FinCEN issued two administrative rulings in regards to "Virtual Currency." The first concerns "exchanges" and supposes they may be regulated as Money Transmitters under the Banking Secrecy Act. The second though supposes that payment processors like BitPay may similarly fall under their purview. This shift comes contrary to the expectations BitPay had disclosed anticipating from FinCEN.
PDFs of the rulings are available here: ruling 1, ruling 2. Extracted plaintext is available below.The First:
FIN-2014-R011
Issued: October 27, 2014
Subject: Request for Administrative Ruling on the Application of
FinCEN’s Regulations to a Virtual Currency Trading Platform
Dear [ ]:
This responds to your letter of December 3, 2013, seeking an administrative
ruling from the Financial Crimes Enforcement Network (“FinCEN”) on behalf of [ ] (the
“Company”), about the Company’s possible status as a money services business (“MSB”)
under the Bank Secrecy Act (“BSA”). Specifically, you ask whether the convertible
virtual currency trading and booking platform that the Company intends to set up (the
“Platform”) would make the Company a money transmitter under the BSA. Based on the
following analysis of the description of the Platform as presented in your letter, FinCEN
finds that the Company would be a money transmitter pursuant to our regulations.
You state in your letter that the Company wishes to set up a Platform that consists
of a trading system (the “System”) to match offers to buy and sell convertible virtual
currency for currency of legal tender (“real currency”), and a set of book accounts in
which prospective buyers or sellers of one type of currency or the other (“Customers”)
can deposit funds to cover their exchanges. The Company will maintain separate
accounts in U.S. dollars and a virtual wallet, both segregated from the Company’s
operational accounts and protected from seizure by the Company’s creditors (the
“Funding Accounts”), in which Customers will deposit their U.S. dollars or convertible
virtual currency to fund the exchanges. The Company will maintain the funding received
from each Customer in its separate book entry account (the “Customer Account”).
Once the exchange is funded, the Customer will submit an order to the Company
to purchase or sell the currency deposited at a given price. The Platform will
automatically attempt to match each purchase order of one currency to one or more sell
orders of the same currency. If a match is found, the Company will purchase from the
Customer acting as seller and sell to the Customer acting as buyer, without identifying
one to the other. If a match is not found, the Customer may elect to withdraw the funds
or keep them in its Customer Account to fund future orders.
According to your letter, the Company will not allow inter-account transfers,
third-party funding of a Customer Account, or payments from one Customer Account to a
third party. Payments to or from the Customer are sent or received by credit transmittals
of funds through the Automatic Clearinghouse (ACH) system or wire transfers from U.S.
banks. In addition, you note that the Platform will not allow any Customer to know the
1identity of another Customer, and Customers must conduct transactions exclusively
through their formal agreements with the Company.
In your letter, you state that the Company is already registered with FinCEN as a
money transmitter and a dealer in foreign exchange. However, you assert that the
Company should not be regulated as a money transmitter for the following reasons:– The Company acts in a similar manner to securities or commodities
exchanges, and there is no money transmission between the Company and
any counterparty.
– If FinCEN were to find that the Company is engaged in money
transmission, then such activity would be integral to the Company’s
business or eligible for the payment processor exemption.
– Lastly, should FinCEN find that the above exemptions do not apply, the
Company fits the definition of “user” rather than “exchanger” or
“administrator” pursuant to FinCEN’s guidance.1This letter first will address the application of the definition of money
transmission and its exemptions to the Company’s activities, and then address whether
the Company should be considered a user rather than an exchanger or administrator of
virtual currency.
FinCEN’s definition of money transmission and existing exemptions
In your letter, you reference language from FinCEN’s definition of money
transmitter that existed prior to FinCEN’s 2011 amendments to the MSB definition. On
July 21, 2011, FinCEN published a Final Rule amending definitions and other regulations
relating to MSBs (the “Rule”).2 The amended regulations define an MSB as “a person
wherever located doing business, whether or not on a regular basis or as an organized or
licensed business concern, wholly or in substantial part within the United States, in one or
more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this section. This
includes but is not limited to maintenance of any agent, agency, branch, or office within
the United States.”3
The Rule defines the term “money transmitter” to include a person that provides
money transmission services, or any other person engaged in the transfer of funds. The
term “money transmission services” means the acceptance of currency, funds, or other
1FIN-2013-G001, “Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using
Virtual Currencies,” March 18, 2013 (the “Guidance”).
