FinCEN’s rulings on cryptocurrency compliance yesterday have drawn praise from a congressional leader. He nevertheless cautioned government agencies to continue working together on a cohesive strategy to deal with virtual currency.
Senator Tom Carper (D-Del) praised the Treasury-based agency for releasing the two rules, which exempted miners from MSB licensing, and also clarified rules for businesses that wanted to buy and sell bitcoins for their own purposes.
“I am glad that FinCEN is working to release rulings in order to provide more clear, consistent, and timely guidelines to potential innovators, meaning those interested in virtual currencies can continue to explore the opportunities this technology offers while also adhering to federal law,” Carper said.
Carper is chair of the Senate Homeland Security and Governmental Affairs Committee, which held hearings into digital currencies last November. He has often been outspoken on the subject, most recently pressing the Commodity Futures and Trading Commission (CFTC) to clarify its position. Bitcoin’s volatility at the moment, which springs from a lack of liquidity, makes it act less like a currency than a commodity or other financial instrument.
He has also advocated a ‘wait and see’ approach to bitcoin, letting the digital currency grow and mature without stifling it by over-regulating it. He has said in the past that he sees ‘good things’ with bitcoin.
More work needed
Carper said today that the technology was evolving, and could be used for a number of purposes. However, he warned that more inter-agency action was needed.
“All government agencies should continue working to help ensure that this evolving technology does not outpace an effective regulatory response. By doing so, federal agencies can help ensure that consumers are protected while also fostering innovation and commerce,” he said.
“I will continue to monitor how federal agencies respond to developments of this technology and, if necessary, encourage agencies to act to ensure that the federal government is speaking with a unified and consistent voice on this issue.”
The Bitcoin Foundation also praised the rulings yesterday.
“FinCEN continues to demonstrate real leadership by listening to the public and providing regulatory clarity within existing frameworks for businesses operating in the space,” it told CoinDesk in a statement, “all the while maintaining appropriate Bank Secrecy Act safeguards for financial institutions.”
Both of the rulings issued yesterday stem from inquiries made by US-based businesses. FinCEN is using its responses to these individual inquiries as policies that now apply across the board.
The first response exempted miners from MSB status, which will doubtless be a relief to any institutional mining companies wanting to set up in the US.
FinCEN to firms: Buy/sell, but for your own account only
The second ruling enabled companies to buy virtual currencies for themselves, selling them on an exchange later for their own purposes. This is in line with the business model proposed by Andre de Castro, owner of RightClick LLC.
The ruling is a copy of a response to an inquiry sent last May, which is when De Castro sent his original letter to FinCEN.
De Castro’s business would purchase bitcoins from customers using a mobile app or web app. He could then sell it on an exchange at a time of his choosing for profit. He is currently planning to open at a physical location in New York.
FinCEN’s response focused on the fact that the applicant was using software to collect bitcoins from sellers, purely for the company’s own account.
“In effect, when the Company invests in a convertible virtual currency for its own account, and when it realizes the value of its investment, it is acting as a user of that convertible virtual currency within the meaning of the guidance,” it said. However, it warned that any transfers to third parties, requested by counterparties, creditors, or owners should still be closely watched.
“When regulations are unclear I would stress caution, which is exactly why I have waited as long as I have to get a proper ruling,” De Castro – who received his clearance from FinCEN in December – told CoinDesk last week. “Federal penalties are stiff for wrongdoers. One need to understand one’s business process well and consider present and past regulations.”
Government image via Shutterstock