7

If a business only exchanges between say bitcoin, litecoin and namecoin. No fiat currencies. Does it still fall under finCEN's regulations?

  • I'm not sure, but can't the US only regulate anything concerning US dollars? So only exchanging anything for dollars? – Steven Roose May 30 '13 at 2:09
4

Your guess is as good as anybody else's. FinCEN's guidelines read:

The term "money transmission services" means "the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means."

That's as broad as you can get. Bottles of Tide detergent apparently serve as a form of value that substitutes for currency, so going by that FinCEN could go after your corner market for not registering as a money transmitter for delivering tide to your door without verifying that you were the person who paid for the order (and keeping records for five years, and ... etc., etc., etc.). Now I know they probably wouldn't stoop to doing that ... just like how the IRS wouldn't treat non-profits differently based on the political aims of the non-profit.

That's called totalitarianism. The laws get interpreted such that the government gets total control over everyone and everything.

3

A virtual currency exchange does count as a money transmitter, although there is some discretion for FinCEN here. The relevant passages are the following:

An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.

and

An administrator or exchanger that (1) accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations, unless a limitation to or exemption from the definition applies to the person.

So the question is then, "is a broker of 'decentralized virtual currencies' who does not accept "real currency" eligible for an exemption?" Note that:

FinCEN's regulations provide that whether a person is a money transmitter is a matter of facts and circumstances. The regulations identify six circumstances under which a person is not a money transmitter, despite accepting and transmitting currency, funds, or value that substitutes for currency.

The Code of Federal Regulations (31 CFR § 1010.100(ff)(5)(ii)(A)-(F)) has those six exceptions:

(A) Provides the delivery, communication, or network access services used by a money transmitter to support money transmission services;

(B) Acts as a payment processor to facilitate the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the creditor or seller;

(C) Operates a clearance and settlement system or otherwise acts as an intermediary solely between BSA regulated institutions ...

(D) Physically transports currency, other monetary instruments, other commercial paper, or other value that substitutes for currency as a person primarily engaged in such business, such as an armored car ...

(E) Provides prepaid access; or

(F) Accepts and transmits funds only integral to the sale of goods or the provision of services, other than money transmission services, by the person who is accepting and transmitting the funds.

None of these examples apply, so the FinCEN appears to have discretion in this area. The closest parallel to a BTC/LTC/etc. broker is a foreign exchange dealer, but FinCEN does explicitly say virtual currency exchangers cannot be treated as foreign exchange brokers. So they could definitely make the case that it is therefore appropriate to treat you as a money transmitter.

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