2
Bank Secrecy Act Regulations – Definitions and Other Regulations Relating to Money Services
Businesses, 76 FR 43585 (July 21, 2011).
3
31 CFR § 1010.100(ff).2
value that substitutes for currency from one person and the transmission of currency,
funds, or other value that substitutes for currency to another location or person by any
means.4 The regulations also stipulate that whether a person is a money transmitter is a
matter of facts and circumstances, and identifies circumstances under which a person’s
activities would not make such person a money transmitter.5
You argue that the Platform renders exchanges anonymous among Customers in
the same way open exchanges for publicly traded equities keep the identity of each
member’s counterparty confidential. At this time, your analogy to the securities and
futures industries and their traditional methods for buying and selling securities and
commodities is not relevant for analysis of the Company’s obligations under the BSA.
FinCEN’s guidance issued on a product or service under one set of specific facts and
circumstances should only be relied upon when applied to another product or service that
shares the same specific facts and circumstances.
As explained in the Guidance, a person is an exchanger and a money transmitter if
the person accepts convertible virtual currency from one person and transmits it to
another person as part of the acceptance and transfer of currency, funds, or other value
that substitutes for currency.6 We disagree with your contention that there is no money
transmission when the instructions of the Customers are issued subject to the condition of
finding an offsetting match. The regulatory definition of money transmission does not
contain any element of conditionality before it applies. A person that accepts currency,
funds, or any value that substitutes for currency, with the intent and/or effect of
transmitting currency, funds, or any value that substitutes for currency to another person
or location if a certain predetermined condition established by the transmitter is met, is a
money transmitter under FinCEN’s regulations. The fact that such a transmission
sometimes may not occur in your business model if no match is found does not remove
the Company from the scope of the regulations for those transactions that do occur.
You state that if money transmission occurs at all, it occurs between the Customer
that sells and the Customer that purchases virtual currency. Your letter clearly describes
the Company’s Platform as consisting of two parts: an electronic matching book for
offers of buying and selling virtual currency and a set of book accounts that pre-fund the
transactions ordered by Customers that want to exchange virtual currency for real
currency (and, on the other hand, by Customers that want to exchange real currency for
virtual currency). You state that a key feature of the Platform is that Customers are never
identified to each other, even after the buyer and the seller are matched. The fact that
Customers are never identified to each other does not affect FinCEN’s analysis of the
transactions. FinCEN finds that in each trade conducted through the Platform, two
431 CFR § 1010.100(ff)(5)(i)(A).
31 CFR § 1010.100(ff)(5)(ii).
6
See FIN-2013-G001.
53
money transmission transactions occur: one between the Company and the Customer
wishing to buy virtual currency, and another between the Company and the Customer
wishing to sell such virtual currency at the same exchange rate.
With regard to whether the money transmission is integral to the provision of the
Company’s service, and thus potentially eligible for exemption, FinCEN has concluded
that the money transmission that takes place within the System does not qualify for the
exemption. There are three fundamental conditions that must be met for the exemption to
apply:
– The money transmission component must be part of the provision of
goods or services distinct from money transmission itself.
– The exemption can only be claimed by the person that is engaged in the
provision of goods or services distinct from money transmission.
– The money transmission component must be integral (that is, necessary)
for the provision of the goods or services.
