USD Exchange FinCEN Compliance Report

[windpath]

USD Exchange FinCEN Compliance Report

by CoinCadence.com

Updated: April 28th, 2014

Preface:
This is a portion of the research conducted for the upcoming Coin Cadence Bitcoin Exchange Review we plan to launch this quarter. We are sharing this data today in hopes of both demonstrating our commitment to a quality index, and getting some feedback on facts gathered and their presentation. As a member of the Bitcoin community, your feedback is both valued and appreciated.

Why we studied FinCEN compliance:
On March 18th, 2013 the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued guidance for virtual currencies, including Bitcoin.

To summarize; all Bitcoin exchanges and some Bitcoin miners are required to register as Money Service Business (MSBs) with FinCEN and comply with anti-money laundering regulations.

Some Bitcoin miners, and all “regular” Bitcoin users are not required to register as MSBs if they only use Bitcoin to purchase goods and services.

Who this report includes:
We researched only exchanges included in the Coin Cadence Bitcoin Exchange Index.

The Index includes all major USD to BTC exchange sites that currently meet our criteria (7 as of this writing).

What we looked for:
As of the March 18th, 2013 guidance all Bitcoin to USD Exchanges are required to register as a Money Services Business. Once registered MSB registrants are publicly searchable on a special section of the FinCEN website.

The results:

Excahnge		Location		Registered		MSB Reg. #		Reg. Date
Atlas		United States		Yes		31000033855084		September 22, 2013
Bitfinex		Hong Kong		No		None		NA
BTC-e		Bulgaria		No		None		NA
Bitstamp		United Kingdom		Yes		31000041666973		February 27, 2014
CampBX		United States		Yes		31000026967575		May 16, 2013
CoinBase		United States		Yes		31000025767705		April 23, 2013
Kraken		United States		Yes		31000032991332		September 5, 2013

Opinion:
To us what this data represents is whether or not an Exchange is proactively pursuing compliance in the US, how you interpret a company registering or not is up to you.

We are happy to report all the major US based exchanges tracked in the Coin Cadence Index registered as MSBs with FinCEN, and we are also pleased to find that Bitstamp, a UK based exchange has also registered.

Bitfinex, as a Hong Kong based company does not stand to gain much by registering with the US FinCEN, and is exposed to little risk for not doing so. However, by my interpretation of the guidance issued by FinCEN they are required to register and report any USD transactions originating in the US over $10,000 on a given day (note: I’m not a lawyer).

We did not expect to find BTC-e listed. BTC-e operates with a high degree of anonymity (lack of any identifying information on their website), and has more then a few disgruntled customers as demonstrated by their threads on this forum. As a result of this we are considering removing BTC-e from the Coin Cadence Index in the near future.

Disclaimer:
This material is provided for general information only and nothing contained in the material constitutes a recommendation for the purchase or sale of anything.

Although the data presented is believed to be reliable we do not guarantee its accuracy for any use.

Nothing presented here is an investment recommendation and any data or content should not be relied upon for any investment activities.

In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from the use of this material.

We make no guarantees about the future of the Bitcoin market or that Bitcoin can be redeemed at any price.

Bitcoin is not backed by any commodity or any other form of money.

Sources:
FinCEN

Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies
http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html

MSB Registrant Search Webpage
http://www.fincen.gov/financial_institutions/msb/msbstateselector.html

Am I an MSB?
http://www.fincen.gov/financial_institutions/msb/amimsb.html

US Government Printing Office: Electronic Code of Federal Regulations

General Definitions
http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=d5570d7646c5fc13fe1fa42a61d1dcf1&rgn=div5&view=text&node=31:3.1.6.1.2&idno=31#31:3.1.6.1.2.1.3.1


The New York Times

More Bitcoin Regulation is Inevitable
http://dealbook.nytimes.com/2014/02/03/more-bitcoin-regulation-is-inevitable/

Forbes

New Money Laundering Guidelines Are A Positive Sign For Bitcoin
http://www.forbes.com/sites/timothylee/2013/03/19/new-money-laundering-guidelines-are-a-positive-sign-for-bitcoin/

Ars Technica

US regulator: Bitcoin exchanges must comply with money-laundering laws
http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/

BTC-e Threads on this forum

BTC-E.com exchange - BTC/NMC/LTC/NVC/TRC/PPC/FTC/XPM - USD\EUR\RUR (fee - 0.2%)
https://bitcointalk.org/index.php?topic=433283.msg4753666#msg4753666

BTC-E.com exchange Bitcoin, Litecoin, Namecoin <-> USD\BTC (fee 0.2%)
https://bitcointalk.org/index.php?topic=40889.msg498371#msg498371

Coin Cadence

Bitcoin Exchange Index
http://www.coincadence.com/bitcoin-index/

[jc01480]

Wow.  Thanks for sharing.  Good to see some progressive thinkers supporting the cause and informing others.

[franky1]

just to add some info..

BTC-E is not a MSB. they do not transfer funds from an actual bank account belonging to them. EG accepting money in from john and sending it out to mary.

they however USE a MSB, much in the same regards as many people use paypal, where users change balances on paypals database but its paypal that moves actual dollars from bank account to bank account..

BTC-E uses Unitransact Pty Ltd and Unitransact Pty Ltd's bank gets wire transfer requests from Unitransact Pty Ltd not BTC-E

(though btc-e ask Unitransact Pty Ltd in the middle)

[DeathAndTaxes]

just to add some info..

