Mt. Gox, the world’s largest bitcoin exchange, has taken a step towards complying with US money-laundering regulations by registering as a money services business with the US Treasury Department.

The Treasury Department’s Financial Crimes Enforcement Network, FinCEN, shows on their website that Mt. Gox’s registration as a money services business was received on Thursday 27th June.

Although this does not constitute approval by FinCEN of Mt. Gox’s activities, it is a sign that the bitcoin exchange is willing to abide by US rules in order to continue operating.

“In practice, registration with FinCEN is a fairly ministerial act: fill out a form, click a button,” said Marco Santori of law firm Nesenoff & Miltenberg. “The more interesting questions are will Mt. Gox register with any or all of the states, and how will it implement its KYC [Know Your Customer] and AML [Anti-Money Laundering] policies.”

Santori went on to explain that registering with the states is financially burdensome and time consuming:

Each state has its own complex regulatory regime, including bonding requirements and personal financial investigation. As such, Mt. Gox might instead seek to team up with already-existing money transmitters in each state. That kind of agency relationship comes with its own costs to be paid to those money transmitters, and will likely cut into its bottom line.

Mt. Gox was processing 80% of all bitcoin transactions earlier this year, but now accounts for just 54%.

Two weeks ago, Mt. Gox halted US dollar withdrawals, claiming the necessary improvement of technical processes. The exchange has been plagued recently by downtime issues and is suffering a general lowering of user confidence, to the extent that bitcoin payment processor BitPay announced that it has temporarily stopped using Mt. Gox to determine its bitcoin exchange rates.

In an earlier sign of compliance with anti-money-laundering regulations, Mt. Gox announced in May that it required users to verify their accounts to perform fiat currency withdrawals and deposits, and that they were doubling their verification staff in order to support a fast turnaround on verification approvals.

Earlier in May, the Department of Homeland Security seized funds from an account held by a Mt. Gox subsidiary in US-based online payment network Dwolla, when it was discovered that Mt. Gox CEO Mark Karpeles never registered the company or its subsidiary in the US as a money transmitter. Dwolla was consequently forced to stop all transactions with Mt. Gox.

FinCEN issued guidelines applying traditional money-laundering rules to virtual currencies in March amid concerns over the involvement of virtual currencies in money laundering. FinCEN stated that virtual currency exchanges must register with them as money transmitters and must comply with anti-money-laundering regulations. Although bitcoin was not mentioned by name in the guidelines, it was clearly implicated by mention of “decentralised virtual currencies”.

The FinCEN Money Services Business registration form lists MtGox Inc. as a Delaware company and states that it is a money transmitter.

Patrick Murck, general counsel for the Bitcoin Foundation, commented, “It’s a positive step for them to legitimize their place in the US market.”

Image credit: Flickr

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