FinCEN Cracks Down on Virtual Currency
Money Laundering Laws Apply to Crypto-Currency
The main US Money Laundering Regulator, FinCEN, recently told a Bitcoin trade group that they must adhere to all rules that apply to any financial institution.
This clarified a March 18 ruling by FinCEN stating that several of the layers in the virtual currency business must register as MSB’s. An MSB (Money Services Business) is required to collect information and combat money laundering by any of their customers. The earlier ruling spoke generally of virtual currencies, but the meeting of this week made clear that the rules apply to Bitcoin as well.
“Virtual Currency administrators and Exchangers must register with FinCEN as Money Service Businesses like any other Financial Institution.”
The laws designating an MSB apply to those involved in the transfer or exchange of currencies. A person who buys products with a virtual currency is not an MSB whereas someone who exchanges it for a different currency would be an MSB. The question as to whether someone who mines Bitcoin is not clear. A Minor who goes on to transfer the Bitcoin for a different currency would qualify as an MSB, whereas one who uses the mined currency to buy goods and services probably would not qualify.
Is Federal Regulation Good For Bitcoin?
The official line from the Bitcoin trade group and the head of Bitcoin companies is that they welcome federal regulation as a way to add legitimacy to virtual currency. On the other hand cryptocurrency has become a way to make illicit purchases thus leading to its rapid growth.
Ultimately the success of the virtual money will be in its acceptance as a real currency. The recent ruling in favor of the SEC designating Bitcoin under their jurisdiction and the FinCEN order are crucial steps towards this end. Alternatively government agencies could have used there clout to try and make virtual currencies illegal. By making efforts towards regulation it makes it clear that cryptocurrecies are legitimate forms of money and will be accepted as such for the foreseeable future.