FinCEN Clarifies Stance on MSB Regs for Virtual Currency Participants (March 19, 2013)
March 19, 2013
The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued clarification of its regulatory stance on persons and entities engaged in the use, exchange and administration of virtual currencies. According to a guidance notice issued by FinCEN this week, users of virtual currencies, such as Bitcoin and Amazon Coins are not considered to be money service businesses (MSBs) under FinCEN’s rules, and thus are not subject to MSB registration, reporting and recordkeeping regulations. However, virtual currency administrators and exchanges are considered to be MSBs—specifically, money transmitters—and thus required to meet those regulations.
The clarification stems from a final rule issued by FinCEN in July of 2011 laying out definitions and responsibilities for MSBs under the Bank Secrecy Act. Under this week’s clarification notice, FinCEN defines a “user” of virtual currency as someone who obtains virtual currency to purchase goods or services. An “exchanger” meanwhile, is a person or entity involved in the business of exchanging virtual currency for real currency, while an “administrator” is a person or entity that issues or puts into circulation virtual currency and has the authority to withdraw such currency from circulation. The latter two types of participants are thus governed by FinCEN’s MSB regulations and are required to register as MSBs. “The definition of a money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the BSA,” according to the guidance.
