"Bitcoin raises untested legal concerns related to securities law, the Stamp Payments Act, tax evasion, consumer protection and money laundering, among others."
No it doesn't. Accepting donations in Bitcoins is no different than accepting cash yen or euro or Zimbabwean dollars. You value them at the market's dollar rate for tax purposes. The other objections are thorough nonsense as far as I can tell.
"We don't want to mislead our donors."
You just did. You took their Bitcoins and did something with them wholly different from what you said you were going to with them. (The EFF says it donated them to the Bitcoin Faucet.) The honest thing, and what your donors expected, would have been to convert them to dollars (or whatever) and spend them as you would any other donation, or to purchase goods and services from the Bitcoin economy to promote your mission.
"People were misconstruing our acceptance of Bitcoins as an endorsement of Bitcoin."
You were endorsing Bitcoin by using it. Just say, "Bitcoin's the Wild West. We're scared to take them." And leave it at that.
"Bitcoin raises untested legal concerns related to securities law, the Stamp Payments Act, tax evasion, consumer protection and money laundering, among others."
No it doesn't. Accepting donations in Bitcoins is no different than accepting cash yen or euro or Zimbabwean dollars. You value them at the market's dollar rate for tax purposes. The other objections are thorough nonsense as far as I can tell.
The EFF is full of lawyers who, presumably, have studies these parts of law at least a little, even if none of them have specialized in it. What's your justification for calling their concerns "thorough nonsense"?
>What's your justification for calling their concerns "thorough nonsense"?
1) Currencies are not securities, and this is plain in definitions of the Securities Act of 1933 and following;
2) The Stamp Payments Act was enacted at the end of the wildcat banking period to end the circulation of small-denomination (less than one dollar) money by bank issuers. It clearly relates to dollar-denominated coins and notes. Bitcoin is a separate currency and has no physical form and no fixed denominations; regardless, the law applies no more to the use of Bitcoin than to the use of any other currency in the United States, which is not controversial.
3) I already explained the tax situation;
4) How is 'consumer protection' a legal issue related to the currency of denomination of a charitable donation?
5) Bitcoin could certainly abet money laundering, but the anti-money-laundering laws of the United States, in addition to regulating the conduct of financial institutions, apply almost exclusively to those who knowingly engage or intend to engage in transactions involving the proceeds of illegal activity.
Bitcoin raises a couple of interesting questions related to its fundamental electronic form, but the objections given are just nonsense.
so do i value them at the market rate when i received them, or when i'm paying taxes, or do i only pay capital gains taxes on them when (haha, if) i sell them?
I think you and the EFF are using different meanings for endorsement. Yes, by accepting it they were saying "we recognize that these BTC have some agreed-upon value and may be exchanged for good or services", and that is one type of endorsement.
What they do not want people to take away, though, is an explicit or implicit statement that "we believe in what bitcoin has set out to do, and lend our [moral] support to the effort" and possibly furthermore "we believe this is a legal thing to do and that it is a freedom we will fight to defend." Those statements, explicit or implicit, are a different type of endorsement.
A couple months ago someone posted the story of a coffeeshop that takes many foreign currencies as a gimmick, to cover over the fact that they don't take credit cards.
Do you think they're endorsing the Chinese yuan?
There's a difference between passively making a payment technique available and actively promoting it to people. By conflating the two, you're opening yourself up to all sorts of ridiculous claims, like the one above.
Absolutely, they are endorsing the Chinese yuan by acknowledging it's a legitimate currency. Why do you think countries make such a big deal about who has embassies with whom?
If you accept a currency, you are implicitly saying "I agree that this thing you have given me has value."
This makes sense for a material currency, where you wouldn't want to be burdened with useless paper rectangles or metal coins. (Same thing for an embassy, by the way, which has a non-zero cost.) But for donations with a digital currency, I think it was reasonable to hope that they could just publish a Bitcoin address just in case without endorsing it for real, because the cost to receive Bitcoin is essentially zero. (Keep in mind that you don't even need to run the software anymore, you just need to keep a copy of the private key somewhere.)