BTC-E is not a MSB. they do not transfer funds from an actual bank account belonging to them. EG accepting money in from john and sending it out to mary.

they however USE a MSB, much in the same regards as many people use paypal, where users change balances on paypals database but its paypal that moves actual dollars from bank account to bank account..

BTC-E uses Unitransact Pty Ltd and Unitransact Pty Ltd's bank gets wire transfer requests from Unitransact Pty Ltd not BTC-E

(though btc-e ask Unitransact Pty Ltd in the middle)

FinCEN position is the mere act of exchanging virtual currency for real currency is in itself money transmission even if no other money transmission occurs.  One could argue that is a stretch and that classification in another MSB category would be more appropriate but until contested in a court of law FinCEN guidance stands.

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

[franky1]

just to add some info..

BTC-E is not a MSB. they do not transfer funds from an actual bank account belonging to them. EG accepting money in from john and sending it out to mary.

they however USE a MSB, much in the same regards as many people use paypal, where users change balances on paypals database but its paypal that moves actual dollars from bank account to bank account..

BTC-E uses Unitransact Pty Ltd and Unitransact Pty Ltd's bank gets wire transfer requests from Unitransact Pty Ltd not BTC-E

(though btc-e ask Unitransact Pty Ltd in the middle)

FinCEN position is the mere act of exchanging virtual currency for real currency is in itself money transmission even if no other money transmission occurs.  One could argue that is a stretch and that classification in another MSB category would be more appropriate but until contested in a court of law FinCEN guidance stands.

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

fincen laws dont apply in bulgaria, cyprus, australia (three countries they are known to exist.) infact i doubt their Unitransact Pty Ltd account is measured in dollars. but instead in Euro's or rubles, which BTC-E, onl on their website, display as a dollar/euro/ruble balance, where no actual US dollars sit in an account. infact Unitransact Pty Ltd is australian so its probably stored as AUD $ in a bank account owned by Unitransact Pty Ltd.

but with that said because the bank account is entity 1. Unitransact Pty Ltd is entity 2. and then btc-e is entity 3. then btc-e is a couple layers from a wire transfer. atmost i think they might be able to twist a few thought out words to class themselves as either agents of Unitransact Pty Ltd or just customers. much like customers of paypal.

so i half agree with your statement

[leopard2]

Ah franky1 you forgot that Americans think of the world as their back yard, any non-American has to bow to American laws of course 

This paper is dripping with arrogance, "disgruntled btc-e customers" ... as if the other exchanges had no disgruntled customers, service discussion is full with threads that tell a different story

BTC-E is not even accepting US wires so why the fuck would they have to register??!!

[windpath]

Ah franky1 you forgot that Americans think of the world as their back yard, any non-American has to bow to American laws of course  

This paper is dripping with arrogance, "disgruntled btc-e customers" ... as if the other exchanges had no disgruntled customers, service discussion is full with threads that tell a different story

BTC-E is not even accepting US wires so why the fuck would they have to register??!!

Well, I guess I'll "drip some more arrogance"??...

As I stated:

To us what this data represents is whether or not an Exchange is proactively pursuing compliance in the US, how you interpret a company registering or not is up to you.

I'm not suggesting that any foreign entity has to "bow to American laws", merely that those that do register are being proactive about compliance with laws that may affect their ability to transact business legally in the US in the future. If you choose to transact business with an unregistered entity that is your choice, but I thought either way you might find the knowledge beneficial.

The reason we are considering removing BTE-e is primarily their lack of transparency about who they are. It's not as if they are some hands off third party, they are managing a significant amount of wealth, and if something goes south there is not a person or entity that can be held accountable on any level. No registered company, no identified leadership, no physical address, what we consider more then the typical amount of complaints going un-addressed, etc...

You'll note that Bitfinex is also not registered, but will continue to be included in our Index. The decision is not based on registration, but on transparency about who you are doing business with. I'd love to talk to the folks at BTC-e if they would like to shed some light on who they are and how their business is set up.

[leopard2]

OK I understand  

No harm taken then.

Regarding BTC-e, note that the compliance Nazis at Gox were the first to go, while BTC-E is fully funded and has never annoyed customers with KYC, yet offers many fiat pairs (at the expense of not serving US customers).  

Bitfinex I don't know them but they don't offer any real BTC/USD pairs do they? Just some sort of futures that continually degrade with contango; how does that fit into an index?

[windpath]

Bitfinex I don't know them but they don't offer any real BTC/USD pairs do they? Just some sort of futures that continually degrade with contango; how does that fit into an index?

They run a BTC/USD order book just like the other exchanges.

From the Bitfinex site:

Change Bitcoins
The changing of Bitcoins works like any regular Bitcoin trading platform by placing your offer to buy or sell Bitcoins in the Orderbook. When one order is matched against another, the order is executed. The Exchange Wallet is used for this feature.

They also offer several other types of trades, like margin trading, which we do not track in the index.

Edit: As a side note, how can you make this assertion:

BTC-E is fully funded

Do you know the company, person or people running BTC-e?

If so I'd like to speak with them.

I'm not trying to bash BTC-e at all, they have been around for 3 years and do a solid consistent trading volume for the most part, but with the total anonymity and seriousness of recent unsatisfied complaints some more information about the management is desirable.

[leopard2]

https://btc-e.com/news/199

Of course they could be lying just like any other exchange

For BTC sake an Auditing Compliance Report would be a good thing 

Today an exchange can be fully AML-KYC-Fincen-whatnot compliant and still be fractional, that's scary.

[windpath]

For BTC sake an Auditing Compliance Report would be a good thing 

I agree, and a reasonable requirement for any audit to be considered credible is that the name of the business, its principals, and its location be included.