In FinCEN’s view, the payment service that the Company intends to offer meets
the definition of money transmission. The Company is facilitating the transfer of value,
both real and virtual, between third parties. Such money transmission is the sole purpose
of the Company’s System, and is not a necessary part of another, non-money
transmission service being provided by the Company. Although rendered before the
2011 modifications to MSB definitions and in some cases involving a different type of
MSB, FinCEN reached the same conclusion in several administrative rulings that apply
to this particular point.7
As you noted in your letter, FinCEN stipulates four conditions for the payment
processor exemption to apply to a particular business pattern:8
(a) the entity providing the service must facilitate the purchase of goods or
services, or the payment of bills for goods or services (other than money
transmission itself);
(b) the entity must operate through clearance and settlement systems that admit
only BSA-regulated financial institutions;
(c) the entity must provide the service pursuant to a formal agreement; and7
See FIN-2008-R007 (“Whether a Certain Operation Protecting On-line Personal Financial Information is
a Money Transmitter” – 06/11/2008); FIN-2008-R004 (“Whether a Foreign Exchange Consultant is a
Currency Dealer or Exchanger or Money Transmitter” – 05/09/2008); FIN-2008-R003 (“Whether a Person
That is Engaged in the Business of Foreign Exchange Risk Management is a Currency Dealer or Exchanger
or Money Transmitter” – 05/09/2008); FIN-2008-R002 (“Whether a Foreign Exchange Dealer is a Currency
Dealer or Exchanger or Money Transmitter” – 05/09/2008).
8
FIN-2013-R002 (“Whether a Company that Offers a Payment Mechanism Based on Payable-Through
Drafts to its Commercial Customers is a Money Transmitter” – 11/13/2013).4
(d) the entity’s agreement must be at a minimum with the seller or creditor that
provided the goods or services and receives the funds.
Despite your assertion that this exemption would apply to the Platform, the
Company fails to meet two of the conditions for the exemption. Specifically, the
Customer is not receiving payment as a seller or creditor from a buyer or debtor for the
provision of non-money transmission related goods or services (FinCEN does not
consider providing virtual currency for real currency or vice versa as a non-money
transmission related service), and the Company is not operating through a clearing and
settlement system that only admits BSA-regulated financial institutions as members.
Although, according to your letter, payments to or from the Customer Accounts may take
place in part using a clearing and settlement system such as EPN, FedACH, or FedWire,
the Platform itself is not a clearance and settlement system that admits only BSAregulated financial institutions, and the payments of convertible virtual currency to and
from the Customers, by definition, take place outside such a clearance and settlement
system.
For the above reasons, FinCEN has determined that the Company is engaged in
money transmission, and such activity is not covered by either the integral exemption or
the payment processor exemption.
FinCEN’s Virtual Currency Guidance
On March 18, 2013, FinCEN issued guidance on the application of FinCEN’s
regulations to transactions in virtual currencies (the “Guidance”).9 FinCEN's regulations
define currency as “the coin and paper money of the United States or of any other country
that is designated as legal tender and that circulates and is customarily used and accepted
as a medium of exchange in the country of issuance.”10 In contrast to real currency,
“virtual” currency is a medium of exchange that operates like a currency in some
environments, but does not have all the attributes of real currency. In particular, virtual
currency does not have legal tender status in any jurisdiction. The Guidance addresses
“convertible” virtual currency. This type of virtual currency either has an equivalent
value in real currency, or acts as a substitute for real currency.
For purposes of the Guidance, FinCEN refers to the participants in generic virtual
currency arrangements, using the terms “exchanger,” “administrator,” and “user.” 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 authority9
See footnote 1.
31 CFR § 1010.100(m).10
5
to redeem (to withdraw from circulation) such virtual currency. A user is a person that
obtains virtual currency to purchase goods or services on the user’s own behalf
The Guidance makes clear that an administrator or exchanger of convertible
virtual currencies that accepts and transmits a convertible virtual currency, or buys or
sells convertible virtual currency in exchange for currency of legal tender or another
convertible virtual currency for any reason is a money transmitter under FinCEN's
regulations, unless a limitation to or exemption from the definition applies to the
person.11 The guidance also makes clear that “a user who obtains convertible virtual
currency and uses it to purchase real or virtual goods or services is not an MSB under
FinCEN's regulations.”
