FinCEN quizzed on mining regs
Do FinCEN's regulations apply to miners? One US-based firm wants to find out, and has asked the regulatory body to clarify.
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:
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:
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.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.