FinCEN issues guidance on Bitcoin and virtual currency

FinCEN (the Financial crimes Enforcement Network, a branch of the US Treasury Department) has issued guidance in March, 2013 to clarify the applicability of the Bank Secrecy Act (“BSA”) to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies. (http://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html).

According to the guidance, companies that exchange or transfer virtual currency (such as Bitcoin) are considered money-service business (MSB) so that the companies must provide information to the government in order to prevent money laundering. Any transactions of more than $10,000 must be reported. Accordingly, companies that exchange, transfer, or administrate Bitcoin must register with FinCEN as Money Service Businesses (MSBs) under the Treasury regulations. However, ordinary users of Bitcoin need not register.

The guidance defines “users,” “administrators,” and “exchangers.” A user is a person that obtains virtual currency to purchase goods or services. A user of virtual currency is not a money services business (“MSB”) and therefore is not subject to MSB registration, reporting, and recordkeeping. An exchanger is a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency. An administrator is a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency. An administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation or exemption applies.

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Roger Royse
rroyse@rroyselaw.com

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City. Read My Full Bio

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