It's all over the news that coinbase "will open the first regulated bitcoin exchange in the U.S.". But what exactly is the news here? Hasn't coinbase been serving customers from all across the U.S. for more than a year now? What is changing?


As the Reddit post linked in your answer points out, the Coinbase that we already knew uses ACH transactions to move money in and out of your account, which makes it not very good for day trading.

Coindesk coverage of the new exchange states that Coinbase previously acted largely as a brokerage for Bitcoin users. A brokerage firm trades securities on behalf of investors. In contrast, an exchange is a market where brokers and dealers meet, with infrastructure to facilitate buying and selling. The Coindesk article goes onto state that Bitcoin will have a full order book, which is a list of interested buyers and sellers for each financial instrument. A matching engine uses the list to determine what trades can be made.

In addition, Coinbase needed money transmitter licenses to operate as an exchange. They already obtained money transmitter licenses in order to legally operate USD wallets (which is why their USD wallets are not available in all US states), but Bitcoin couldn't hope to operate as a legal exchange in the United States without money transmitter licenses.

Regulations in the United States have required that certain types of Bitcoin businesses have money transmitter licenses, as business attorney Marco Santori explains:

The Financial Crimes Enforcement Network (“FinCEN”) is the bureau of the US Department of the Treasury that enforces federal regulation of money services businesses in the United States.

On March 18, 2013, FinCEN published guidance announcing that it would make no distinction between transmitters of government (or “fiat”) currency and transmitters of bitcoin, which it now famously referred to as a “decentralized convertible virtual currency”, rather than by name itself.

Thus, businesses that transmitted, sold or exchanged bitcoin were now Money Services Businesses, specifically “money transmitters”, required to register with FinCEN and satisfy ongoing record-keeping and reporting requirements. From the perspective of the federal government, an entire industry of visionary startups that had not already registered, and had no intention of registering, became potential criminal enterprises overnight.

He goes on to state that spending Bitcoins on goods / services does not make one a money transmitter, but that transmitting money (fiat money or cryptocurrency) does. In addition, exchanging fiat currency for cryptocurrency, cryptocurrency for fiat currency, or even between different cryptocurrencies makes one a money transmitter in the eyes of the US federal government.


This old reddit post kind of answered it for me. But I won't be marking this as the answer, in case anyone would care to provide a more direct and well-referenced explanation.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.