How a user engages in obtaining a virtual currency may be described using any
number of other terms, such as “earning,” “harvesting,” “mining,” “creating,” “autogenerating,” “manufacturing,” or “purchasing,” depending on the details of the specific
virtual currency model involved. The label applied to a particular process of obtaining
virtual currency is not material to its characterization under the BSA. Whether a person
is deemed to be an MSB depends on how that person uses the convertible virtual
currency, and for whose benefit. The mechanism by which the virtual currency is
obtained is not material in determining MSB status.
FinCEN does not accept the Company’s argument that it should be considered a
user and not an exchanger, because “a true virtual currency exchange would have its own
reserve of virtual currency and dollars that it would buy and sell in order to fund
exchanges with its users.” As explained in the Guidance and indicated above, a person is
an exchanger and a money transmitter if the person accepts convertible virtual currency
from one person and transmits it to another person as part of the acceptance and transfer
of currency, funds, or other value that substitutes for currency. The method of funding
the transactions is not relevant to the definition of money transmitter. An exchanger will
be subject to the same obligations under FinCEN regulations regardless of whether the
exchanger acts as a broker (attempting to match two (mostly) simultaneous and offsetting
transactions involving the acceptance of one type of currency and the transmission of
another) or as a dealer (transacting from its own reserve in either convertible virtual
currency or real currency). Therefore, FinCEN finds that the Company is acting as an
exchanger of convertible virtual currency, as that term was described in the Guidance.
When engaging in convertible virtual currency transactions as an exchanger, a
person must register with FinCEN as a money transmitter, assess the money laundering
risk involved in its non-exempt transactions, and implement an anti-money laundering
11The definition of “money transmitter” in FinCEN's regulations defines six sets of circumstances –
variously referred to as limitations or exemptions – under which a person is not a money transmitter,
despite accepting and transmitting currency, funds, or value that substitutes for currency. 31 CFR
§ 1010.100(ff)(5)(ii)(A)-(F).6
program to mitigate such risk. In addition, the Company must comply with the
recordkeeping, reporting, and transaction monitoring requirements under FinCEN
regulations. Examples of such requirements include the filing of Currency Transaction
Reports (31 CFR § 1022.310) and Suspicious Activity Reports (31 CFR § 1022.320),
whenever applicable, general recordkeeping maintenance (31 CFR § 1010.410), and
recordkeeping related to the sale of negotiable instruments (31 CFR § 1010.415).
Furthermore, to the extent that any of the Company’s transactions constitute a
“transmittal of funds” (31 CFR § 1010.100(ddd)) under FinCEN’s regulations, then the
Company must also comply with the “Funds Transfer Rule” (31 CFR § 1010.410(e)) and
the “Funds Travel Rule” (31 CFR § 1010.410(f)).12
This ruling is provided in accordance with the procedures set forth at 31 CFR Part
1010 Subpart G. In arriving at the conclusions in this administrative ruling, we have
relied upon the accuracy and completeness of the representations you made in your
communications with us. Nothing precludes FinCEN from arriving at a different
conclusion or from taking other action should circumstances change or should any of the
information you have provided prove inaccurate or incomplete. We reserve the right,
after redacting your name and address, and similar identifying information for your
clients, to publish this letter as guidance to financial institutions in accordance with our
regulations.13 You have fourteen days from the date of this letter to identify any other
information you believe should be redacted and the legal basis for redaction.
If you have questions about this ruling, please contact FinCEN's regulatory
helpline at (703) 905-3591.Sincerely,
//signed//
Jamal El-Hindi
Associate Director
Policy Division12
For example, the definition of transmittal of funds involves unconditional transmittal orders. Please note
that FinCEN does not consider some predetermined conditions (such as “at market”) to exempt a series of
transactions involving the acceptance and transmission of currency, funds, or value that substitutes for
currency from a transmitter to a recipient from the definition of transmittal of funds and its related
recordkeeping requirements.
