The Feds Don't Seem to Understand Bitcoin
Last week, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) made waves in the Bitcoin community by releasing a statement of guidance that paid special attention to virtual currencies. Patrick Murck, who provides legal council to Bitcoin.org and contributes to the foundation's blog, expressed concerns about the implementation of the suggestions, which are being made to the Bank Secrecy Act.
Murck said he "was happy to see FinCEN issue some clarity around the overly-broad pre-paid access rules and definitively state that they do not apply in the context of bitcoin," but he was also pretty worried about the ill-fitting definitions FinCEN came up with:
Left unsaid are any specifics around the facts and circumstances that would constitute "engaging as a business." [In reference to the definitions of "User", "Administrator" and "Exchanger"]
FinCEN's guidance implies that every person who has ever had any virtual currency and has ever exchanged that virtual currency for real currency may now be considered a money transmitter under the Bank Secrecy Act. That is, of course, an untenable position.
What is crystal-clear is that once a person sells a single Satoshi for real currency that person is no longer a "User" and therefore not categorically exempted from MSB registration.
Murck summarized the FinCEN guidance as follows:
- A person may spend money to purchase bitcoin or mine bitcoin and then exchange the currency for goods and/or services without having to register with FinCEN as an MSB.
- If a person receives real money in exchange for their bitcoin they MAY have to register with FinCEN.
- If a miner exchanges their mined bitcoin for real money they MUST register with FinCEN.
- Anyone transacting bitcoin on someone else's behalf MUST register with FinCEN.
Murck also tried to calm businesses and individuals working with the currency, noting that "under the Administrative Procedures Act (APA), FinCEN can't promulgate new rules without going through a notice and comment proceeding whereby the public may have their voices heard."