I agree. Have these guys done any legal due diligence on any of this? Any lawyers care to chime in? I thought you couldn’t do this in many states without a money transmitter license.

Also, does this constitute financial advise? That’s also a big no no in the USA. The CoinTracker guys (current yc batch who make an app for tracking crypto) mentioned that as a reason for not offering a portfolio management product right out of the gate.

Also doesn’t stripes terms of service basically prohibit this? I bring this up because in the interview they say the following:

“What platform/tools do you use for your business?

Stripe for payments”

This is what Stripes TOS says:

“By registering with us, you are confirming that you will not use the Service to accept payments in connection with the following businesses, business activities or business practices.”

“Virtual currency that can be monetized, resold, or converted to physical or digital products and services or otherwise exit the virtual world (e.g., Bitcoin); sale of stored value or credits maintained, accepted and issued by anyone other than the seller ”

https://stripe.com/ca/prohibited-businesses

I think this is a cool idea, I’m just not sure if they are going about it in a compliant way. If they are doing the right thing they should stick a FAQ up on their launch page ASAP.

Assuming they are doing this legally I’d also love to know how they are handling taxes when they buy these 100 currencies. I.e when you buy alts using eth/btc that’s a taxable event. How do they factor that into the pricing.

Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms. Which banks have no issue dealing with crypto related businesses? Anyone know what banking partners Coinbase, Gemini, Bitpay etc use?

> Kind of a bummer that none of the mainstream payment processors allow crypto related businesses on their platforms.

Surely you're not surprised? Credit card chargebacks make it virtually guaranteed that widespread fraud would occur.

"Have these guys done any legal due diligence on any of this?"

Something, something, move fast and ask for permission later.

In all seriousness, what is the worst that could happen to these guys?

"In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000."

https://www.irs.gov/newsroom/irs-reminds-taxpayers-to-report...

I'm not their or your lawyer and this isn't advice it is just one among what I assume are many possible examples of penalties that have been asserted for those who are messing around with coins without really thinking them through. I don't know who is doing their taxes or legal prep, maybe they've got this all covered, who knows.

UPDATE: They reply in another comment that they've been advised to avoid US sales for the time being. Makes sense.

> Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does.

I look forward to the "How I lost $32,000 selling crypto-USBs" after the fraud claims and chargebacks are filed.

Thousands of smaller transactions. You are buying USB keys with a set amount of Crypto. They can just assume 10% scam ratio and rise price by that.

If scamming something like this is possible, the scammers have an incentive to scam as much as possible, so the "scam ratio" will tend to grow to 100% quite fast unless there's a huge amount of legitimate business.

I don't really think this is true in practice. There is a risk to scamming, plus even with zero risk not every customer would choose to scam them (given morals/etc).

It only takes one sophisticated scammer to make the "scam ratio" close to 100%.

If that would be true, then Ebay, Amazon, Etsy etc. would have no right to exist in the world.

The difference may lay in the years that those you named had to adjust and readjust their countermeasures and learn from their mistakes ( up to a point ).

Hi, this reply is completely irrelevant to the subject matter, but i couldn't directly send you a message so this is my only option. quite a while back in a topic regarding bitgrail losing 170m you submitted a link to the bitgrail trollbox chat log in here

https://news.ycombinator.com/item?id=16355342

but unfortunately the link no longer has file, is there any chance you still have the chat log? i would be incredibly helpful.

Thanks

At this stage, as long as you are using a company like Stripe with enabled full transaction review settings, you can tap into this countermeasures (or even better) with few clicks.

> Err.. aren't these guys going to run into regulatory problems? You need a license to sell this in the US.

We've had some conversations with our legal team at Cooley & some conversations with outside counsel at Goodwin Procter. They have not been able to reach consensus on whether we fall within regulatory oversight. Until then, we're not going to be selling anymore in the United States. It comes down to whether this is art or a collectible or not. We're working on it & have stopped sales for the time being. :)

> Not to mention selling crypto with credit cards is a great way to go broke unless you own the keys like Coinbase does.

This is a fair point, there is actually trust on both sides of the relationship here - we're trusting that our customers will not chargeback & they're trusting us not to steal their keys.

> Also, why would you trust the keys they are sending you? Having someone else generate a wallet for you then sending it to you via a USB key sounds very very bad.

We originally thought so as well. When we sold a bunch we were surprised & started talking to our customers. It turns out, they don't want to go through the hassle of finding a wallet creator, disconnecting their computer from the internet, generating a wallet, writing down private keys or mnemonics & securing them.

You can think of this kind of how car dealerships don't run their own mail servers anymore or pizza places don't run their own instance of a bind DNS server. They want the convenience of not having to worry about it.

We're currently working hard on a v2 that makes it a bit more secure while maintaining usability.

> I don't get this.

We really didn't either, but the people that have trusted us with their money helped us understand this: Everyone who is working on cryptocurrency projects is suffering from the curse of knowledge [1] - most of them don't care about the end user.

1. https://en.wikipedia.org/wiki/Curse_of_knowledge

Glad you guys got a lawyer to look into this. Thread very carefully with crypto, taxes and the US government. Good luck.

> we're trusting that our customers will not chargeback

I remember when I was young once, too.

> You need a license to sell this in the US.

I think Dr. McCoy said it best: “There aren't going to be any damn permits. How can you get a permit to do a damn illegal thing!”

You sound like a doctor not a miracle worker!

>You need a license to sell this in the US.

I'm not sure if you do. How is this any different than "buy X product for $50 and get a $5 mail-in-rebate via AMEX gift card"?

crypto is just like pizza and has nothing to do with currencies in the US, no?

almost certainly going to run into regulatory problems. As the former head of an former MSB, I did not enjoy the experience.

> regulatory problems

They should be more concerned about federal prosecution for fraud

> I don't get this

Because it is a scam