13
31 CFR §§ 1010.711-717.7
And the Second:
FIN-2014-R012
Issued: October 27, 2014
Subject: Request for Administrative Ruling on the Application of
FinCEN’s Regulations to a Virtual Currency Payment System
Dear [ ]:
This responds to your letter of January 6, 2014, seeking an administrative ruling
from the Financial Crimes Enforcement Network (“FinCEN”) on behalf of [ ] (the
“Company”), about the Company’s possible status as a money services business (“MSB”)
under the Bank Secrecy Act (“BSA”). Specifically, you ask whether the convertible
virtual currency payment system the Company intends to set up (the “System”) would
make the Company a money transmitter under the BSA. Based on the following analysis
of the description of the System to provide payments to merchants who wish to receive
customer payments in Bitcoin, FinCEN finds that, if the Company sets up the System, the
Company would be a money transmitter and should comply with all risk management,
risk mitigation, recordkeeping, reporting, and transaction monitoring requirements
corresponding to such status.
You state in your letter that the Company wishes to set up a System that will
provide virtual currency-based payments to merchants in the United States and (mostly)
Latin America, who wish to receive payment for goods or services sold in a currency
other than that of legal tender in their respective jurisdictions. The Company would
receive payment from the buyer or debtor in currency of legal tender (“real currency”),
and transfer the equivalent in Bitcoin to the seller or creditor, minus a transaction fee.
The current intended market for the System is the hotel industry in four Latin American
countries where, because of currency controls and extreme inflation, merchants face
substantial foreign exchange risks when dealing with overseas customers.
According to your letter, a merchant will sign up with the Company to use the
System, and incorporate the Company’s software into its website. Customers purchasing
the merchant’s goods or services (e.g., hotel reservations) will pay for the purchase using
a credit card. Instead of the credit card payment going to the merchant, it will go to the
Company, which will transfer the equivalent in Bitcoin to the merchant. The Company
pays the merchant using the reserve of Bitcoin it has acquired from wholesale purchases
from virtual currency exchangers at the Company’s discretion (thus the Company
assumes any exchange risk that occurs during the time between the Company’s wholesale
purchases and its payment to a merchant). The Company has no agreement with the
customer and will only make payment to the merchant.
1You maintain that the Company should not be regulated as a money transmitter
because it does not conform to the definition of virtual currency exchanger, due to the
fact that the Company makes payments from an inventory it maintains, rather than
funding each individual transaction. You also maintain that, should the Company be
considered an exchanger of convertible virtual currency, the Company’s business should
be covered under an exemption that applies to certain payment processing activities, 1
and/or the Company’s transmissions should be deemed integral to the transaction and
thereby covered under another exemption from money transmission.2
FinCEN’s Virtual Currency Guidance
On March 18, 2013, FinCEN issued guidance on the application of FinCEN’s
regulations to transactions in virtual currencies (the “Guidance”).3 FinCEN's regulations
define “currency” as “[t]he coin and paper money of the United States or of any other
country that is designated as legal tender and that circulates and is customarily used and
accepted as a medium of exchange in the country of issuance.”4 In contrast to real
currency, “virtual” currency is a medium of exchange that operates like a currency in
some environments, but does not have all the attributes of real currency. In particular,
virtual currency does not have legal tender status in any jurisdiction. The Guidance
addresses “convertible” virtual currency. This type of virtual currency either has an
equivalent value in real currency, or acts as a substitute for real currency.
For purposes of the Guidance, FinCEN refers to the participants in generic virtual
currency arrangements, using the terms “exchanger,” “administrator,” and “user.” 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. A user is a person that
obtains virtual currency to purchase goods or services.5 Under the Guidance, both
exchangers and administrators are considered to be money transmitters unless a limitation
or exemption from the definition of money transmitter applies to that person.61
31 CFR § 1010.100(ff)(5)(ii)(B).
31 CFR § 1010.100(ff)(5)(ii)(F).
3
FIN-2013-G001(“Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using
Virtual Currencies,” March 18, 2013).
4
31 CFR § 1010.100(m).
5
FIN-2014-R001 “Application of FinCEN’s Regulations to Virtual Currency Mining Operations” 01/30/2014, clarified that a user is a person that obtains virtual currency to purchase goods or services on
the user’s own behalf. (emphasis added)
6
See FIN-2013-G001.
