 Today's episode of The Bitcoin Show is brought to you by Mt. Gox, M-T-G-O-X dot com, and Bitcoin Bonus, Bitcoin Bonus dot com, and Mezzy Grill, M-E-Z-E Grill dot com. Everybody, and welcome to The Bitcoin Show. This is episode 44, and we are back from Tokyo. We had an amazing week of shooting onsite in Tokyo, Japan. I wanted to surprise you guys. I know I gave you a little sneak preview via Skype because I thought I'd fallen off the radar or something, but we got some amazing, amazing footage at Mt. Gox, at memory dealers out on the town in Japan, talking to the local Bitcoin community in Japan, and can't wait for you to see that. We're still editing it because we want to make it perfect, and probably the very next episode you see will be that, so stay tuned for our next episode. Today, though, we have a really special guest with us. His name is Matt Hutchins, and he is an attorney at law graduate of Harvard Law School. He is someone that we met actually at the Bitcoin conference and World Expo in New York here, and we were talking about the Bitcoin legal think tank. So our conversation actually began there at the conference, so welcome, Matt. Thanks, Bruce. It's great to be on the show with you. Sure, and you're living in New York now and getting ready to relocate to California? That's right. I've been working in New York. I'm moving to Los Angeles, and I was really glad I had a chance to meet you at the conference and to speak with you and Gavin and all the other hot shots in the Bitcoin world. And it seems like there are a lot of fruitful discussions that are going forward on the basis of what was said at the conference. Yeah, it's amazing, right? And you know, I don't know, well, as I was telling you at the conference when we talked about this, well, I remember we met actually at Hudson-Eatery the first time. That's right. Yeah, and I was sitting there, and I was like, wait a minute, did somebody say he's a lawyer, an attorney? Wait a minute, wait a minute. And then at the conference when I stood up and said I was a lawyer, I noticed people's ears peaking. Oh, we're lawyers. We're looking for lawyers. Yeah, we're recruiting. And then I definitely noticed that no one else said they were lawyers, so. Isn't that interesting, right? So I had, you know, a way, way back, you know, we went to meetup.com, which I recommend anyone who's interested in, you know, developing friendships and connections in the Bitcoin community, go to meetup.com. This is not a commercial, they're not a sponsor, but meetup.com is a great, great tool for networking. And so I went to meetup.com and created meetup.com slash Bitcoin, which is the New York Bitcoin users group. The first one. Yeah, meetup is great. It was a great thing. And actually, we'll talk about that tomorrow, but I had them do the same thing in Tokyo. So now there's one in Tokyo and Pittsburgh or Philadelphia are all over the place. So anyway, there's dozens of them now. But anyway, as a result of the meetup, this monthly meetup, we have these spin-off groups that have started and they're emerging and kind of mutating. But the hackathon, which was a weekly thing going on for quite a while until all the developers got recruited and now they're all employed. So, you know, they don't volunteer as much when they're getting paid by multiple projects, it seems. And then the promotathon, which is similar, you know, people just get real busy. But the other one was the Bitcoin legal think tank, because I wanted to try and find attorneys who were really interested in all the various aspects. The legal implications of Bitcoin are at least as complex and fascinating, if you're into that sort of thing, as the technical aspects. But they're technical, they're both technical, but in very different realms. That's right. And one is extremely logical and the other one is extremely legal. Well, we say the legal world requires its own logic. Yeah, it's logic. Right. And I have the greatest admiration for Gavin and all of the technical development team. Those are some very skilled men. And when I met them at the men is accurate because there really aren't that many women. That's true. But they are, they're doing a great service to the entire, really the whole internet by developing this technology that we call Bitcoin. But every new technology has implications that have to be sussed out on a legal side. And we're clearly already running into some of the issues that arise there. I wanted to come on the show to talk not about any particular application of the law to Bitcoin that we might consider something like advice, but more just to talk about why people should be looking for advice and why people should talk to lawyers and think about these legal issues, not just from their own perspective, but from the perspective of, so not what's the self-serving answer, but what's the right answer. And also what's the answer someone else might come to about this. It's difficult because I like this is one of the reasons why I mean, I propose this legal think tank. Oh, and by the way, the rest of the story about proposing this legal think tank was very fascinating because we didn't get a single attorney. I mean, what I did start to get, though, was I got contacted by law firms all across the country and even the world outside of the US who had been hired by startups or venture capitalists or whoever. They've been hired to research Bitcoin. So they start researching Bitcoin and they somehow find out that I mentioned the word Bitcoin legal think tank. And then they contact me and say, we want to pick the brain of your legal think tank. And I'm like, well, guess what? You're it. You are it. There isn't one. So now we have Matt Hutchins. They're legally tank. But we'll talk more about that later. We do want to cultivate at least some thought on these topics because there's obviously a real shortage of knowledge. And I also understand that at least my understanding is that the way it's sort of working is we're looking at laws, if you forgive the analogy, for the 1800s stage coach transportation laws and trying to apply them to Star Trek teleportation that was just invented yesterday. And how does this fit when it comes to picking up horse dung on a public crosswalk? It just doesn't apply. So we're taking old laws and applying them to something brand new and