A Blog About Current Issues in White Collar Defense
Treasury Department: Bitcoin Dealers Are Regulated Under Money-Laundering Laws
Timothy Lee at Forbes magazine has reported today that the Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury Department, has issued new guidelines on the legal status of Bitcoin under U.S. money laundering laws. Essentially, Bitcoin dealers have now been placed under the nation’s anti-money laundering regulations and must comply with those rules.
Lee notes that Bitcoin exchanges, which exchange Bitcoins for conventional currencies, and most Bitcoin “miners,” which process Bitcoin transactions, must now register as Money Services Businesses (MSBs) under the Treasury regulations. Ordinary users of Bitcoins need not register.
Bitcoin is a peer-to-peer network that exchanges the virtual currency in a largely unregulated environment. Lately, Bitcoins have become acceptable for a number of types of transactions, and some see them as a currency of the future that transcends national borders.
Lee argues that the Treasury action is actually not a bad thing for Bitcoin’s future.
“FinCEN is clearly trying, in its somewhat bumbling way, to squeeze a square technological peg into its round regulatory hole. Reading between the lines, FinCEN is saying that if Bitcoin-based businesses fill out some paperwork and collect some information about their customers, then they’ll be left alone,” Lee writes.
Given the existence of U.S. anti-money-laundering statutes, Lee adds, “FinCEN’s guidance is probably the best Bitcoin fans could have hoped for: it sends a clear sign that America’s anti-money laundering regulators do not consider the currency a threat and isn’t going to try to force it to change or shut down.”
We tend to agree. There needs to be a balance between enforcing the money-laundering laws (which are designed as a tool against terrorism and other serious wrongdoing) and permitting the free exchange of commodities and currency. It appears that the Administration, so far, is striking the correct balance.