Below is the full statement from the president of IRTA on this matter. It is reproduced from the barter exchange industry's LinkedIn group:
http://www.linkedin.com/groups/This-is-must-read-exchange-4410507.S.224685603
IRTA has been researching this issue and has received guidance from its government liaison with 30 years financial sector government experience and knowledge of the barter industry. Her opinion is that contacting a FinCEN hotline representative without knowledge of the industry is a waste of time.
“Unless a barter company was trading “real currency” for their currency to be turned back into a “real currency” on the other end, there are no concerns.” If you are issuing a convertible virtual currency the first paragraph explains the requirements that affect you.
Background
The Bank Secrecy Act (BSA) and corresponding regulations subject financial intuitions and Money Services Businesses (MSBs) to a wide range of anti-money laundering obligations. Among other things, MSBs must establish anti-money laundering programs, file currency transaction reports and suspicious activity reports, and collect and maintain customer information and transaction records. Most types of MSBs must also register with FinCEN. Regulated MSBs include, among other entities, providers of prepaid access and money transmitters.
On March 18, FinCEN issued the guidance to clarify the applicability of Bank Secrecy Act regulations to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies. FinCEN clarifies that a person that obtains a virtual currency to purchase goods or service (a “user”) does not fit within the regulatory definition of a money transmission service, and therefore is not subject to the relevant regulations. However, a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency (an “exchanger”), and a person engaged as a business in issuing a virtual currency, and who has the authority to redeem such virtual currency (an “administrator”), generally are considered money transmitters under FinCEN’s regulations if they (i) accept and transmit a convertible virtual currency or (ii) buy or sell convertible virtual currency for any reason. The guidance reviews FinCEN’s specific determinations regarding different activities involving virtual currencies and the appropriate regulatory treatment of administrators and exchangers under each of the scenarios. Specifically, the guidance addresses (i) brokers and dealers of e-currencies and e-precious metals; (ii) centralized convertible virtual currencies; and (iii) de-centralized convertible virtual currencies.
“Keep in mind that FinCEN is addressing Bank Secrecy, in particular, people moving currency under the radar. You'll notice that part of this equation is converting the virtual currency from real currency and back into real currency. Now, if a barter company was engaged in activities (based upon the facts and circumstances of the particular case) to essentially help a person (legal entity) to move funds under the radar, then a barter company, just like a non-barter company, would need to concern themselves with the regulations.”
Here's some excerpts on the regulations to give you a sense of the target audience:
Money launderers thinking virtual currency provides an easy way to towel-off have had a rude awakening this month with the U.S. Treasury announcing that virtual currencies, like real currencies, must abide by the same rules regarding what's legal and illegal.”
"Companies engaged in activities involving convertible virtual currencies should assess the impact of the Guidance on their obligations under the BSA Regulations without delay. Moreover, in light of the indirect influence FinCEN positions can have on interpretations of state money transmitter licensing laws, administrators and exchangers of convertible virtual currency may want to re-evaluate their status under those laws as well.
Read more at: http://phys.org/news/2013-03-treasury-guidelines-virtual-money-transmitters.html#jCp
FinCEN’s regulations define currency (also referred to as “real” currency) as “the coin and paper money of the United States or of any other country that [i] is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance.”
Whereas virtual currency is something that sometimes acts like currency but isn’t legally accepted:
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. This 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.
"The distinction is very important to the government. The new rules basically make it clear that even though the government doesn’t think that Bitcoin is the real thing, operators like BitPay, which exchange and administer Bitcoin will be treated like businesses who wire money and exchange foreign currency."
"As the WSJ reports, that basically means that these companies will have some additional bookkeeping requirements, and that they’ll have to report transactions of more than about £6,000. Whether this new guidance will be enforceable given the untraceable nature of Bitcoin remains to be seen."
http://www.linkedin.com/groups/This-is-must-read-exchange-4410507.S.224685603
IRTA has been researching this issue and has received guidance from its government liaison with 30 years financial sector government experience and knowledge of the barter industry. Her opinion is that contacting a FinCEN hotline representative without knowledge of the industry is a waste of time.
“Unless a barter company was trading “real currency” for their currency to be turned back into a “real currency” on the other end, there are no concerns.” If you are issuing a convertible virtual currency the first paragraph explains the requirements that affect you.
Background
The Bank Secrecy Act (BSA) and corresponding regulations subject financial intuitions and Money Services Businesses (MSBs) to a wide range of anti-money laundering obligations. Among other things, MSBs must establish anti-money laundering programs, file currency transaction reports and suspicious activity reports, and collect and maintain customer information and transaction records. Most types of MSBs must also register with FinCEN. Regulated MSBs include, among other entities, providers of prepaid access and money transmitters.
On March 18, FinCEN issued the guidance to clarify the applicability of Bank Secrecy Act regulations to persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies. FinCEN clarifies that a person that obtains a virtual currency to purchase goods or service (a “user”) does not fit within the regulatory definition of a money transmission service, and therefore is not subject to the relevant regulations. However, a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency (an “exchanger”), and a person engaged as a business in issuing a virtual currency, and who has the authority to redeem such virtual currency (an “administrator”), generally are considered money transmitters under FinCEN’s regulations if they (i) accept and transmit a convertible virtual currency or (ii) buy or sell convertible virtual currency for any reason. The guidance reviews FinCEN’s specific determinations regarding different activities involving virtual currencies and the appropriate regulatory treatment of administrators and exchangers under each of the scenarios. Specifically, the guidance addresses (i) brokers and dealers of e-currencies and e-precious metals; (ii) centralized convertible virtual currencies; and (iii) de-centralized convertible virtual currencies.
“Keep in mind that FinCEN is addressing Bank Secrecy, in particular, people moving currency under the radar. You'll notice that part of this equation is converting the virtual currency from real currency and back into real currency. Now, if a barter company was engaged in activities (based upon the facts and circumstances of the particular case) to essentially help a person (legal entity) to move funds under the radar, then a barter company, just like a non-barter company, would need to concern themselves with the regulations.”
Here's some excerpts on the regulations to give you a sense of the target audience:
Money launderers thinking virtual currency provides an easy way to towel-off have had a rude awakening this month with the U.S. Treasury announcing that virtual currencies, like real currencies, must abide by the same rules regarding what's legal and illegal.”
"Companies engaged in activities involving convertible virtual currencies should assess the impact of the Guidance on their obligations under the BSA Regulations without delay. Moreover, in light of the indirect influence FinCEN positions can have on interpretations of state money transmitter licensing laws, administrators and exchangers of convertible virtual currency may want to re-evaluate their status under those laws as well.
Read more at: http://phys.org/news/2013-03-treasury-guidelines-virtual-money-transmitters.html#jCp
FinCEN’s regulations define currency (also referred to as “real” currency) as “the coin and paper money of the United States or of any other country that [i] is designated as legal tender and that [ii] circulates and [iii] is customarily used and accepted as a medium of exchange in the country of issuance.”
Whereas virtual currency is something that sometimes acts like currency but isn’t legally accepted:
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. This 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.
"The distinction is very important to the government. The new rules basically make it clear that even though the government doesn’t think that Bitcoin is the real thing, operators like BitPay, which exchange and administer Bitcoin will be treated like businesses who wire money and exchange foreign currency."
"As the WSJ reports, that basically means that these companies will have some additional bookkeeping requirements, and that they’ll have to report transactions of more than about £6,000. Whether this new guidance will be enforceable given the untraceable nature of Bitcoin remains to be seen."
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