The US Financial Crimes Enforcement Network (FINCEN) released its opinion on: Request for Administrative Ruling on the Application of FinCEN’s Regulations to a Virtual Currency Payment System yesterday (27th October 2014).
The ruling which is an update to an earlier ruling of October 2013, in which only Bitcoin Exchanges were subject to the Money Transmitter Rules, exempted other types of businesses from being categorized as money transmitters.
With the new ruling, it seems that Bitcoin Brokers and Merchant processors would now also need to be licensed and obtain Money Transmitters Licenses in the States where the Bitcoin companies intends to source clients from.
Now that FinCEN has issued new guidelines what remains to be seen, what action would the individual department of banking & financial services (or equivalent) in each State do? Would they issue a cease & desist notice to the existing players? give them a temporary pass till such time they are licensed?
If the States do not give a temporary relief to these companies then it would have serious repercussions on their daily trade volume and company valuations.
I have a sinking feeling that the regulators, especially FinCEN will also go after exchanges that are outside the US and yet picking up business from the US. The only clear winner in this battle of regulatory compliance with having the associated licenses is CoinX, a stealth startup based out of Atlanta, GA, that has 30+ related money transmitter licenses.
For other startups, this news could not come at a worse time. These companies now have to pony up the capital to apply for licenses, increase their net worth, find surety bonding and insurance so that they can qualify for license application, a process which can take many many months.
This page was last updated on October 28, 2014.