March 19, 2013

US Regulatory Guidance on Bitcoin

The Financial Crimes Enforcement Network (FinCEN) has issued new guidelines addressing the Application of FinCEN's Regulations to Persons Administering, Exchanging, or Using Virtual Currencies. The guidelines do not mention Bitcoin by name, but there is little doubt which "de-centralized virtual currency" FinCEN had in mind.

The good news is that Bitcoin is not recognized as a "real currency" by FinCEN, and therefore, helps Bitcoin avoid the regulations that apply to "prepaid access" products: "A person's acceptance and/or transmission of convertible virtual currency cannot be characterized as providing or selling prepaid access because prepaid access is limited to real currencies." Furthermore, FinCEN writes, "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." This means that a holder of bitcoins can spend those funds without registering as a "money services business" or reporting concerns regarding money transmission.

From there, the guidance gets a little unclear, especially regarding the lines between "users", "money transmitters", and "exchangers". Bitcoin Foundation's general counsel posts his interpretation here.