US govt clarifies virtual currency regulatory position

US govt clarifies virtual currency regulatory position

The US government has moved to clarify its regulatory stance on virtual currencies such as bitcoin, confirming that while users are not classified as money services businesses (MSBs) subject to its rules, exchanges and administrators are.

In a guidance notice, the Treasury's Financial Crimes Enforcement Network (FinCEN) confirms that users of bitcoins, Amazon Coins and other virtual currencies are not MSBs under the Bank Secrecy Act and so do not fall under registration, reporting, and recordkeeping regulations.

However, exchangers - those "engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency" - and administrators - those "engaged as a business in issuing (putting into circulation) a virtual currency" - are considered MSBs.

This means that firms such as CoinLab, which recently agreed a deal to handle the North American operations of bitcoin exchange MT. Gox, are likely to fall under the regulations.

According to bitcoinmagazine, the news could prove very expensive for US-based bitcoin exchanges, with MSB licenses requiring "tens of thousands of capital to acquire in each state, and a money transmitter must get a license in each state whose residents they intend to provide services to".

One of the firms affected will be Tradehill, which is relaunching this week after more than a year out of action following a legal spat with processor Dwolla.

Separately, tech site BGR has reported a surge in downloads for bitcoin-related iPhone apps in Spain, speculating that the recent news from Cyprus is prompting people to consider moving their cash to a currency that cannot be confiscated by the government.

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