Bitcoin miners and investors aren’t money transmitters, says FinCEN

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Bitcoin is the first cryptocurrencya form of money that uses cryptography to control its creation and management, rather than relying on central authorities. Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: In bitcoin mining money transmitter activities, FinCEN's decision would require Bitcoin exchanges where bitcoins are traded for traditional bitcoin mining money transmitter activities to disclose large transactions and suspicious activity, comply with money laundering regulations, and collect information about bitcoin mining money transmitter activities customers as traditional financial institutions are required to do.

In its October study, Virtual currency schemesthe European Central Bank concluded that the growth of virtual currencies will continue, and, given the currencies' inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks.

Inthe U. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. In JuneBitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from California's Department of Financial Institutions accusing the foundation of unlicensed money transmission, Matonis denying the foundation is engaged in money transmission and saying he viewed the case as "an opportunity to educate state regulators.

In late Julythe industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set bitcoin mining money transmitter activities practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards.

Bitcoins have acquired a reputation for use by criminals to purchase drugs, launder money, and gamble. While there is some merit to these claims, as of Bitcoins do not appear to be extensively used in money laundering. Gambling with Bitcoins is popular and accounts for a large percentage of Bitcoin transactions although a smaller percentage of transactions by valueand a significant proportion of Bitcoin activity can be linked to the purchase of illegal drugs.

Named a "shady online currency [that] is starting to gain legitimacy in certain parts of bitcoin mining money transmitter activities world" by CNN, [15] The Washington Post has bitcoin mining money transmitter activities it "the currency of choice for seedy online activities. In The Guardian reported that the currency was primarily used to purchase illegal drugs and for online gambling, [20] and The Huffington Post stated that "online gambling accounts for a huge portion of Bitcoin activity.

Several news outlets assert that the popularity of Bitcoins hinges on the ability to use them to purchase illegal substances. Although there are fears that Bitcoins may be used to launder money, the FBI stated in that, while the potential for money laundering exists, there were no known instances of this occurring. Gox, a service that allowed users to exchange Bitcoins for US dollars. An April estimate showed that the amount of electricity being used every day to mine bitcoins was about megawatt hours, the amount capable of powering about 31, American homes.

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Bitcoin - Cryptocurrency - Ethereum Tokens. Bank Secrecy Act 31 U. Chapter X Regulatory Authority: FinCEN issued guidance that stated as follows: PDF Since January , FinCEN has issued several additional virtual currency administrative rulings about whether certain virtual currency businesses were deemed to be money transmitters.

They are as follows:. An exchange that sells ICO coins or tokens, or exchanges them for other virtual currency, fiat currency, or other value that substitutes for currency, would typically also be a money transmitter. The registration must be renewed every two years. PDF An MSB that is money transmitter must conduct a comprehensive risk assessment of its exposure to money laundering and implement an anti-money laundering "AML" program based on such risk assessment.

FinCEN regulations require MSBs to develop, implement, and maintain a written program that is reasonably designed to prevent the MSB from being used to facilitate money laundering and the financing of terrorist activities.

The AML program must: OFAC requires all U. It is important to have a compliance program in place to avoid or mitigate receiving civil and criminal penalties from OFAC for non-compliance.

The failure of an MSB to comply with FinCEN's anti-money laundering regulations can result in the assessment of civil money penalties and criminal prosecution. Set forth below are copies of recent settlements and court decisions that penalized virtual currency companies and their executive officers for failing to comply with FinCEN's anti-money laundering regulations. This website provides general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments.

These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to retain an attorney for advice on specific legal issues.

They are as follows: