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I've read several "stings" and raids for running unlicensed money transfer businesses for people buying and selling bitcoin on localbitcoins. All of the articles are extremely vague and don't explain exactly when it becomes illegal. Is there any direct source or any laws with numbers? Is it one transaction over $10,000 that's illegal, or anything adding up to $10,000 or just whoever the police feel like arresting that's selling a lot. 1 2 3 4 What about when someone buys with stolen money or money from illegal proceeds. Did you commit a crime if you sell bitcoin to someone and the money is stolen, or the gift cards are stolen?

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    There are about 250 jurisdictions in the world. Each of them would have different laws on that. Your question is way too broad dude. – Greendrake Jun 30 at 9:48
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When does it become illegal to exchange bitcoin for cash?

When the transaction purposefully skips the controls in place regarding anti-money laundering.

Generally speaking, the issue is not the mere involvement of cryptocurrency in a transaction, but the crimes a wrongdoer seeks to camouflage or conceal by means of cryptocurrencies. Such crimes typically involve money laundering, identity theft, stolen card numbers, and the like. As quoted in one of the links you provide, "[t]he use of bitcoins in the transactions is a new technological flourish to this very old crime".

Is there any direct source or any laws with numbers?

Apropos of your first link, mentioning that "a Florida judge threw out money transmitting charges against a bitcoiner" (see also here), I will point out that the court's dismissal of charges against that defendant has been reversed early this year. See State v. Espinoza, 264 So.3d 1055 (2019).

Although the judges' narratives of a case are questionable and/or sloppy and to be taken with a grain of salt, the appellate decision cites language from Florida legislation as applicable to virtual currencies (and, impliedly, cryptocurrencies). You will notice that the focus in the Espinoza decision is the interpretation of Florida Statutes in its sections 560.125(1) and (5)(a) (regarding unauthorized vendors), and 560.103(21), (29) (defining monetary value as "a medium of exchange, whether or not redeemable in currency").

As usual, each legislation may present subtle and/or fundamental variations. For instance, the court in Espinoza at 1065 identified that federal law is inapplicable there in that 31 C.F.R. § 1010.100(ff)(5)(i)(A) contemplates that "the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means" (emphasis added), and Espinoza's transaction(s) did not involve a third party. By contrast, the Florida statute does not allude to third parties in that transmission of monetary value, hence preventing the statutory sanctions from being preemptively foreclosed in the matter of Espinoza.

What about when someone buys with stolen money or money from illegal proceeds. Did you commit a crime if you sell bitcoin to someone and the money is stolen, or the gift cards are stolen?

That also depends on the jurisdiction and the facts of the case. In Espinoza, he was allegedly informed that the cash he received (or was about to receive) in exchange for bitcoins "derived from engaging in illegal activity and that [the buyer] was planning to use the bitcoins to engage in further illegal activity", Espinoza at 1058. The court highlighted the State's argument that "dismiss[ing] a charge of money laundering is improper because money laundering requires intent" (emphasis added), which is sanctioned by section 896/101(3)(c).

  • "When the transaction purposefully skips the controls in place regarding anti-money laundering." This still seems rather vague. If you only deal with verified users with an id submitted and state I'm not attempting to hide money is it no longer illegal to do it a lot with out a license? If I sell bitcoin every month to pay bills that could add up. The same warped reasoning was used to shut down bestmixer.io because they stated on their site that it could be used to hide the addresses, whereas dozens of other mixers weren't seized that didn't state that. – user5389726598465 Jun 30 at 21:47
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    @user5389726598465 It is illegal (regardless of your disclaimer of "not attempting to hide money") to the extent that such clandestine exchange knowingly eludes regulator's --rather than your-- monitoring. Also, it need not add up by way of periodic transactions. You will notice in Espinoza that the number or frequency of transactions are nowhere relevant. The mere fact that a transaction is a one-time event does not preclude its possible purpose of committing or abetting a crime (hence some of my criticism regarding the other answer's mistaken conjecture of "a one-off transaction"). – Iñaki Viggers Jun 30 at 22:34

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