revolutionary that's never existed before. That's a fair way of characterizing the way that these sorts of things develop at first. In a certain sense, the way people should think about legal questions is the way that Sherlock Holmes would approach a mystery, which is, what are all of the possible solutions to this problem? And then which one actually happened? So eliminate all of the impossible ones and we'll find the correct answer. And with legal questions, we have to think about all the possible answers to a certain legal question and think about the exact words that are used and think about how could these words be viewed by one person or another person and what are other ways that they might, the particular way that things are worded, how could that be important? And also in an abstract sense, how does this feel? And what are the various perspectives people might have? And then which one do I believe is correct? Which one serves my interests the best? And which one is most likely to be viewed by any particular third party, such as a regulator or a prosecutor? And those are people that we should be thinking about. And also, again, I'm a total layman. If I'm not mistaken, words have a common lingo, street conversation out on the street, meaning, but then there's a legal definition that can be completely different. So people can refer to Bitcoin as a virtual currency. Is it virtual? Is it currency? OK, if you go to bitcoin.org and it says currency, therefore it's legally a currency? Well, no. I mean, the legal definition of currency can be completely different. And if I'm not mistaken, it can be different meaning state by state, country by country, and so on, right? That's a good point. If you take, for example, the recent French decision that's generated so much interest in the Bitcoin community, one of the areas that was argued is whether or not Bitcoin is a currency. Because if it is considered a currency, then certain legal regimes apply. But if it's merely a form of property, which is intangible, then different forms of legal regulation would apply. Now, that question is, first of all, it's hard to get a hold on exactly what elements of something make it a currency. There's the question of whether it's a store of value that people can hold. And for example, I do work. I get paid in something. I hold that, and I use it to spend later. That's a store of value. People used precious metals like gold for that. You could use anything for that, really, as long as you feel that later on someone else is going to be interested in taking that from you. Gold is commonly accepted as a store of value. But the actual use of gold is not that functional. Jewelry is attractive. But people are drawn to gold mostly because of the color and its historical use. I always point out that there are more retailers in Manhattan that accept Bitcoin readily than gold, perhaps. Outside the Diamond District. Outside the Diamond District, right. Unless they're actually, you know. But I mean, for normal, ordinary commerce standing in line, yeah, it's just not traded like that. And it's not invisible and convenient and so on. So in terms of a store of value, we definitely see people using Bitcoin for that purpose. And in a lot of senses, it's better than gold because it is easier to transfer. It's potentially more secure because you could memorize a password to an encoded Bitcoin address, which is stored in a secure place. And then no one can get that without having the password that only you know. They do that with gold, that's true. Someone could deprive you of access to a secure file and keep you from getting your Bitcoin. But it would be hard for them to actually take possession of your Bitcoin that way. You can also make, if it's encrypted file, you can make a million copies of it. Even then, it's pretty hard for them to deprive you of it if it's distributed all over the place, right? Right. But then there are other aspects of a currency, such as its use in economic transactions. Bitcoin is being used for that sum. But it's not really taken off. People are very optimistic about the Bitcoin economy. And the infrastructure is still being put in place to make that possible. And one of the most important aspects of a statutory definition of currency would be that it is a national currency. It's being issued by someone. Right, issued by anyone. So for example, if we look at a country like, I guess, Bermuda, Bermuda has the Bermuda dollar. Now the Bermuda dollar is one for one with the US dollar. And so Bermuda is effectively on the international gold standard of the dollar. But they have their own currency. Which is not really a gold standard, literally. Sure, yeah. But the reserve standard, Bermuda knows that they have foreign currency reserves in dollars. And anybody in the whole world is going to take that. And although, of course, as people like to point out, the Federal Reserve could just print dollars, every time they've done that, they've taken them back out of circulation. And so it's been a very reliable central bank. And there's a good reason for that, in that there's a reputation to be held, as we've seen lately, that could be put in danger. Bitcoin has certain attractive characteristics for a lot of these elements, in terms of being a store of value, being transferable. It has not yet been used as a national currency, but it could be. It could be, right? It could be. Some give a small nation like, was it Iceland or something decides to make it a national currency? Maybe they would peg their currency to the Bitcoin. Maybe they would. How could they do that without issuing it? Well, they could simply abolish their own currency and say, Bitcoin is now our national currency. Now, there's an interesting question. How would that affect the legal status of Bitcoin? So an arbitrary action by some nation state that isn't within anyone's control, could that suddenly change the legal status of Bitcoin? Tanzania could do it. Anybody could do it. Any country could do it. And it might even be a play by some actor in that country. Who knows? There could be reasons it might happen. For the good or for the bad. So that's one reason that we have to look beyond the words to what's actually happening. One reason to think that Bitcoin could be considered a currency is that there are exchange markets. So