FinCEN Sends Warning Letters to Unregistered Bitcoin Businesses

Daniel Cawrey
Dec 19, 2013 at 10:00 UTC
Updated Sep 10, 2014 at 15:25 UTC

The Financial Crimes Enforcement Network (FinCEN) has sent out warning letters to bitcoin-related businesses notifying them that they must comply with federal money transmission laws, according to reports.

FinCEN, a unit of the US Treasury Department, has sent out “industry outreach” letters regarding anti-money laundering practices. Around a dozen letters have been delivered to bitcoin businesses so far.

Back in November, Jennifer Shasky Calvery, the head of FinCEN, suggested at a Senate hearing that virtual currency exchanges and administrators should do three things: register with FinCEN, put in place anti-money laundering procedures and maintain their records.

Mike Caldwell, the proprietor of Casascius Coins, minted physical units of bitcoin with private keys embedded within. He received a letter from FinCEN, and subsequently posted this notice on his website:

“I have suspended accepting new orders, pending resolution of some concerns I have as to regulatory issues.”

The letter Caldwell received indicated that his enterprise was considered a money transmitter business.

The Verge reported that only 35 bitcoin-related companies have registered with FinCEN as money transmitter businesses. It’s clear from these letters that FinCEN believes more companies need to file paperwork in order to be compliant.

Perhaps the most noteworthy bitcoin business to fall foul of US law has been the Japan-based exchange Mt. Gox. The company had $2.9m seized when it failed to inform its US bank that it was in the business of transmitting money.

Government regulators have been interested in learning more about virtual currencies. With the exception of Mt. Gox and money laundering enterprise Liberty Reserve, regulators have simply been on a mission to gather information.

State regulation

In August, the New York Department of Financial Services (DFS) issued 22 subpoenas to bitcoin companies as it tried to understand what type of policy to enact in the state where US financial activities are headquartered.

The DFS has also considered issuing so-called “BitLicenses” to virtual currency businesses.

48 US states currently require money transmission businesses to register with a local regulatory commission, South Carolina and New Mexico are the only two exceptions.

A number of countries have made statements regarding bitcoin policy within their jurisdiction recently.

The Chinese government has just placed restrictions on bitcoin as a method of payment, causing the price of the currency to spiral downward.

In contrast, Denmark’s financial authority has stated that cryptocurrencies are not subject to financial regulation there. Additionally, Norway’s director general of taxation has said that bitcoins “don’t fall under the usual definition of money or currency,” which makes for an interesting tax situation within the scandinavian country.

Via Reuters

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