FinCEN: Bitcoin Miners Need Not Register as Money Transmitters
Published on December 29, 2013 at 10:55 BST
Bitcoin miners who mine “for themselves” do not have to register as Money Services Businesses (MSBs) with the US Financial Crimes Enforcement Network (FinCEN), according to an official letter from the agency this week.
FinCEN was replying to a request for clarification by Atlantic City Bitcoin (AC Bitcoin), aka advocate Milly Bitcoin, who maintains an array of ASIC miners in New Jersey. According to the letter, miners are still free to purchase goods or trade with exchanges with the bitcoins they produce whether operating as individuals or businesses.
The news should come as a relief for smaller-scale mining operations. Jerry Brito, senior research fellow at the Mercatus Center, indicated that FinCEN wrote in a private letter last July that all miners would have to register as MSBs, and uncertainty had remained since then.
This could have put many individuals out of the mining business with its range of compliance regulations, such as having an auditor on staff. AC Bitcoin has been in regular contact with FinCEN in 2013 and pointed out that any necessity for miners to register as MSBs would require a public statement to that effect under the US Administrative Procedures Act.
AC Bitcoin said FinCEN’s explanation was satisfactory enough for small miners at the moment, and showed FinCEN now had a greater understanding of bitcoin than in March, which was a positive sign.
The exact wording of the letter still leaves some room for interpretation, though, and its ramifications could hinge on words like “disposing” of bitcoin or “transmitter” of money in many cases. This could be deliberate to allow prosecution of individual cases at some later stage, but FinCEN’s letter does clearly state it does not consider AC Bitcoin a “money transmission service” under its rules.
The letter stated:
“In undertaking such a conversion transaction, the user is not acting as an exchanger, notwithstanding the fact that the user is accepting a real currency or another convertible virtual currency and transmitting Bitcoin, so long as the user is undertaking the transaction solely for the user’s own purposes and not as a business service performed for the benefit of another. A user’s conversion of Bitcoin into a real currency or another convertible virtual currency, therefore, does not in and of itself make the user a money transmitter.”
What is still not clear is how MSB or money transmission regulations will apply to larger operations or companies selling hosted mining contracts, like Cloud Hashing, Cointerra’s TerraMine Hosting or Butterfly Labs’ Hosted Mining. Users on reddit also engaged in debate over what it might mean for mining pools. Such groups generally distribute mined bitcoins amongst themselves but they vary in size and complexity of their arrangements.
USB Mining image credit via Flickr
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