functionally, it's being treated in the same way that a currency is treated. Yeah, but the same is true for wheat and beans, and isn't it anything that not everything with an exchange market is a currency? True, but let's say I buy futures on wheat, which usually you would buy futures. Those are usually traded on a particular exchange, and it's a contract that's unique to that exchange. Let's say I actually buy the commodity itself. Then I have it, and I have to sell it to someone in another place. People don't generally just give you money for the commodity. You have to find someone who's willing to buy it from you. And so sure I could give, I could enter a contract that somebody else now owns my 100 tons of wheat, and they accept delivery in the Port of Long Beach in Los Angeles. And then it's their responsibility to ship it somewhere. But that's just the same thing as selling it to them. And I'm probably going to take a hit on it because I'm not putting it in their hands. Bitcoin, on the other hand, all I have to do is just send it to them. And it's electronic, virtually zero transaction cost. So it's very fluid. It's fungible. It's divisible. And it is readily exchanged into currency all around the world. Let's say I had a large amount of Japanese yen, and I wanted to change it into dollars. I could buy Bitcoin with my yen, I could send it to the US, and then buy dollars with my Bitcoin. So it acts as a medium between different currencies. Yeah, a medium between currencies and a medium between geographic distances, national boundaries. It's so unique. So let me ask you this because I'm confused. What are the basic legal definitions? Don't feel bad about being confused, Bruce. OK, I think it's very, it really admitted it. It's a confusing thing. And anyone who says they're not confused by it is lying. No, it doesn't know enough. It doesn't know enough, right? If they're not confused, then they should be. OK, so, but OK, let's start with this. What are the possible legal, because we're talking about the legal definition of what is a Bitcoin or Bitcoins, the plural. It could be like, you call it a statutory definition. Is that what you called it? So could it be a currency? It could be a store value? Is there a long list of possible things that it could be defined as by any particular jurisdiction or regulatory body or prosecutor or whatever? Well, some of those ideas were explored in the proposed paper, the draft paper that a certain Yale student, a law student, put on the, believe you put it on the Social Science Research Network. And that paper got a good bit of attention. I disagree with some of his conclusions, but it illustrates that there are a lot of possible boxes in which Bitcoin might fit. And they're not necessarily mutually exclusive. On the one hand, you have the extreme characterization of it as a security. I think that's a very dubious characterization. I think that securities generally have an issuer and represent a stake in some sort of a business. Like a stock? Yeah. A stock is a security? Bitcoin doesn't really resemble a stock at all. You know, it's much more of a commodity, but in the sense that it's more like owning a ton of coal that's sitting in a train car somewhere in the world and that people can swap ownership rights to that object. Then it is that you say own 1,000th of a percent in Microsoft and that the value of your stake in Microsoft is dependent on the value of the company. The company is a whole lot. Yeah. And necessarily on their future earnings. Right. There are no future earnings in Bitcoin. No. That would be split up among stakeholders. Right. And so then there's the stored value question. That's certainly an attractive definition to slap on it because it looks a lot like things that are stored value. Let me ask you this. I'm sorry to interrupt. The stored value, is that what we would refer to as a gift card, like a Starbucks or a Best Buy gift card? That's what my understanding of stored value is. Now, I'm not an expert in that area, so clearly we're just speculating here as to what any particular person might think of Bitcoin. But Bitcoin is not a contract or any kind of amount which you could settle later. When I buy Bitcoin, I don't expect to have a claim on a particular fund. For example, a gift card. Technically, you're putting money into a fund that will sit there until you come back with your claim and take your part of that fund and usually transfer it to a designated merchant. So one of the benefits, for example, buying a Best Buy gift card is that they might have the right to go ahead and book revenue on that amount because there's no right to a refund of your credit at Best Buy. And so merchants like that because... A lot of advantages for them. You might lose the card too. But then you have a relationship with both Best Buy and the financial company that's holding the money. Oh, it's not Best Buy. I always assumed it was the actual retailer that depends on the case. Probably not. Probably not, yeah. But with Bitcoin, you don't have a relationship with any particular person because you're holding the Bitcoin. There's no issuer. You can't go to Gavin and say, hey, give me my money that I paid. I tried that. He just laughed at me and hung up. Called Satoshi too. Didn't work. So yeah, there's no issue. Again, there's no issuer. There's no fund. There's no, it's just this, what do you call it, intangible? Yeah, it's sort of an electronic commodity. But even that, the closer you look at it, the more slippery Bitcoin is because you don't really attach yourself to Bitcoin. Owning a Bitcoin is really more a matter of having the power to transfer that Bitcoin to someone else. Or rather, since the person you transfer to will not possess it any more than you, then it's a matter of having the power to give someone else the power to designate another person who will have the power to hold it. And so, right, it's a whole chain. It sounds so funny when you say it like that, but it's true. That's exactly right. It's the blockchain. The blockchain is a matter of attaching one ID to a portion of a Bitcoin that was issued in the past. Some new entry on the blockchain. And there's only one person who has the authority to assign that block, that little portion of the block, to the next person who will then have the power to assign it