What's to stop fully licenced bitcoin exchanges from trading fiat pairs?

[monsterer]

Hi guys,

Is there anything stopping a fully licensed bitcoin exchange from trading fiat only pairs, like EUR/USD?

I guess the only issue would be finding customers who had bank accounts in both currencies, but potentially it could open a lot of business for those previously forced to go through expensive brokers?

Cheers, Paul.

[Stephen Gornick]

a fully licensed bitcoin exchange

Define "fully licensed bitcoin exchange"

If there's a license then there must be a license issuer.  At a minimum, this will vary from one jurisdiction to another.

Now if you are referring to an exchange that is compliant with FinCEN's money transmitter rules (e.g., registered as an MSB, licensed with states) that wishes to enter the forex market (to trade EUR/USD, for instance), then with forex there are other regulations with a completely separate regulator than FinCEN.

[monsterer]

Now if you are referring to an exchange that is compliant with FinCEN's money transmitter rules (e.g., registered as an MSB, licensed with states) that wishes to enter the forex market (to trade EUR/USD, for instance), then with forex there are other regulations with a completely separate regulator than FinCEN.

I was referring to this case. Out of interest, what regulator and regulations are there for allowing the exchange of fiat currencies?

[Stephen Gornick]

I was referring to this case. Out of interest, what regulator and regulations are there for allowing the exchange of fiat currencies?

From the FinCEN guidance:

Dealers in Foreign Exchange

A person must exchange the currency of two or more countries to be considered a dealer in foreign exchange.19 Virtual currency does not meet the criteria to be considered "currency" under the BSA, because it is not legal tender. Therefore, a person who accepts real currency in exchange for virtual currency, or vice versa, is not a dealer in foreign exchange under FinCEN's regulations.

- http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html


So from that is seems reasonable that one could, from the U.S., accept EUR in exchange for BTC (and vice-versa) and not be considered a dealer in foreign exchange.    There might still be the requirement to register as an MSB, but not as a "dealer of foreign exchange".    Now if you try to go USD --> BTC, then those BTC --> EUR, then that effectively is a USD --> EUR trade and those transactions might cause you to be considered a dealer in foreign exchange.

As far as what regulators exists for a forex brokerage?  Here's a snippet from a forex brokerage:

In American the main Forex regulatory commissions are the National Futures Association (NFA), Securities and Exchange Commission (SEC), and the Commodities and Futures Trading Commission (CFTC). These bodies regulate Forex brokers in the US and ensure that only registered brokers are able to operate in the country, and that transparency in all transactions are maintained.

- http://www.etoro.com/education/american-forex-regulation.aspx

[monsterer]

As far as what regulators exists for a forex brokerage?  Here's a snippet from a forex brokerage:

In American the main Forex regulatory commissions are the National Futures Association (NFA), Securities and Exchange Commission (SEC), and the Commodities and Futures Trading Commission (CFTC). These bodies regulate Forex brokers in the US and ensure that only registered brokers are able to operate in the country, and that transparency in all transactions are maintained.

- http://www.etoro.com/education/american-forex-regulation.aspx

I was wondering less about brokerages and more about actual fiat exchanges - AFAIK they don't exist in the forex world at all, since all offers get posted to the Electronic Clearance Network, so it might be a nice avenue to explore for a business...?

Cheers, Paul.

[Stephen Gornick]

I was wondering less about brokerages and more about actual fiat exchanges

Most every U.S. state has regulations for currency exchangers (e.g., converting USD to EUR, or other currency).

[monsterer]

I was wondering less about brokerages and more about actual fiat exchanges

Most every U.S. state has regulations for currency exchangers (e.g., converting USD to EUR, or other currency).

Is that FinCEN's remit, or some other authority?

[MSantori]

I was wondering less about brokerages and more about actual fiat exchanges

Most every U.S. state has regulations for currency exchangers (e.g., converting USD to EUR, or other currency).

Is that FinCEN's remit, or some other authority?

Each state has its own regulatory agency that enforces that state's money transmission laws and licensing requirements. Recently in the news, for example, you might have seen that the California Department of Finance sent a Cease and Desist letter to the Bitcoin Foundation.

[polarhei]

I was wondering less about brokerages and more about actual fiat exchanges

Most every U.S. state has regulations for currency exchangers (e.g., converting USD to EUR, or other currency).

Is that FinCEN's remit, or some other authority?

Each state has its own regulatory agency that enforces that state's money transmission laws and licensing requirements. Recently in the news, for example, you might have seen that the California Department of Finance sent a Cease and Desist letter to the Bitcoin Foundation.

Why the monitoring is not federal law? Too interesting.