FinCEN issues guidance on convertible virtual currencies - 09 May 2019

FinCEN released an interpretive guidance of preexisting regulations to apply to certain business models involving money transmission of substitutes for currency, specifically, convertible virtual currency. The guidance is in response to questions raised by financial institutions, law enforcement, and regulators concerning the regulatory treatment of multiple variations of businesses dealing in CVCs. This guidance lists specific examples of business models that are included in the definition of money transmission and specific business models that are not; seven categories of included business models are listed: 

  1. Peer-to-peer exchanges
  2. CVC wallets
  3. CVC kiosks
  4. Decentralized applications
  5. Anonymity-enhanced CVC transactions
  6. Payment processing services
  7. Internet casinos

As well, anyone exchanging or administering convertible virtual currency who is not already regulated by the CFTC or the SEC needs to register as a money services business and will be included in the definition of money transmission. The guidance lays out the steps a money services business must take to comply with regulations: 1) register with FinCEN, 2) get an anti-money laundering compliance policy that specifies what Know Your Customer information will be collected, 3) designate a Compliance Officer to monitor transactions and file suspicious activity reports for activity that looks suspicious and file currency transaction reports for transfers over ten thousand dollars, and adhere to the record-keeping requirements. The regulatory interpretations contained in the guidance may extend only to other business models consisting of the same key facts and circumstances as the business models described in the guidance. Similarly, a person who is engaged in more than one type of business model may be subject to more than one type of regulatory obligation or exemption. The purpose of this guidance is to help financial institutions comply with already existing BSA obligations as they relate to current and emerging business models involving convertible virtual currency.  

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