to the next one. And so, when we look at it, you really are the owner of your key. Control. It's a key. You're not really holding a coin, you're holding a key to the coin. Yeah. You own your key in that you possess it and keep it secret, but then your key has a fluctuating value. I've heard somewhere another possible definition is something to do with intellectual property. Is it intellectual property? And what would be, the other thing is, okay, if you call it a currency or... It's open source. Yeah. Well, but I mean, the actual private key is not. That could be considered intellectual property that you own because it's your private key. I don't know. But okay, the other thing is, okay, aside from the definitions, which I'm sure there are more, but a currency and a commodity and all these different things, all the way to security to intellectual property. I wanna let you continue discussing those, but the other thing is, what are the implications of that? For example, if it were deemed by, and this is another thing, in completely different jurisdictions, like in France, it might be considered this. In Ohio, it might be considered that. It's gonna be a mess, but if it's deemed a security in Arkansas, there are existing laws that applying to security that suddenly apply to Bitcoin. Or if it's deemed to be intellectual property in Malaysia, there's gonna be intellectual property law that suddenly, like that, applies to Bitcoin, right? Right. So there are several different legal regimes that I'm sure a lot of people are concerned about. State money transmitter laws are right at the top. And that is a complicated area. I would certainly, so one of my favorite things to say is, I'm not your lawyer, but I can tell you that you should have one. And I can recommend a lawyer. I highly recommend people who are in my profession. Yes. Because we are hard to understand and we have our own little language. It's called the law. And it's hard to understand in general. But aside from state money transmitter laws, the Bank Seekers Act is one of the big elephants in the room. And... Is that the know your customer part? Or is that just a part of it? No, as far as I know, know your customer is... Patriot. Yes. Know your customer comes in with the Bank Seekers Act, but there are other parts of the law that interface with the Bank Seekers Act to create that. Okay. And so, the key part of the Bank Seekers Act, which creates that responsibility is the need to register with FinCEN. And so, what happens is the act itself creates the authority in various federal agencies, Federal Reserve is part of it, to promulgate regulations. The regulations are enforced by FinCEN. FinCEN is a super agency organization that connects with various government offices. And FinCEN requires reporting of certain transactions, including the anti-money laundering requirements. So, know your customer is like a subset of anti-money laundering. And anti-money laundering laws through the Bank Seekers Act are certainly a problem for Bitcoin in that if you are subject to the Bank Seekers Act, you need to be collecting that information from your customers. Now, how do you get there? Currency exchangers could be subject to the Bank Seekers Act. That's one possible way of getting there, but the statutory definition of currency, as far as I remember, or the regulatory definition, goes back to this concept of national currency. Now, when you say currency exchangers, you mean one currency for another currency? Because if I'm selling baseball cards, that's not a currency exchanger. I'm selling baseball cards for dollars. If baseball cards are not a currency, but if it's currency for currency- But FinCEN regulates dealers in gold in the same way that they would regulate a currency exchanger. So, they might look at what you're doing and say what you're doing is similar enough that you need to be a member of the FinCEN network. You need to be registered with us. And you need to be reporting certain types of transactions and complying with any money laundering laws. There's the rub. It sounds arbitrary. Like they just decide this. That's the problem with these things. I say there should be an agency that you could go to with a proposed business plan and get them to advise you to say this is legal or this is not legal. Well, that's the role of lawyers in our system. That's the role of lawyers in that. But they won't guarantee anything is legal. They'll guarantee certain things are illegal, but they won't guarantee anything is legal. Right? Well, that resembles what's happening with this French decision. Because the French court, going all the way back to where we started, said that as far as I could tell, my French is a little rusty, said that the bank which closed that account acted improperly. But it didn't decide the underlying issue of whether Bitcoin is a currency or whether it is some sort of electronic asset. It doesn't seem to have definitively decided that. That seems to still be an open question that could be reversed. It was more, I think, and I'm not trying to give anyone advice on this, but just saying that they appear to have made their ruling more on the rights of an account holder. They're saying that it was their right to have time and notice. And that's certainly one avenue that you can use to defend your own rights whenever they're implicated by a relationship like with a bank is, you can say, maybe you disagree with me about this, but we should take this question in front of a court and you should give me an opportunity to defend myself before you do anything which might affect my business. That's a good time to have a lawyer. But, and it's good to have a lawyer say that to them because lawyers also know how to communicate with business people in a way that is less, well, okay, I won't say less adversarial, but maybe less confrontational or at least less emotional. They speak the same language. Yeah, yeah, maybe less emotional. And saying like. Let's prone to misunderstanding, I guess. Right, right, just saying like, we have rights, you can't stomp all over them. So going back to where we were saying about the Bank Secrecy Act, one of the ways that you get stuck in the Bank Secrecy Act could be if Bitcoin is a currency. There's another issue that comes up though. So we mentioned state money transmitter laws. If