22
FinCEN disagrees with your position that the Company does not convert the
customer’s real currency into virtual currency because the Company purchases and stores
large quantities of Bitcoin that the Company then uses to pay the merchant. As described
above, the Company is an exchanger under the Guidance because it engages as a business
in accepting and converting the customer’s real currency into virtual currency for
transmission to the merchant. The fact that the Company uses its cache of Bitcoin to pay
the merchant is not relevant to whether it fits within the definition of money transmitter.
An exchanger will be subject to the same obligations under FinCEN regulations
regardless of whether the exchanger acts as a broker (attempting to match two (mostly)
simultaneous and offsetting transactions involving the acceptance of one type of currency
and the transmission of another) or as a dealer (transacting from its own reserve in either
convertible virtual currency or real currency).
FinCEN concludes that the Company would be a money transmitter, specifically
because it is acting as an exchanger of convertible virtual currency, as that term was
described in the Guidance. Additionally, you then ask, if FinCEN determines that the
Company is an exchanger, whether either an exemption for certain payment processing
activities or an exemption for transactions integral to the sale of other goods or services
would apply.
FinCEN’s definition of money transmission and existing exemptions
On July 21, 2011, FinCEN published a Final Rule amending definitions and other
regulations relating to MSBs (the “Rule”).7 The amended regulations define an MSB as
“a person wherever located doing business, whether or not on a regular basis or as an
organized or licensed business concern, wholly or in substantial part within the United
States, in one or more of the capacities listed in paragraphs (ff)(1) through (ff)(7) of this
section. This includes but is not limited to maintenance of any agent, agency, branch, or
office within the United States.”8
BSA regulations, as amended, define the term “money transmitter” to include a
person that provides money transmission services, or any other person engaged in the
transfer of funds. The term “money transmission services” means the acceptance of
currency, funds, or other value that substitutes for currency from one person and the
transmission of currency, funds, or other value that substitutes for currency to another
location or person by any means.9 The regulations also stipulate that whether a person is
a money transmitter is a matter of facts and circumstances, and identifies circumstances
under which a person’s activities would not make such person a money transmitter.10
7Bank Secrecy Act Regulations – Definitions and Other Regulations Relating to Money Services
Businesses, 76 FR 43585 (July 21, 2011).
8
31 CFR § 1010.100(ff).
9
31 CFR § 1010.100(ff)(5)(i)(A).
10
31 CFR § 1010.100(ff)(5)(ii).3
FinCEN stipulates four conditions for the payment processor exemption to apply
to a particular business pattern:
(a) the entity providing the service must facilitate the purchase of goods or
services, or the payment of bills for goods or services (other than money
transmission itself);
(b) the entity must operate through clearance and settlement systems that admit
only BSA-regulated financial institutions;
(c) the entity must provide the service pursuant to a formal agreement; and
(d) the entity’s agreement must be at a minimum with the seller or creditor that
provided the goods or services and receives the funds.11
The Company fails to satisfy one of these conditions. The Company is not
operating through clearing and settlement systems that only admit BSA-regulated
financial institutions as members. According to your letter the real currency payments
from the consumer take place within a clearing and settlement system that only admits
BSA-regulated financial institutions as members (specifically, a credit card network),
however, the payment of the Bitcoin equivalent to the merchant, by definition, takes
place outside such a clearing and settlement system, either to a merchant-owned virtual
currency wallet or to a larger virtual currency exchange that admits both financial
institution and non-financial institution members, for the account of the merchant.
With regard to whether the money transmission is integral to the provision of the
Company’s service, and thus potentially eligible for exemption, FinCEN has concluded
that the money transmission that takes place within the System does not qualify for the
exemption. There are three fundamental conditions that must be met for the exemption to
apply:
a) The money transmission component must be part of the provision of goods or
services distinct from money transmission itself;
b) The exemption can only be claimed by the person that is engaged in the
provision of goods or services distinct from money transmission;
c) The money transmission component must be integral (that is, necessary) for
the provision of the goods or services.
