. "You should also bear in mind that States like New York and Texas have publicly stated that merely conducting a single transaction with a consumer residing in those States creates a sufficient nexus between a company and that State to give them jurisdiction on issues of money transmission," he said.

Hah, everyone including Texas, is stooping to California's level.

It's worse for precious metals:

http://theexaminer.com/stories.....-state-law

In the past week, two transient gold buying operations have been found in violation of a new Texas law requiring businesses and individuals to register and obtain proper licenses before they purchase gold and other precious metals.

http://www.silverdoctors.com/h.....-mugshots/

imagesIf you live in the city of Houston, TX and are selling physical gold or silver, you are now officially considered a criminal until proven otherwise, as Houston's City Council has passed an ordinance requiring anyone selling gold or silver to be fingerprinted and photographed, as well as requiring photographs be taken of all items being sold precious metals dealers.

[Mr Whipple]

Well, now they have to spend money and hire lawyers to defend against this bullshit. They should be able to sue them for prosecutorial misconduct.

Personally, I just bought some bitcoins today. I went through:

BitInstant ----- ZipZap ------- MoneyGram -------- ZipZap -------BitInstant --------- bitcoin online wallet

So, I fucked up and entered my name using a capital letter. You can only use lower case letters when entering your information, I found out. So, I got all fucked up at the CVS. I didn't have my tablet with me, so I had to go home and place another order.

They just want to make it so difficult, people will stop using it. Fuck them. It just makes me want to use it more.

I started small talk with the cashier. I told her I was buying Bitcoin. She said that there have been a lot of people in there recently using ZipZap. I lol'd. They were all buying Bitcoins. She didn't ask me what they were, so I assumed she knew. What the Hell. I want people to know I'm buying bitcoins. It's still not illegal, and no one has any way of knowing what I may or may not be using them for.