you look at, so one of the important legal decisions or legal cases that involved electronic currencies is of course the EGOLD case. And EGOLD was prosecuted under the Patriot Act for not being a registered money transmitter when they should have been. And so that's part of. That was state money transmitter laws. So state money transmitter law could be the basis of the federal prosecution under the Patriot Act. And the Patriot Act looks to many different sources of law. State law is one of them. The Bank Secrecy Act is part of that. The Patriot Act also can cause you to be subject to the Bank Secrecy Act if part of your business is related to an informal value transfer system, IVTS. So informal value transfer system is traditionally associated with a Habala or a black market Peso system. And there is an argument to be made that Bitcoin is a perfect incarnation of that. Like an electronic ledger that's right. Does it need to be centralized or to be defined as that? Maybe not. See that's the thing is there are ways to distinguish it. I would argue that Bitcoin is not an IVTS in the traditional sense, but the words informal value transfer system. They have this sort of vague and menacing sound to them. What the hell is that? Your baseball cards could be called that. Right. Anything could be called that. Right. So that's exactly the point. If anything can be called an informal value transfer system, then somebody might try to use it to call it that. Makes sense. So it comes back to do you really want to take a chance and shouldn't you be thinking about avoiding the wrath of a prosecutor instead of trying to placate one who is already angry at you. Exactly. I was obviously, you know, I was in Tokyo recently and I was sitting right there next to Mark when he got the call from the lawyers in France in Paris. And I want to tell you how he explained it to me. So, but first, right? So stay, stay tuned right after this because I want to thank our sponsors. And if it weren't for them, including Mark, Mt. Gox, obviously, Mt. Gox is the largest and oldest Bitcoin exchange site. If you want to buy or sell Bitcoin without leaving your easy chair, just get on your lap type and type in mtgox.com, Mt. Gox.com. They also now have a new site called Bitcoins with an S, bitcoins.com, which is in development, it's like in beta at this point, but it's going to be the new portal site for Bitcoin beginners, people who don't know anything about Bitcoin, they can go there and learn about Bitcoin and get set up. They can actually buy Bitcoin and they don't even worry about the dollars. It immediately, whatever they buy immediately turns into Bitcoin. So it's a real slick new service for Bitcoin beginners, but for traders in advanced functionality, it's still Mt. Gox, mtgox.com. Like I say, they have a vast majority market share, they're in it for the long haul, and they have two-factor authentication, which means you get a little USB device that's really affordable. And it's a little tiny, tiny thing that fits in your key ring, kind of like one of those little drugstore barcode things. It's really tiny. In fact, it was so thin, I thought it was a printed image on the actual paper when I got it, but it peels right off. But it goes on your key ring, you stick it in the USB port, and it actually types in a unique password that's only good for one second. So your computer can be full of viruses, and it doesn't matter. The virus can't capture the wallet file because your Bitcoins are on Mt. Gox, and the virus can't capture the password because it can capture the password, but it's only good for one second, so it's useless to the thing. So that is a brilliant advancement in security. We thank Mt. Gox for all of their support of the Bitcoin show, bringing us to you every day. And bitcoinbonus.com. Bitcoin bonus is a real cool service that we actually discovered way before they became a sponsor. They contacted us and decided to become a sponsor, but I had already been hearing about it from people who buy things online on a regular basis. You can buy from Dr. Frugal here, shops online at, what is it, Best Buy, and all the major, buy.com, and all the major online retailers are there, including web hosting. I heard from a web designer who sets up hosting accounts for his clients several times a week, and every time he sets up a hosting account, he gets this big booty of Bitcoin. So it pays you back in Bitcoin for shopping online, doing the shopping that you're doing anyway. The trick is you gotta remember, so whenever you're about to check out, whenever you're about to click that checkout button, go, wait a minute, let's pop over to bitcoinbonus.com and see if they're on there. They probably are, chances are, because he's adding new vendors all the time, and you just click the link through that and you're gonna get a kickback in Bitcoin. So we thank bitcoinbonus.com for sponsoring the Bitcoin show. And, Mezzy Grill, of course, the, everybody knows Mezzy Grill is so famous, not only for being the world's first restaurant that, Brick and Mortar restaurants, if there's any other kind, that accepts Bitcoin, they also sell Bitcoin, and they're open seven days a week, breakfast, lunch, and dinner. We're authentic Mediterranean food meets modern flavor. It's delicious, that's the bottom line. It's very, very healthy and delicious. So if you're in New York, or you're passing through New York, ask anybody, where's Columbus Circle? And then it's three blocks south of that. That's a tourist destination. Anyway, everybody goes to Columbus Circle, you'll see the site of the southwest corner of Central Park where all the films are made and you'll recognize all those scenes. Just walk a couple blocks south and right there on the left, Mezzy Grill. mezegrill.com and we thank Marwan at Mezzy Grill for sponsoring the Bitcoin show. All right, so we're back. Now I want to tell you this, this is about the French case. I was, it was so cool because after hours, I got really some really good quality time in there with Mark because everybody went home for the night in the evening and Mark's sitting there, the hacker that he is hacking away and I would sit right next to him and ask him questions and try not to bother him, but pay attention to what he was doing and learn. Really cool. And at one point, I'm trying to think it would, I