The Silk Road 2.0 website as well as dozens of other dark market websites were seized as part of a coordinated international law enforcement action involving the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice’s Computer Crime and Intellectual Property Section, and multiple European law enforcement and intelligence agencies.

On Monday, FinCEN issued two advisory rulings responding to requests for clarification regarding the money transmitter status of two virtual currency companies.  While the advisory rulings are technically limited to only the requesting companies, they strongly suggest that FinCEN considers both virtual currency payment processors and virtual currency exchange platforms to be money transmitters.  In practical terms, many virtual currency businesses that previously have argued that they are exempt from FinCEN regulations will now have to register as money transmitters, implement an anti-money laundering program, and comply with other reporting and recordkeeping requirements under the Bank Secrecy Act.  We summarize the two rulings below, and then lay out some of the key “takeaways” for virtual currency businesses.


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FinCEN issued two advisory rulings responding to requests from a virtual currency payment processor and a virtual currency exchange platform regarding their money transmitter status under federal law.  A summary and analysis of the rulings can be found here.

The IRS issued Notice 2014-21 yesterday, which describes how the IRS will apply U.S. tax principles to transactions involving virtual currency.  The GAO had previously issued a report on virtual economies and currencies, calling for additional IRS guidance on the basic tax reporting requirements applicable to virtual currencies.
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It appears that FinCEN has, at least to some extent, clarified the status of Bitcoin miners as Money Service Businesses (MSBs) under the federal Bank Secrecy Act (BSA).  Cointext.com has posted the text of an unpublished administrative ruling from FinCEN responding to a request for clarification filed by Atlantic City Bitcoin LLC in June of this year.  While we have not yet been able to confirm it with FinCEN, the ruling appears to be genuine.  According to the text of the ruling posted on Cointext.com, Atlantic City Bitcoin would not be engaged in money transmission (and thus required to register with FinCEN as an MSB) if it (1) uses mined bitcoins to purchase goods or services from, or pay debts due to, others on its own behalf, (2) converts mined bitcoins into legal tender or other virtual currencies, or (3) transfers mined bitcoins to its owners.
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The Financial Crimes Enforcement Network, or FinCEN—the Treasury Department agency that oversees anti-money laundering efforts—has recently sent letters to several Bitcoin-related businesses saying that they may be engaging in money transmission without being registered with FinCEN.  Under FinCEN’s regulations, any entity engaging in money transmission must register as a “money service business,” or face potentially severe civil and criminal penalties. 
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