<div id="articleHeader" style="margin:0px 0px 1.875em;padding:0px 0px 0.8125em;border-width:0px 0px 1px;border-bottom-style:solid;border-color:rgb(197,197,197);font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">

<h1 style="margin:0px;padding:0px;border:0px;font-size:1.875em;font-style:inherit;font-variant:inherit;font-weight:normal;line-height:1.3em;vertical-align:baseline"><span class="speechFragmentSeparator" id="speechFragmentSeparator__1_0" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">B</span>itcoin Foundation Receives Cease And Desist Order From California<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_1" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline"> </span></h1>

</div><p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">[Disclosure: Author serves on Board of Directors for Bitcoin Foundation<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_2" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span>]</p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">Directly following last month’s Bitcoin 2013 conference event in San Jose, CA that brought decent revenue into the state, California’s Department of Financial Institutions decided to issue a cease and desist warning to conference organizer Bitcoin Foundation for allegedly engaging in the business of money transmission without a <a href="http://dfi.ca.gov/Licensees/money_transmitter/default.html" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none">license </a>or proper authorization<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_3" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">If found to be in violation of California Financial Code, penalties can be severe ranging from $1,000 to $2,500 per violation per day plus criminal prosecution which could result in fines and/or imprisonment<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_4" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> Additionally, it is a felony violation of federal law to engage in the business of money transmission without the appropriate state license or failure to register with the U.S. Treasury Department<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_5" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> Convictions under the federal statute are punishable by up to 5 years in prison and a $250,000 fine<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_6" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<div style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline"><span style="font-size:16px;line-height:24px">The Bitcoin Foundation is a nonprofit corporation registered in Washington, D.C. with mailing address in Seattle, WA</span><span class="speechFragmentSeparator" id="speechFragmentSeparator__1_8" style="font-family:inherit;font-size:inherit;line-height:inherit;font-style:inherit;font-variant:inherit;margin:0px;padding:0px;border:0px;vertical-align:baseline">.</span><span style="font-size:16px;line-height:24px"> </span><span style="font-size:16px;line-height:24px">As a nonprofit, its mission is to standardize and promote the open source Bitcoin protocol and they receive generous support from individuals and corporations to advance those objectives</span><span class="speechFragmentSeparator" id="speechFragmentSeparator__1_9" style="font-family:inherit;font-size:inherit;line-height:inherit;font-style:inherit;font-variant:inherit;margin:0px;padding:0px;border:0px;vertical-align:baseline">.</span><span style="font-size:16px;line-height:24px">  The foundation also boasts significant international membership</span><span class="speechFragmentSeparator" id="speechFragmentSeparator__1_10" style="font-family:inherit;font-size:inherit;line-height:inherit;font-style:inherit;font-variant:inherit;margin:0px;padding:0px;border:0px;vertical-align:baseline">.</span></div>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">One activity that the foundation does not engage in is the owning, controlling, or conducting of money transmission business<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_11" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> Furthermore, that activity would also be against the original charter of the foundation<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_12" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> As general counsel for the Bitcoin Foundation, Patrick Murck has lead responsibility for corresponding with the California Department of Financial Institutions<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_13" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">At this stage, it’s difficult to tell whether or not it was a general blanket action and if other bitcoin-related entities received cease and desist letters from California<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_14" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> If Bitcoin Foundation was not the only recipient, then expect other companies to come forward in the days and weeks ahead<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_15" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">The issued letter was signed by State of California Senior Counsel Paul T. Crayton and the letter was copied to Department of Financial Institutions Deputy Commissioner Robert Venchiarutti, who also serves on the Board of Directors of the <a href="http://www.mtraweb.org/about/board-of-directors-2/" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none">Money Transmitter Regulators Association </a>, ironically a national <em style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">nonprofit</em> organization dedicated to the efficient and effective regulation of the money transmission industry<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_16" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">Recently, the State of Illinois also <a href="http://www.paymentssource.com/news/illinois-sends-cease-and-desist-to-square-over-licensing-issue-3013424-1.html" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none">issued </a>a cease and desist letter to mobile payments processor Square for failing to have the proper licensing in accordance with the state’s Transmitters of Money Act<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_17" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> Prepaid card provider NetSpend and six other payments companies also <a href="http://digitaltransactions.net/news/story/3907" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none">received </a>Illinois cease and desist orders<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_18" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> If this practice grows among states, it could have a potentially significant “<a href="http://en.wikipedia.org/wiki/Chilling_effect_%28law%29" title="Chilling effect (law)" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none">chilling effect </a>” on financial services innovation, especially upon lawful businesses that are designing infrastructure to support and grow the Bitcoin technology<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_19" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span>Freedom of choice in currencies is probably the most important free speech issue of our time<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_20" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">For similar but not wholly unrelated reasons, the Electronic Frontier Foundation and several law school clinics established the collaborative archive<a href="http://en.wikipedia.org/wiki/Chilling_Effects" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none"><em style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">Chilling Effects Clearinghouse</em> </a>in 2001 to protect lawful online activity from harassing legal threats related to intellectual property<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_21" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<p style="margin:0px 0px 1.5em;padding:0px;border:0px;font-family:'PT Serif';font-size:16px;line-height:24px;vertical-align:baseline;color:rgb(31,9,9)">Harkening back to the <a href="http://themonetaryfuture.blogspot.com/2011/05/in-fifty-days-payments-innovation-will.html" target="_blank" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline;color:rgb(31,9,9);text-decoration:none">saga </a>of FaceCash and Aaron Greenspan, this new far-reaching action from California’s financial regulator apparently now scoops up nonprofit scientific and educational organizations<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_22" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span> California, the cradle of technological innovation and home to the inspiring Silicon Valley venture capital community, is now focusing its sights on the futuristic Bitcoin<span class="speechFragmentSeparator" id="speechFragmentSeparator__1_23" style="margin:0px;padding:0px;border:0px;font-family:inherit;font-size:inherit;font-style:inherit;font-variant:inherit;line-height:inherit;vertical-align:baseline">.</span></p>

<div><a rel="nofollow" target="_blank" href="http://www.forbes.com/sites/jonmatonis/2013/06/23/bitcoin-foundation-receives-cease-and-desist-order-from-california/" class="Xx" dir="ltr" style="font-family:arial,sans-serif;font-size:13px;line-height:16px;background-color:rgb(255,255,255)">http://www.forbes.com/sites/jonmatonis/2013/06/23/bitcoin-foundation-receives-cease-and-desist-order-from-california/</a><span style="color:rgb(38,38,38);font-family:arial,sans-serif;font-size:13px;line-height:16px;background-color:rgb(255,255,255)">  </span></div>

<div><span style="color:rgb(38,38,38);font-family:arial,sans-serif;font-size:13px;line-height:16px;background-color:rgb(255,255,255)"><br></span></div><div><br></div><div>James</div>