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The Financial Crimes Enforcement Network (FinCEN) today issued two administrative rulings regarding digital currency. And the government has apparently decided to go with the nuclear option.
The first ruling published today relates to the application of FinCEN regulations to a virtual currency trading platform, while the second ruling discusses the application of FinCEN regulations to a virtual currency payment system.
In ruling FIN-2014-R011, FinCEN states that any and all cryptocurrency exchanges must become licensed as a money transmitter including crypto-only exchanges:
"As explained in the Guidance, a person is an exchanger and a money transmitter if the person accepts convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency."
In ruling FIN-2014-R012, the agency confirms that and and all payment processors are obliged to register as money transmitters, significantly increasing the cost of entry in becoming a payment service provider.
"As described above, the Company is an exchanger under the Guidance because it engages as a business in accepting and converting the customer’s real currency into virtual currency for transmission to the merchant. The fact that the Company uses its cache of Bitcoin to pay the merchant is not relevant to whether it fits within the definition of money transmitter."
Once labeled a money transmitter, a business wishing to continue operating must pay hundreds of thousands of dollars to become licensed in each of the 50 states. And that’s only the beginning of the regulatory costs and legal hoop jumping.
In addition, companies are required to register with FinCEN, conduct a comprehensive risk assessment of its exposure to money laundering, implement an Anti-Money Laundering Program based on such risk assessment, and comply with various record keeping, reporting and transaction monitoring obligations, in addition to meeting several other requirements.
It is interesting to note that the government classifies Bitcoin as a digital “property” for taxation purposes, but as a digital “money” for regulatory and licensing purposes.
Full Story: http://altcoinpress.com/2014/10/fincen-ruling-us-government-ramps-up-war-on-cryptocurrency/