Back in 2011 when the amazing and beautiful Casascius coins came to my attention it seemed obvious that the minted “coins” could be considered anything more than novelty. However, seeing as the Financial Crimes Enforcement Network (or FINCEN) has sent Mike Caldwell a nastygram regarding his business of minting the bitcoin-wallet holding coins citing his operation as engaging in money transfer he is shutting down while consulting a lawyer.

According to an article in Wired the news came from FINCEN just before Thanksgiving and Caldwell says that the letter told him the Treasury Department considered him to be money transmitting. And, in order to be a money transmitter in the United States there’s a great deal of legal hoops to leap through. In the past even foreign-based exchanges such as MtGox have fallen afoul of money transmission rules and had an account seized by the DHS.

Caldwell’s entire operation is bitcoin-based and he doesn’t accept US currency for the task, only BTC. After receiving the amount of bitcoins he mints a metal coin (for a $50 fee in BTC) and places a paper-wallet under a tamperproof hologram on the coins themselves and returns them via the USPS. Accessing the paper-wallet on the Casascius coin requires breaking the tamper-proof seal and using the secret key within.

The shutdown of his operation comes with a notice placed on his website:

Nov 27, 2013: For the time being, I have suspended accepting new orders, pending resolution of some concerns I have as to regulatory issues. I am anticipating a possibility of having to prequalify buyers, and am holding off taking orders until I know for sure.

For the unenlightened, Casascius Bitcoins are not actually “physical bitcoins.” They are instead novelty coins minted with the BTC symbol and emplaced with a tamper-proof paper-wallet that gives access to the bitcoins stored within. The coins themselves represent no currency and are not tender of any sort except for the metal and workmanship put into them. In essence: a Casacius coin is a pretty offline wallet.

The problem comes from the fact that Caldwell has no way of verifying that the person who sent him the bitcoins is the same person he his shipping the final product to. As a result, argues Faisal Islam, the director of compliance advisory services with Centra Payments Solutions, in the Wired article. By receiving bitcoins over the Internet, and then transferring access to those bitcoins via the USPS he could be in fact engaging in money transmission.

Not willing to run afoul of FINCEN, Caldwell has opted to complete out his current queue of contracts and shut down for an indefinite period of time.

[Image credit: An image of a Casacius Bitcoin from https://www.casascius.com/]