With all of the headlines about the astronomical prices of various cryptocurrencies, you may have missed a troubling trend: US law enforcement keeps charging people with a crime for selling bitcoin.
In May of this year, a man from Nixa, Missouri waived his right to a grand jury and pleaded guilty to "conducting an illegal money transmission business." According to a posting by the US Department of Justice, Jason Klein had conducted five separate in-person transactions of cash for bitcoin with undercover federal agents, ranging from $1,000 to $15,000 in value.
Selling bitcoin in-person has long been a niche market for hobbyists who use the Finnish site localbitcoins.com to coordinate sales in their city. Selling bitcoins peer-to-peer is also an alternative to using centralized exchanges that operate as businesses. It"s not illegal to sell bitcoins per se, but at least four people across the US this year have been charged or pleaded guilty to the crime of exchanging the cryptocurrency for fiat as a business without a license—"business" being the keyword.
Why and when is selling bitcoins a crime? To find out, I called up Marco Santori, a lawyer specializing in bitcoin at Palo Alto-based firm Cooley. According to Santori, it"s been an issue for bitcoiners since 2013, when the US Financial Crimes Enforcement Network declared that selling bitcoin as a business is money transmission that requires licensing. Individual states have followed suit, and New York"s BitLicense legislation, for example, says you need a license to sell bitcoin as a business.
""As a business" is the qualifier that triggers the money transmission laws," Santori said over the phone. "If you come to me and ask to buy $100 worth of bitcoin and I sell that to you, in no state is that sole activity considered to be money transmission. It must occur in a sufficient frequency and volume and you have to accept all comers. It"s a fact-based test."
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