can't remember if it was in the morning or at night, but anyway, the phone rang, the phone on the desk rang and he goes, that's France. So he knew that that was Paris calling and so that's the, because he told me like five minutes before, he said that they're gonna be calling any minute. This is the outcome of the latest outcome, I guess it's a continuing saga because they closed his account and they were ordered to open it again, they opened it, I think, and then they closed it again and just back and forth, back and forth, it's a continuing thing. From what I understand, he's really pursuing this primarily, at least one of the main reasons is because he's hoping that this will set a precedent that they'll be able to use hopefully in the rest of Europe and other places that it'll set some case law because that's what is needed, case law. That's a valid point. I think that he's to be commended for going to court over it and not just backing out and going around. Going away like they would like him to, yeah, right. And really, in order to defend your rights, you have to act quickly because if you let it get stale, then sometimes it can be hard to get back in the position you were in before. Now, in the U.S., I'm sure that people will be fighting the same fights. The French case will not really set a precedent in the U.S. So as much work as is done there, it'll all have to be done over and over again. So that's one wasteful aspect of early resistance. It'll be early martyrs, too, like the early pioneers, you know, many of the early pioneers died, sadly, you know. The Oregon Trail. Oh, yeah. Oh, what I wanted to say, though, this is, I'm sorry to interrupt, but I wanted to get this part out, is that he, this is one of the things that he told me was, the way he explained it to me was that it was a battle about closing our account and or leaving it open, their account, that is. And the French law, in French law, if a small business or any business needs a bank account to survive as a business, which they do, obviously, for the operation of their business, they are required to be allowed to have a bank account in France. So that's what this is based on. Now, so there's opening and the closing and the bank flying in the face of the judges, the court's ruling and now being fined per day until they open it and so on, opening and closing and so on. But the other thing was that the way he explained it to me was that the court had declared that no, you, bank, you are not the authority on deciding what Bitcoin is and it is not up to you to decide what Bitcoin is. That it's up to this other court or agency or whatever. So now I think that's been kicked over and now they finally have said that this other court needs to decide. So I think that it's actually spinning off another case. This is something which is potentially a unique feature of French law in that the banking system is regulated in a way in which these sorts of decisions are appealable to a government body. So that's one advantage that they're enjoying right now. Another thing which potentially applies here, I don't know anything about the French code itself, but there is a European electronic money directive which could color the interpretation of things. One of the aspects of the ruling which I noticed is that the French court said that there's no counterparty in this transaction and so that cuts against it being considered a form of electronic money. Is that the same thing as saying there's no issuing entity? Right. Okay. Right. And so the European E-Money directive makes it easier for an issuer to enter the business of creating an electronic currency that would essentially possess a lot of the aspects of Bitcoin, but maybe resemble more like eagled. And in theory, someone could use Bitcoin for that purpose. They could take the technology of Bitcoin, create their own blockchain, issue it out and do it one for one with whatever currency they want and just amass a fund of money that they hold in a bank account that people can come back and claim against. But it would be unlikely that people would be doing that because if they know that the electronic currency is as good as that currency, then they'll be happy to hold the electronic currency. Right. And so in theory, they would be putting more and more of that electronic currency into circulation and it would function out there just as money. So the Europeans are already ahead of the game on that. They're thinking in the future, they're thinking what's the next step for personal finance which is probably what that would be used for. In America, we don't have anything like that. In fact, our laws are very draconian in that area. I think I might have missed something in the explanation. This electronic money directive is a... That's a European Union level regulation. And it's a regulation. What is that regulation? It just defines what electronic money is. So it's difficult for me to say. I can't tell you that that's binding law in the entire European Union. It may be that that sets a standard that countries have to adopt but as far as I know, it creates a procedure set of guidelines and defines a certain type of activity which is known in Europe as electronic money. So it's a directive and it sets a procedure and so on but it's not necessarily law that's binding. That's it. So it's not all law is binding in the same way. Law is a universe of different interacting regimes and although there might be one form of law which applies in some circumstances, there could be other forms of law that would preempt it. So it may be that a European nation could individually enact a law which says that we don't honor this certain directive or they could refuse to enact it locally. So it's very complicated. Just like the US has state law and federal law, I can't tell you whether that would be binding everywhere but just the existence of that regulation would be likely to influence the definition of electronic money and currency. In these member nations. But courts are dynamic. One of the reasons we have courts is that it would be easy to avoid the law if there were not a human being interpreting it in that if everything was just defined in a code, in a book, and you could just look and see what is subject to a certain law and just those words applied, then you could just walk right