This being said, the EFF's choice is cautious, but sensible. (It's just slightly annoying to see Bitcoin labeled as a "product or service", whereas it's supposed to be a protocol.)
The overhead of keeping BTC is probably low, but what happens if they lose that private key? How many people have access to it, what's the protocol for using it, ....? I know if someone sent me some BTC there's a good chance they'd be lost to the world forever.
And then people will throw a hissy if you aren't "using" their donation. Maybe their choice of the faucet can be viewed in a different light. They are using the donations to promote and ensure a bright future for bitcoin by spreading the wealth. :)
Unless you only take payment in trade, you deal almost exclusively with imaginary currencies. All currency is fiction to streamline an economy so we don't have to expend an inordinate amount of time and effort in a barter system. Most currency isn't even printed, just numbers in computer systems, sometimes with a dead tree paper trail.
Sure, but there is a real system in place that specifies that I am able to get milk per litre for 2 EUR, and purchase a coffee at the local coffee place for 3 EUR, not only that during that entire time I am able to have paper in my hands which has "value" because EVERYONE considers it to be valuable.
I can't do the same with Bitcoin, I can't have paper in my wallet, I can't go trade it for real goods right now. There is a lot of fluctuations in the price of Bitcoin, since it is entirely virtual it can easily be attacked and there are no systems in place for me to get my Bitcoin back if there is a fraudulent transaction.
Such an arrangement of payment in a different currency might fly in the US. But I am guessing such stunts in the top two populous countries can get you arrested?
Whether or not accepting it was seen as an endorsement, this is a pretty strong unendorsement considering recent events. So much so that it feels like another nail in a coffin.
"[1] We understand that we cannot close the account that has been set up in EFF’s name and that returning the donations to the individual donors would be complex and difficult."
Returning the Bitcoins would neither be complex nor difficult. For every transaction you know the sender address and the recipient address. So just return the money to the sender address: as long as the sender didn't remove his old wallet file this address will be valid.
(The only case where you can't return money to the sender address is if some type of virtual "bank" like MyBitCoin was used. In that case sender address do not correspond to the addresses of the individual users. However, the large majority of users doesn't use those banks, but runs their own clients.)
It's possible that some of the addresses that donated to the EFF were single-use throwaway addresses which the original owners may not still have the keys for
Not sure if that is correct. At least the BitCoin client does not show sender addresses, only "you have received x BTC with this address". That is why you ideally give each sender their own address to send to, so that you can track who paid you.
Not sure how the internal cryptography works, but I think if the information was available, the client would show it.
It does not make sense for the Bitcoin client to do so, because you can only use this information if you know all Bitcoin addresses of the sender (as any one might potentially be used as sender of the Bitcoins).
In addition, even the (typical) sender does not know all of his addresses, as some of those addresses are only internally used by the Bitcoin client.
Still, if you send the money to any of those addresses it will appear in the wallet of the sender.
We are looking forward to taking all of the risks laid out in your opinionated statement. Movements/Startups like Bitcoin are the reason Guy Kawasaki uses the half-mimicking quote: "paradigm shifting," in all of his presentations. And Bitcoin is justified, because they are way beyond the elevator pitch.
I don't get it, and sorry for the BTC story haters, but it is interesting to me. Not only because of BitCoin, but because of general considerations about payment startups.
When is something an alternative currency? Would it be illegal for me to donate apples to the EFF, which they could then sell on the farmers market to pay for their servers? Or would that make apples an alternative currency and hence illegal?
Just saying - BitCoin calls itself a currency, but personally I consider them to simply be a virtual good. I sold some bitcoin I mined, and I expect that is how I should explain my income to the tax inspector. So I will probably even have to pay VAT.
So when is a currency a currency? What is the difference between an apple and a pound note? (Assume the apple never decays).