In FinCEN’s view, the payment service that the Company intends to offer meets
the definition of money transmission. Such money transmission is the sole purpose of the
11See 31 CFR § 1010.100(ff)(5)(ii)(B); see also FIN-2013-R002 (“Whether a Company that Offers a
Payment Mechanism Based on Payable-Through Drafts to its Commercial Customers is a Money
Transmitter” – 11/13/2013). FIN-2013-R002 clarifies that for the payment processor exemption to apply,
the entity must use a clearance and settlement system that intermediates solely between BSA regulated
institutions.4
Company’s System, and is not a necessary part of another, non-money transmission
service being provided by the Company. Although rendered before the 2011
modifications to MSB definitions and in some cases involving a different type of MSB,
FinCEN reached the same conclusion in several administrative rulings that apply to this
particular point.12
For the above reasons, FinCEN has determined that the Company is engaged in
money transmission, and such activity is not covered by either the payment processor or
the integral exemption. Please note that FinCEN would reach the same conclusions if
payments were made in virtual currencies other than Bitcoin. As a money transmitter, the
Company will be required to (a) register with FinCEN, (b) conduct a comprehensive risk
assessment of its exposure to money laundering,13 (c) implement an Anti-Money
Laundering Program based on such risk assessment, and (d) comply with the
recordkeeping, reporting and transaction monitoring obligations set down in Parts 1010
and 1022 of 31 CFR Chapter X. Examples of such requirements include the filing of
Currency Transaction Reports (31 CFR § 1022.310) and Suspicious Activity Reports (31
CFR § 1022.320), whenever applicable, general recordkeeping maintenance (31 CFR §
1010.410), and recordkeeping related to the sale of negotiable instruments (31 CFR §
1010.415). Furthermore, to the extent that any of the Company’s transactions constitute a
“transmittal of funds” (31 CFR § 1010.100(ddd)) under FinCEN’s regulations, then the
Company must also comply with the “Funds Transfer Rule” (31 CFR § 1010.410(e)) and
the “Funds Travel Rule” (31 CFR § 1010.410(f)).
This ruling is provided in accordance with the procedures set forth at 31 CFR Part
1010 Subpart G. In arriving at the conclusions in this administrative ruling, we have
relied upon the accuracy and completeness of the representations you made in your
communications with us. Nothing precludes FinCEN from arriving at a different
conclusion or from taking other action should circumstances change or should any of the
information you have provided prove inaccurate or incomplete. We reserve the right,
after redacting your name and address, and similar identifying information for your
clients, to publish this letter as guidance to financial institutions in accordance with our
regulations.14 You have fourteen days from the date of this letter to identify any other
information you believe should be redacted and the legal basis for redaction.
12See FIN-2008-R007 (“Whether a Certain Operation Protecting On-line Personal Financial Information is
a Money Transmitter” – 06/11/2008); FIN-2008-R004 (“Whether a Foreign Exchange Consultant is a
Currency Dealer or Exchanger or Money Transmitter” – 05/09/2008); FIN-2008-R003 (“Whether a Person
That is Engaged in the Business of Foreign Exchange Risk Management is a Currency Dealer or Exchanger
or Money Transmitter” – 05/09/2008); and FIN-2008-R002 (“Whether a Foreign Exchange Dealer is a
Currency Dealer or Exchanger or Money Transmitter” – 05/09/2008).
13
We caution the Company about incorporating into its comprehensive risk assessment the delicate balance
between helping merchants avoid losses due to the fluctuation of their currencies of legal tender because of
inflationary trends or devaluation, on the one hand, and collaboration with their potential evasion of foreign
exchange control regulations applicable in their jurisdictions, on the other.
14
31 CFR §§ 1010.711-717.5
If you have questions about this ruling, please contact FinCEN's regulatory
helpline at (703) 905-3591.Sincerely,
//signed//
Jamal El-Hindi
Associate Director
Policy Division6