around it. And so it's not that easy. And if it is Mount Gox that is involved in this fight in France, they might have a long and difficult fight ahead of them and that can be very expensive. Mount Gox is uniquely situated to bear a financial burden in the Bitcoin community and that they have the highest transaction volume and they are drawing a certain percentage of those into their own funds. But some of the smaller Bitcoin shops would not be able to afford the kind of legal fight that would be needed in order to get a judge to decide these kinds of questions and to survive the appeals. It's important that a judge decides these questions in one way or the other, just whether it's good or bad per se, of course, good or bad just depends on your viewpoint, but either way, it's good that it's decided so that people have some basis to make decisions on. Like they know case law basically that, okay, this has been ruled on before. So we can assume that this is the way it would be ruled on again, right? The thing about case law is that it's very much rooted in the facts. So on the one hand, that means that you may not be able to rely on one case when your facts are different. Another thing is that case law doesn't emerge until the facts are there. So, and a case doesn't just spring out of the blue. Cases are brought by parties for a reason. So in the case of this French dispute, it's entirely possible that the bank would just say, enough, we don't wanna fight you, that's it. And then they withdraw all of whatever has happened and there might not be any binding law that comes out of all this. And that's often what happens in these areas is that rather than litigate something to a binding opinion, especially large corporations will often avoid that and inter-settlements. In this case, it would just be not fighting anymore. So it could be a while before something actually ends up being decided as case law. And then like you said, the facts are different in every case. And even if the facts are exactly the same, if you're in different parts of the federal system, then the court could disagree with other courts that have ruled on the issue. And it wouldn't be ultimately decided till it reached the Supreme Court, which it might never get there. And so you might never have the kind of definition that you would want. This is one area of the law where, or one reason that the law can create uncertainty that will limit the potential for investment in new technologies. Big investors are very hesitant to get into something that's legal gray area. That's exactly right. And often they would rather develop their own competing technology that they can predict in which they can run under their own organizational umbrella because it's more controllable. They can defend it as part of their existing operations, a new product. And or it may be that they feel like something like Bitcoin, it's just too out there, too international, and too dangerous. Too uncontrollable. Right, right. I imagine a big company like Microsoft or Google or Apple would want total control of whatever it is they do because especially if they put their name on it. And for the same reasons that the Bitcoin community has a communal nexus effect where people's work gets shared and builds on everyone else's work. There's a free rider problem which is potentially implicated in legal fights in that let's say I invest $10 million in setting up my big business. And I spend another $10 million on litigating and defending my rights against Visa and Bank of America and PayPal. And I win all those fights. And then what's gonna happen the next day? Somebody else is gonna come along and spend $100 million and build a Bitcoin business that's 10 times as good as mine. So that's something to worry about, too. Wow, it's a wild spectrum. So where does this leave us? Oh, by the way, before we get back to that I wanna bring this up, that you are willing to and interested in. I kind of recruited you, I know. But for this Bitcoin legal think tank because you seem to be the first lawyer who has actually expressed an interest in exploring all these things besides just contacting me to ask the think tank questions. So I wanna appeal again, if you're watching this video and you are an attorney, anywhere in the world, right? It doesn't have to be the United States because this applies to the, it's a global currency. You can actually reach Matt at, what is it, Bitcoin legal think tank at gmail.com. You got it in there? So see right there. Bitcoin legal think tank at gmail.com. Send Matt an email and you're starting a mailing list and you'll be able to discuss some of these things in an interesting way, which is really, really needed. And then I'll have someplace to send these calls that I get from these big, big law firms. They don't know where to begin. They don't know who to talk to. Well, the stage that we're at right now is that there needs to be a conversation among people who have differing views. And through that dialogue that emerges, there will be a position staked out and a landscape will emerge. And then we can, as a community, start to form a sense of where Bitcoin stands and create a self-governance mechanism in which individual businesses either get certified by some sort of group that looks at the way that they're behaving. Or, more likely, they would adopt the principles of a community document, sort of like, the Creative Commons is out there as a document, which is then used by individuals to give certain rights away to their work. If we have a community document out there on Bitcoin. Like a wiki, like a legal wiki or something? Well, it could be that there would need to be an organization involved. And there are various organizations that operate in the electronic sphere. So it'd be good if there could be some imprimatur put on it. But maybe the first stage would be just having a white paper developed in the community. And then moving on to a set of self-governance principles. And then from there, possibly creating a certification system. And ultimately the goal of all that would be to get ahead of the regulatory game. So by defining the nature of Bitcoin and creating principles that everyone accords with, you can influence the view of Bitcoin that will be taken at a later time. And the community needs to actively be engaging in