Do the FinCEN virtual currency regulations apply to Bitcoin miners in addition to exchanges? No one seems sure, but now, one consultant wants to find out. A US consulting firm has written to the Financial Crimes Enforcement Network (FinCEN) in the US, asking it to clarify its position on bitcoin mining.
Atlantic City Bitcoin (ACB), registered in the state of New Jersey, has requested an administrative ruling to determine once and for all how the FinCEN rules, announced in March, apply to mining.
ACB’s beef concerns what it highlights as a disparity in FinCEN guidance. The guidance says:
“A person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.”
Some interpretations argue that a bitcoin miner creates the currency, meaning that if they sell it for fiat currency, they could be regulated. Others, such as Jeff Garzik, one of the core Bitcoin developers who recently began working at Bitpay, say that there’s nothing to worry about as long as they effectively outsource the transmission process to a licensed exchange.
The problem is, none of these people are lawyers, making their arguments about whether miners are to be regulated little more than conjecture. As ACB points out, when you’re dealing with potentially large amounts of money, you ideally want any regulatory body to be very clear on its definitions.
The ACB request attempts to cut through the whole tangled mess by focusing the discussion on another document: FinCEN’s definition of a money transmitter. It uses this document to propose that miners could never be classified as money transmitters, no matter what FinCEN’s virtual currency guidance may say. In particular, this piece of text:
“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.”
ACB proposes that this makes it impossible to call a bitcoin miner a transmitter, because they do not receive value from another party. “Since the coins were created during mining it is not possible to have accepted them from another person,” the ACB proposal says. It also adds that bitcoin minors are not administrators because they cannot remove coins from circulation. It argues that they are not exchanges either, meaning that the only other way to define them in FinCEN terms is as users, which it says would also leave them exempt from categorization as a money services business.