Will Circle & Coinbase Close Your Account For Buying Knives & Selling Bitcoin?

Navigating the web of government regulation, and effectively implementing the procedures governments actually call for, is one of the biggest hurdles a new financial company faces in the modern age.

As global terrorism grows an increasingly common theme internationally, concerns over money laundering and funding potentially shady cells must play a daily role crafting policy and procedures for a new financial company.

Thus, sometimes things pop up which can be interpreted as limiting freedom, and company’s can be criticized. A Reddit user  last week noted a peculiarity he had found in Circle’s user agreement. Circle’s user agreement states:

There are a variety of reasons why you can’t purchase most weapons on the Internet in the first place. They are not our rules; they’re the federal government’s. If you’d like to purchase these items (that’s a knife), we strongly suggest that you go to a physical store and use a different form of payment. Otherwise, we will have to close your account.

It’s likely Circle’s view of facilitating the global sale of knives is similar to their take on marijuana, which they expound upon a bit more than knives:

We’re not trying to ruin your vibe. We’re simply bound by the laws in place, and we don’t want anything getting in the way of building you a great product.

Coinbase also bans  “Unlicensed sale of firearms and certain weapons,” under which such knives such as banned by Circle could be meant.

Circle is a consumer facing “Bitcoin bank”, as it marketed itself early on, “focused on transforming the world economy with secure, simple, and less costly technology for storing and using money.” The company provides mobile apps meant to enable greater ease-of-use in online and in-person payments.

Circle made headlines in May 2014 by offering new customers $10 in free bitcoins.

Knives have been a controversial tool in recent years, especially in England.

In England, police have organized to put an end to pointy knives. As the Lancashire Police posted on Facebook , they participated in a England-wide program to get knives off the streets.

In the US, regulation of knives has also received  some attention, but in a much softer manner than England.

As Circle replied to Cryptocoins News: “Anyways, as you probably know there are a lot of knife types out there (kitchen, swiss army, utility, fishing, letter opening) but we’re more concerned with those that are directly identified, or perceived, as weapons.”

Circle is merely doing what it believes it must in order to stay within the purview of laws by which it is governed. For instance, know your customer regulations make it explicit that a business operating in the manner of Circle, especially in the US, must take measures to ensure that its service is not being used to abet crime, in particular recurring crime, such as money laundering.

Circle has merely taken note of the global trend by industrialized nations to regulate knives in some manner. There is one thing both Circle and Coinbase have in common in terms of user agreements:

Circle:

Making money by selling coins.

There is a good deal of misinformation out there about this topic.

While it may seem innocent enough (and maybe even profitable!) to buy or sell bitcoin using a web site that connects you directly with people in your area, federal law classifies this activity as “money transmission.” All money transmitters, ourselves included, are required to register with the Treasury Department, verify customer identities and meet a variety of other requirements. Further, many states require licensing to be able to act as a money transmitter. As such, Circle is not able to provide services to any individuals who may be engaging in money transmission activity.

So, if you find yourself performing this activity, either with strangers or friends down the block, we will have to end our relationship and close your account.

Coinbase forbids the same on their list of barred practices:

Operating as an unlicensed money transmitter, money service, payment service provider, e-money, or any other financial services business which requires licensure, including but not limited to exchanges of virtual currencies, sales of money orders or traveler’s checks, and escrow services

So, it is true. Coinbase and Circle might ban your account on their websites for buying knives and selling bitcoins, as well as numerous other activities. Nevertheless, bitcoins peer-to-peer nature makes both of these activities possible.