the dialogue that's necessary to explore the law, to examine the nature of Bitcoin and the way that it is being used. And to make decisions in a forward-looking way about what should be done and what should not be done. And there should be some mechanism of identifying those who are actually following certain principles and those who are not. But that's very difficult. And so that might not come until a later time down the road. But at least there need to be some guiding principles. Yeah, because like right now, I mean, until these issues are decided about what is Bitcoin, I mean, the basic idea is if somebody, you know, somebody, whatever, in name of state, you know, Missouri decides he wants to, whatever, he's a college student in Missouri and he wants to start his own Bitcoin exchange site. And now the software is free open source. Anybody can be a bank, scary. But anybody can open up an exchange site, for example. What kind of guidance can that person get? Because it depends on the, are we defining it as a currency? Are we defining it as, you know, this or that? You know what I mean? Like they're just really operating in the dark. And even if they hire the best law firm in their town, they don't know, they're gonna be calling you. You know, it's kind of like the blind leading the blind at this point, isn't it? I would, in a lot of ways it is. And I may have read some of these statutes and looked at some of these questions, but I know nothing about compliance with the Bank Secrecy Act. And that's what it comes down to, is do you or don't you? And registration with the state regulators as say a money transmitter, do you or don't you? And I think that's, those are questions that have to be answered on a case by case basis by individuals who are looking at their personal risks and considering what sort of liability they could face. And exactly what they're doing. So there are some ways in which you might structure your business carefully under the advice of an attorney so that you could make it clear to regulators that you are not a money transmitter. But you might speak with a lawyer who would say still all the same, you should think about the real risk that you're taking and look at e-gold. That was a very serious prosecution. Nobody wants to be indicted for a federal offense because even in indictment, even if you do not ultimately have any guilt in the matter, even if you successfully defend yourself, indictment itself is very damaging. And I would, anyone who disagrees with my ideas about talking to a lawyer and going to regulators, I strongly encourage them to read Harvey Silverglade's book, Three Felonies a Day. It is a case-based analysis of what federal prosecutors can do when they get a bug up their ass. And I think that Harvey Silverglade has written a lot about this. Which you're talking about that has an interview when we were sitting outside and you were taking it. Maybe I was, maybe I was. So Three Felonies a Day, pick it up, look at it, and think about it before you decide not to talk to a lawyer. It's cheaper to read a book than to talk to a lawyer. Yes, but probably one is a good prerequisite to the other so that you have an understanding of how important it is. Yeah, and it's just kind of mind-boggling, but it's a real, I call it a city full of warehouses of warehouses full of cases of cans of worms. It's just a huge, huge complex. And we're almost out of time, but I wanted to ask you this. When you talk about state banking regulations, just generally speaking, I know this is not specific, but in general, are they very similar from state to state or are they completely different? They're totally different. They're totally different. Some of them are based on a model law or here or there, but they can be totally different and deviate in unpredictable ways. So if you're doing anything that covers even just the whole country of the United States, you have to deal with these regulations in every single state that you deal with. Until we have a federal law that covers exactly this area, then there will not be any preemption and there is a crazy quilt of state law. That's the term sometimes. Crazy quilt, very apropos. I would just say this, that Bitcoin is very exciting and the people who are using it are doing, I think, really good things with it in that they're thinking about how to make transactions easier for individuals. In and of itself, Bitcoin seems to be legal to use and to hold and it's something that's out there on the internet, it's a technology. But the key choke point is going to be the exchanges and the places where cash meets Bitcoin. And that's- What about individual people, like junior high kids who have iPhones and they say, here's $5, here's $5 for the Bitcoin. I mean, they're doing the same thing where the cash meets the Bitcoin. Is that, I mean, it's a tiny scale. Maybe no one's ever gonna pay attention. Doing anything as a business can get you in trouble. But if you do it on a really small scale, then the law is generally more favorable to you and it also becomes a question of whether anyone would waste their time with you. But if you're handling large amounts of money and you think you might have customers that have rights against you, then you should definitely have a lawyer. Yeah, that's for sure. Okay, well, on that note, I wanna thank you, Matt, especially for stepping up and in a way, you're a leader now because you're the first founding organizer of the Bitcoin Legal Paytank. Right, I like that one. Yeah, you're the finest. You're the wildest, yeah. So everybody who's discussing this now is a pioneer because this is such a new thing and it's really cool to be on the cutting edge of whatever it is, whether it's good or bad, depends on your perspective and all that stuff, but it's really fascinating no matter how you look at it. Well, I like to think of myself as a Bitcoin wildcat that they're prospecting the legal terrain. There you go. Cool, so if you're a legal wildcat, definitely. Send an email to bitcoinlegalthinktank at gmail.com and also give us your feedback here at the Bitcoin Show anytime. We love to hear from you, bitcoinatonlyonetv.com, all spelled out. And thank you, Matt Hutchins, for joining us today, really appreciate it. It was great. It was really cool. All right, take care. See you all. Same time tomorrow.