Re: New crypto regs outlaw financing non-US development
Lucky Green writes: [snip] Finally, to the big one:
Sec. 736.2 General prohibitions and determination of applicability.
* * * * * (7) General Prohibition Seven--Support of Certain Activities by U.S. persons--(i) Support of Proliferation Activities (U.S. Person Proliferation Activity). If you are a U.S. Person as that term is defined in Sec. 744.6(c) of the EAR, you may not engage in any activities prohibited by Sec. 744.6 (a) or (b) of the EAR which prohibits the performance, without a license from BXA, of certain financing, contracting, service, support, transportation, freight forwarding, or employment that you know will assist in certain proliferation activities described further in part 744 of the EAR. There are no License Exceptions to this General Prohibition Seven in part 740 of the EAR unless specifically authorized in that part.
IMHO, this closes the door on the foreign contracting loophole used by C2 and others. It is now illegal for US persons to finance or contract out overseas crypto development, since doing so will obviously assist in proliferation. While not unexpected (I offered a bet on Cypherpunks that this would happen. Nobody took the bet.), this provision sets a dangerous precedence. The technical assistance prohibitions of the past have been transformed into general prohibitions against "financing, contracting, service, support, transportation, freight forwarding, or employment".
Again, IANAL.
If they have not already done so, those currently doing work for/with C2 can form an off-shore company to manage and develop the crypto work. This off-shore company can then sell shares (private/public) to citizens and companies (both foreign and domestic) and use the proceeds to develop the software. Some of the investors (e.g., C2) could be offered the opportunity to become distributors and support the products in their respective countries. I doubt the Executive order can be interpreted to mean U.S. citizens cannot purchase stocks of foreign companies engaged in crypto. There are many companies (e.g., NEC, Siemans, Philips, ect.) which engage in development of crypto equipment which would not be exportable if they were produced in the U.S. Can the gov't deny us the right to invest in these and other offshore companies? Since those working for C2 are already doing so offshore (e.g., Australia and England, I believe) these parties would only need to separately incorporate an entity to conduct that portion of their current business now under contract to C2. --Steve
On Sun, 29 Dec 1996, Steve Schear wrote:
I doubt the Executive order can be interpreted to mean U.S. citizens cannot purchase stocks of foreign companies engaged in crypto. There are many companies (e.g., NEC, Siemans, Philips, ect.) which engage in development of crypto equipment which would not be exportable if they were produced in the U.S. Can the gov't deny us the right to invest in these and other offshore companies?
You doubt but are you sure? Potential investors are unsure as well. The executive order has a "chilling effect" on such investments, and could affect their actual stock value. The idea strikes me as an attempt to slow strong crypto development so U.S.-sponsored escrow alternatives can be put into wide deployment. It may also be a "trial-balloon" to see if the USG can get away with deny individuals and corporations the right to invest in "non-approved" technologies. The current administration is hell-bent on imposing any limitations it can. All this makes me wonder why there is any doubt that this country has devolved into a near police-state. Compromise away your rights and you get what you deserve. _______________________________________________________________ Omegaman mailto:omega@bigeasy.com PGP Key fingerprint = 6D 31 C3 00 77 8C D1 C2 59 0A 01 E3 AF 81 94 63 Send e-mail with "get key" in the "Subject:" field to get a copy of my public key _______________________________________________________________
At 2:27 PM -0600 12/30/96, Omegaman wrote:
On Sun, 29 Dec 1996, Steve Schear wrote:
I doubt the Executive order can be interpreted to mean U.S. citizens cannot purchase stocks of foreign companies engaged in crypto. There are many companies (e.g., NEC, Siemans, Philips, ect.) which engage in development of crypto equipment which would not be exportable if they were produced in the U.S. Can the gov't deny us the right to invest in these and other offshore companies?
You doubt but are you sure? Potential investors are unsure as well. The executive order has a "chilling effect" on such investments, and could affect their actual stock value.
And I think that a prosecutor who _wished_ to make an example of someone could use the new regs to indeed go after someone who made an "investment" in the stock of a foreign company! An investment is clearly exactly what the regs mention. Now, obviously, all prosecutions have _costs_, and prosecution of someone for buying $10,000 worth of stock in a large European or Japanese company doing frowned-upon crypto work would be unlikely...unless that person was Phil Zimmermann or someone else the feds want zapped. But many investments are for much larger amounts...if someone invests $200K in the stock of a company doing frowned upon work, the government might well decide to prosecute. That the regs clearly give them the authority to prosecute is the key. The essence of a terror state is that one never knows when the hammer will fall. This "FUD" (aka "random reinforcement") keeps the sheeple in line. --Tim May Just say "No" to "Big Brother Inside" We got computers, we're tapping phone lines, I know that that ain't allowed. ---------:---------:---------:---------:---------:---------:---------:---- Timothy C. May | Crypto Anarchy: encryption, digital money, tcmay@got.net 408-728-0152 | anonymous networks, digital pseudonyms, zero W.A.S.T.E.: Corralitos, CA | knowledge, reputations, information markets, Higher Power: 2^1398269 | black markets, collapse of governments. "National borders aren't even speed bumps on the information superhighway."
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azur@netcom.com
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Omegaman
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Timothy C. May