FinCEN has issued 2 new guidance documents addressing cryptocurrency and other convertible virtual currency (CVC). The guidance does not establish any new regulatory expectations. Rather, it consolidates current FinCEN regulations, guidance and administrative rulings that relate to money transmission involving virtual currency, and applies the same interpretive criteria to other common business models involving CVC. FinCEN’s rules define certain businesses or individuals involved with CVCs as money transmitters subject to the same registration requirements and a range of anti-money laundering, program, recordkeeping, and reporting responsibilities as other money services businesses. It also warns of threats posed by virtual currency misuse.
For entities trying to run legitimate businesses that use crypto in some way, but face regulatory uncertainty, this type of guidance is welcomed. FinCEN was one of the first U.S. financial regulators to address these issues back in 2013. While other regulators have addressed crypto to some extent, many questions remain.
According to an accompanying press release, “The comprehensive advisory FinCEN issued today highlights the risks associated with darknet marketplaces, peer-to-peer exchangers, unregistered money services businesses, and CVC kiosks and identifies typologies and red flags to help the virtual currency industry protect its businesses from exploitation.” It continues by stating:
FinCEN was the first financial regulator to address virtual currency and the first to assign obligations to related businesses to guard against financial crime …. The money transmitter definition we published in 2011 and the guidance we issued in 2013 clarifying how that definition applies to transactions involving virtual currency have proven to be exceptionally durable. Our regulatory approach has been consistent and despite dynamic waves of new financial technologies, products, and services, our original concepts continue to hold true. Simply stated, those who accept and transfer value, by any means, must comply with our regulations and the criminal misuse of any methodology remains our fundamental concern.
The two guidance documents are Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies and Advisory on Illicit Activity Involving Convertible Virtual Currency.