> So when is a currency a currency? What is the difference between an apple and a pound note? (Assume the apple never decays)
There's no difference. Currencies are just goods whose primary use is as a means of exchange.
The usually enumerated properties of a currency are (1) a means of exchange, (2) a store of value, and (3) a unit of account.
(2) is really not required; almost all modern and historical currencies fail it to some degree. (1) is the true test, and it amounts simply to being able to find someone willing to exchange what you want for some amount of your would-be currency; (3) follows from (1), since (1) implies agreeing a price in units of your currency.
This reply makes the most sense in all of the threads here. We don't have enough info to make scientifically correct claims about Bitcoins but everyone keeps talking about it like it is figured out.
Makes sense. EFF knows the law as well as anyone, the concern here is that they could be entangled in as-yet-unknown legal disputes because of their use of bitcoin. That'd be wasteful of both bitcoin and regular currency donations.
I think it makes sense for them to step up and admit that they don't understand the law surrounding bitcoin well enough to be comfortable accepting it. There's no point in assuming an unknown-sized risk just for bitcoin when there's other things in their mission they can work towards.
I'd hate to see the EFF financially decimated merely because they accepted bitcoin donations. They are useful people, let them pick their battles.
That said, I think it's fair for the Bitcoin people to feel abandoned by the EFF for their sudden refusal to deal with btc without a thorough legal explanation that others could work with. The EFF is pretty much who you'd expect to fight for this type of project and for them to take a sudden and largely unexplained hands-off stance is odd.
They do say "[this laundry list of laws] [are potentially related]" but they're aware of the "three felonies a day" nature of our society. What isn't potentially illegal?
Besides, most of those issues would go away if they simply resold their btc immediately and claimed that as the donation value.
I can see that they don't want to be seen as endorsing the use of Bitcoin specifically, especially storing value in it, but if they immediately resold their btc they'd be using it safely (to avoid a hypothetical btc crash wiping out their funds) and promoting responsible usage of any payment service (storing money in Paypal accounts is a notorious no-no, even though it's denominated in USD).
"we’re giving the Bitcoins that have been accumulated, or that may accumulate in the future, in the account set up in our name to the Bitcoin faucet"
If I understand correctly, EFF has some legal doubts about Bitcoin as a currency. So they give up and will give back randomly the money. Why not doing the same for the existing currencies? or the current financial system? we may have some doubts but it's not a reason to give away the money.
The donors usually expect the money to be used for their cause. As a EFF donor (in USD and Bitcoin), I would like to be sure that the money is used for the objectives of the non-profit organization.
Maybe they didn't officially endorse it, but by un-accepting it they are unendorsing it, although they would not admit it. Doesn't this decision have something to do with the MtGox hack incident?
Facebook, Microsoft, and Zynga are all indirectly controlled by the state. They can be completely dismantled if we are so inclined. Bitcoin cannot be dismantled via the same direct political power.
This is why playing within a broken system is such a pain in the ass and doesn't allow a reform of the system. If everyone followed the EFF's example no one would be trading Bitcoins. Worried about fucking tax evasion and tax laws, wtf.
When you are a large target championing somewhat risky territory, you cannot be as lackadaisical as one person. Especially when your entire platform is based on morals, ethics and the like.
No it doesn't. Accepting donations in Bitcoins is no different than accepting cash yen or euro or Zimbabwean dollars. You value them at the market's dollar rate for tax purposes. The other objections are thorough nonsense as far as I can tell.
"We don't want to mislead our donors."
You just did. You took their Bitcoins and did something with them wholly different from what you said you were going to with them. (The EFF says it donated them to the Bitcoin Faucet.) The honest thing, and what your donors expected, would have been to convert them to dollars (or whatever) and spend them as you would any other donation, or to purchase goods and services from the Bitcoin economy to promote your mission.
"People were misconstruing our acceptance of Bitcoins as an endorsement of Bitcoin."
You were endorsing Bitcoin by using it. Just say, "Bitcoin's the Wild West. We're scared to take them." And leave it at that.