FinCEN: Stablecoin Issuers Are Money Transmitters, No Matter What

“Just because you say you are a banana doesn’t make you a banana,” said Director Blanco.

Nov 19, 2019 at 5:00 p.m. UTC
Updated Sep 13, 2021 at 11:43 a.m. UTC

The U.S. Financial Crimes Enforcement Network (FinCEN) views all stablecoins as falling under their remit to protect “money transmission services, Director Kenneth Blanco said.

Speaking at Chainalysis Links conference in New York City on Friday, Blanco said FinCEN upholds its “technology neutral” standpoint in including stablecoins under that definition.

“It does not matter if the stablecoin is backed by a currency, a commodity, or even an algorithm – the rules are the same,” Blanco said. 

The clarification by America’s anti-money laundering regulator came as Blanco insisted stablecoin administrators must register as a Money Services Business (MSB) with FinCEN.

A branch of the Treasury Department, FinCEN investigates money laundering and other financial crimes by pouring through transaction records and data. 

Including stablecoins as money transmitters, and their administrators as MSBs, means firms dealing with them must follow federal know-your-customer (KYC) and AML laws under the Bank Secrecy Act. 

Stablecoins are issued based on reserve assets - frequently, 1:1 with the U.S. dollar or linked to a basket of currencies. But they can also use other mechanisms to ensure stability. Dai, the MakerDAO token, uses algorithms to rebalance. 

Bitcoin, on the other hand, trades freely.

It is a distinction without a difference, according to Blanco. 

“Just because you say you are a banana doesn’t make you a banana,” he said.

“FinCEN applies the same technology neutral regulatory framework to any activity that provides the same functionality at the same level or risk, regardless of its label. It is not what you label it, it's the activity you actually do that counts.”

Blanco’s comments add legal clarity to a fast-evolving corner of the crypto space, whose recent big-name storylines such as Facebook’s Libra project attracted widespread media attention. 

But the stablecoin concept is not new; Blanco said Friday. FinCEN began studying stablecoins in crypto’s early days and first issued guidance on it in 2008. He said that increasing public interest warranted clarification.

FinCEN’s past decisions placed money transmission service considerations on ICO issuers and most recently on some decentralized applications.

The remarks Friday reemphasized a recent talking point by Blanco: there’s no excuse for non-compliance. Not in money transmission or in the requirements of Financial Action Task Force’s Travel Rule

“You can’t build a car that only goes 150 miles per hour and ask us to change the speed limit. That’s not happening. Build your car to meet the requirements,” he said.

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