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FinCEN Issues Guidance on Virtual Currencies
Practical Law Legal Update 0-525-0300 (Approx. 3 pages)
FinCEN Issues Guidance on Virtual Currencies
by PLC Finance
| Published on 25 Mar 2013 • USA (National/Federal) |
The Financial Crimes Enforcement Network (FinCEN) issued guidance on the applicability of Bank Secrecy Act requirements to persons involved with virtual currencies.
On March 18, 2013, the Financial Crimes Enforcement Network (FinCEN) issued guidance clarifying the applicability of Bank Secrecy Act (BSA) requirements to persons creating, obtaining, distributing, exchanging, accepting or transmitting virtual currencies. Virtual currency is a form of exchange that can operate like currency but does not have all the characteristics of real currency. In particular, it does not have legal tender status in any jurisdiction.
The guidance distinguishes between users, administrators and exchangers of virtual currency:
- Exchangers. An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds or other virtual currency. An exchanger is a money services business (MSB), specifically a money transmitter, subject to applicable BSA requirements under the regulations unless a person falls under a limitation to or exemption from the definition.
- Administrators. An administrator is a person engaged as a business in issuing a virtual currency and who has authority to redeem the virtual currency. An administrator is also an MSB, specifically a money transmitter, subject to applicable BSA requirements under the regulations unless a person falls under a limitation to or exemption from the definition.
- Users. A user is a person that obtains virtual currency to purchase goods or services. A user is not an MSB under the regulations and is therefore not subject to MSB registration, reporting and recordkeeping requirements.
The designation of exchangers and administrators as money transmitters may also trigger state licensing requirements. 48 states currently require money transmitters to be licensed to conduct business in that state.
To learn more about FinCEN's regulations under the BSA, see Practice Note, US Anti-money Laundering and Trade Sanctions Rules for Financial Institutions.