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."