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Math-Based & Virtual Currencies: Legal & Regulatory Frontiers October 6, 2013 Las Vegas

Math-Based & Virtual Currencies: Legal & Regulatory Frontiers October 6, 2013 Las Vegas. MONEY 2020. OVERVIEW. What are math based and virtual currencies? What are the legal and regulatory challenges? How are the challenges being addressed? What’s beyond Silk Road …. New Currencies.

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Math-Based & Virtual Currencies: Legal & Regulatory Frontiers October 6, 2013 Las Vegas

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  1. Math-Based & Virtual Currencies: Legal & Regulatory FrontiersOctober 6, 2013Las Vegas MONEY 2020

  2. OVERVIEW • What are math based and virtual currencies? • What are the legal and regulatory challenges? • How are the challenges being addressed? • What’s beyond Silk Road…

  3. New Currencies • What are the difference between • Virtual • Digital • Crypto • How many exist? • What are distinguishing characteristics? • Centralized v. decentralized • Reserved or non-reserved • Other characteristics

  4. Legal/Regulatory Frontiers • FinCEN – Money Services Business • State money transmitter licensing • Banks/bank regulators • Taxes • Consumer protection • Other?

  5. Elephant in the Room • Money Laundering and Terrorist Financing

  6. The Elephant in the Room Money Laundering And Terrorist Financing

  7. Regulation by Enforcement • e-gold • Digital Currency is the new frontier; it’s a wild wild west (2008) • Plea agreement with founder of system and system • Judge: system not illegal, founder had no criminal intent • Exchangers indicted • Liberty Reserve • System allegedly illegal • International cooperation • Treasury Department used its Special Measures – “primary money laundering concern” • Silk Road • International cooperation • Focus on use of the currency, not the system itself

  8. Silk Road Indictment • USA v. Ross William Ulbricht • Charges • Money Laundering Conspiracy • Narcotics Trafficking Conspiracy • Computer Hacking Conspiracy • Bitcoin-based payment system • “Bitcoin bank” • Bitcoins held in escrow • Tumblers • Mistakes • What’s missing?

  9. End of the (Silk)Road Bitcoins are not illegal in and of themselves and have known legitimate uses. However, Bitcoins are also known to be used by cybercriminals for money-laundering purposes, given the ease with which they can be used to move money anonymously. USA v. Ulbricht

  10. Anonymity vs. Privacy • What is a Bitcoin Tumbler, it is sometimes known as a Bitcoin Mixer or a Bitcoin Laundry. It is used to disguise the transaction chain leading to your account by passing through one or more intermediaries. This is very useful if you are a business that does not want your bitcoin transactions public knowledge. • Looking for greater obfuscation? Try BitLaundry, for all your Bitcoin washing needs!

  11. You have to take a leap of faith Trust will follow Man of Steel (2013)

  12. D.A.T.A • Mission • Members • Methods • Means • Message

  13. Bitcoin Foundation • Members • Mission • Means • Methods • Message

  14. Math-based currencies • Bitcoin exchange - outside US ? • Japan • Germany • India • Canada • Singapore

  15. Math-based currencies • Stalled money transmission leads to innovation • Alternate purposes • Manufacturing Supply-Chain intermediaries • Bitcoin protocol layering • Not altcoins, but existing on top of bitcoin

  16. As History Shows… Evolution Always Wins Man of Steel (2013)

  17. Speaker Contacts Carol Van Cleef Patton Boggs, LLP cvancleef@pattonboggs.com Patrick Murck Bitcoin Foundation patrick@bitcoinfoundation.org Constance Choi Payward, Inc. constance@payward.com Pervees Faisal Islam Centra Payments Solutions p.faisal.islam@centrapayments.com

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