FinCEN issues new regulations, US digital currency companies may face more supervision

The Financial Crimes Enforcement Network (FinCEN) has published new rules for businesses in the United States seeking to tokenize commodities traded on blockchains.

In a letter responding to the anonymous company, FinCEN determined that the company is a money transmitter transmitter and recommended that startups with a similar business model be licensed in all 50 states.

The letter can be interpreted as saying that money transfer services should be broadly applicable to the following two types of startups:

1. Safekeeping of physical assets

2. Issuing digital assets for trading

Its ruling is as follows:

“The SEC believes that because the Company not only acted as a commodity broker or dealer, but also served as an administrator of a freely convertible virtual currency, the Company falls within the definition of a money transmitter service.”

exception

Notably, the FBI also provides guidance on how such business models can avoid being classified as money transmission services in the United States.

Citing a 2011 exemption decision, the FBI wrote:

"The only situation where there is an exemption is if the type of economic service provided by the company is that the buyer pays the seller directly, then the company will meet the conditions of the exemption and the enforcement network will not consider the company to be a money transmitter service."

Interpretation

In response to the ruling, risk and compliance expert Juan Llanos said:

“More broadly, any broker or dealer (or any other firm) that issues a certificate of ownership (whether paper, digital, or a statement) and enables the unrestricted transfer of value is a money transmitter.”

Llanos believes this understanding can be extended to many parts of the bitcoin ecosystem, even to services like bitcoin wallet provider Blockchain.info.

"Governments could argue that wallet services, which provide an 'account' or representation of value through software, are in fact 'issuing' electronic certificates of ownership," he said.

Ultimately, Llanos reasoned, the ruling will lead to an increase in the number of digital currency companies that fall under the definition of money transmission services and, therefore, will be subject to the provisions of the Bank Secrecy Act.

－－－－