Cryptocurrency, also known as virtual money, digital tokens, and coins, has emerged as one of the most popular and adaptable means of conducting financial transactions. The bitcoin market is quickly increasing. However, there remains confusion over the handling of such digital currency offers and sales. Because of the growing popularity of utilising cryptocurrencies in financial transactions and to raise money, several governments have begun to adopt legislation to govern how bitcoin is used in commercial operations.
The United States has enacted a number of federal and state-level rules. Certain components of cryptocurrencies may be subject to money service industry laws, securities legislation, and state-specific restrictions. If your company centres on bitcoin, this article will help you ensure regulatory compliance while doing cryptocurrency-related activities.
Regulations for Money Service Businesses
If your firm includes transactions converting cash to digital assets or digital assets to cash, you must assess if some of these transactions may be subject to money service industry restrictions. Virtual currency exchangers and administrators are considered “money transmitters” and must follow the Bank Secrecy Act and its accompanying rules. Registration with FinCEN, an AML compliance programme, and a mechanism for filing BSA reports are some of the criteria.
In March 2018, the Financial Crimes Enforcement Network (FinCEN) published a guidance letter with instances of when the money transmitter restrictions would most likely apply. A money transmitter is, for example, an exchange that offers Initial Coin Offering (ICO) coins or tokens or trades them for other virtual currency, fiat cash, or other value that substitutes for currency. Similarly, a money transmitter is a developer that offers convertible virtual currency, including ICO coins or tokens, in return for another sort of value that substitutes for cash.
It is critical to examine state-specific rules while picking which state to establish your bitcoin firm in. Although most governments remain mute or ambiguous about their position on crypto-related transactions, several states have adopted their own legislation at the state level. In Wyoming, for example, crypto to crypto is not considered money transfer. To perform virtual currency operations in the state of New York, cryptocurrency-related firms must get a BitLicense from the New York State Department of Financial Services (NYSDFS).