Lawyers, analysts, academics and government officials debated the regulatory implications of bitcoin today - and none of them seemed to agree. In a panel at the Inside Bitcoins conference, one of the big sticking points was FinCEN's attitude to miners. One speaker even suggested that the whole guidance could be challenged.
"FinCEN will be fairly stable" said Jacob Farber, senior counsel for lawyer Perkins Coie LLP. "There will still be questions for miners and users," he said.
"Miners are in the most unclear territory," said Jerry Brito, senior research fellow at George Mason University's Mercatus Center. "Are they administrators as defined in FinCEN?" Miners who mine bitcoins and use them to purchase real goods and services are categorized as mere users. "But if they sell those coins, they do qualify," he said.
One of the problems, said Brito, is that FinCEN issued its virtual currency guidance based on centralized currencies, whereas bitcoin is decentralized. The agency also failed to take proper comment before releasing the guidance, he said. "The guidance could be challenged."
At least FinCEN had some guidance. The US Commodities and Futures Trading Commission (CTFC) has no guidance yet, said Farber, although it has hinted that it might look at the issue.
Most states regulate money transmission businesses, other than New Mexico, South Carolina, and Montana, he said - although few have issued official guidance on virtual currencies. Other states (New York and Texas among them) are extra aggressive, and have threatened extra-territorial action against violators.
When it comes to taxation, the Internal Revenue Service has issued little guidance, says James White, Director of Tax Issues at the US Government Accountability Office. It last published some guidance on virtual economies in 2007, but hasn't zeroed in on virtual currencies. The GAO published a report on IRS guidance for virtual currency taxation recently. "They're running to keep up," he told CoinDesk. The GAO had recommended informal guidance to at least give the public some information about how they should report bitcoin income. The IRS agreed, but there is no timeline for publication yet.
"You've got a tax environment where they try to force things into tax buckets," White said. "But they don't always fit very well." The alternative is to alter the regulatory framework itself, but this is a long and laborious process.
Debating the nuances of the regulation is a distraction, Patrick Griffin, head of business development for OpenCoin, told CoinDesk. "The industry has to get ahead of the messaging," he said, touting the DATA self-regulatory organization that was announced early this morning, of which OpenCoin is a part. "The regulators are not going to get hung up on legal nuance. The first sniff they get of anything illicit moving through the system, they'll shut it down."