Accepting BTC and SBD as Payment in the US - Legal Considerations - FinCEN 2014 Ruling Regarding Virtual Currency Payment System
Do you accept BTC or SBD as a form of payment in the US, or plan to in the future?
If so, this ruling from the US government on The Application of FinCEN’s Regulations to a Virtual Currency Payment System likely applies to you. For those of you who are not interested in reading the dense legal document, I will summarize what I found.
(This paragraph is not the subject of this post, but I wanted to give the context of why I am writing this article.)
I was recently doing research on the possibility of setting up a SBD->USD payment gateway via PayPal. Long story short - I decided not to proceed due to the complex and difficult nature of regulations/laws in the US regarding money laundering. In the process of doing my research though, I came across a very interesting ruling from The US Department of Treasury Financial Crimes Enforcement Unit, and decided it would be good to share what I found.
The topic of the ruling is that a company was planning to accept BTC as a form of payment, and they wanted to know "Whether the convertible virtual currency payment system the Company intends to set up would make the Company a money transmitter under the BSA".
A "money transmitter" is required by US law to comply with a whole bunch of regulations to ensure that they are not facilitating money laundering and other types of financial crimes. It is a huge burden to place on a store owner or shop that just wants to accept digital currencies as a form of payment: As a money transmitter, the Company will be required to (a) register with FinCEN, (b) conduct a comprehensive risk assessment of its exposure to money laundering,13 (c) implement an Anti-Money Laundering Program based on such risk assessment, and (d) comply with the recordkeeping, reporting and transaction monitoring obligations set down in Parts 1010 and 1022 of 31 CFR Chapter X. Examples of such requirements include the filing of Currency Transaction Reports (31 CFR § 1022.310) and Suspicious Activity Reports (31 CFR § 1022.320), whenever applicable, general recordkeeping maintenance (31 CFR § 1010.410), and recordkeeping related to the sale of negotiable instruments (31 CFR § 1010.415). Furthermore, to the extent that any of the Company’s transactions constitute a “transmittal of funds” (31 CFR § 1010.100(ddd)) under FinCEN’s regulations, then the Company must also comply with the “Funds Transfer Rule” (31 CFR § 1010.410(e)) and the “Funds Travel Rule” (31 CFR § 1010.410(f)). So what is it about accepting BTC that makes the shop owner a "money transmitter"? Basically, in order to not be considered a money transmitter, the company must comply with these four requirements: For a normal shop owner processing cash and credit cards, these are not an issue; but for BTC and digital currency, one of them is: FinCEN ruled that: The Company is not operating through clearing and settlement systems that only admit BSA-regulated financial institutions as members. According to your letter the real currency payments from the consumer take place within a clearing and settlement system that only admits BSA-regulated financial institutions as members (specifically, a credit card network), however, the payment of the Bitcoin equivalent to the merchant, by definition, takes place outside such a clearing and settlement system, either to a merchant-owned virtual currency wallet or to a larger virtual currency exchange that admits both financial institution and non-financial institution members, for the account of the merchant. FinCEN ruled that the Company is engaged in money transmission, which subjects them to the rules pertaining to a money transmitter. The other thing FinCEN added (as if that all wasn't enough) was: Please note that FinCEN would reach the same conclusions if payments were made in virtual currencies other than Bitcoin. Unfortunately, that means the ruling applies to SBD as well. Some Personal Notes / Disclaimers:
I think it's an issue if you are converting it to actual dollars. If you accept steem in return for say amazon vouchers (using a similar business model to Gyft), then you are OK.
Here is just another example of how government stagnates business . With all the regulations you are afraid to do anything .
but it is also perhaps a need to protect the public
IF the government actually went after cybercriminals and terrorists, then I would agree that you had an argument.
The NY Times exposed the government's tracking program focusing on hawala (an off-books asset transfer system) that terrorists were using, compromising it's effectiveness and violating security laws. No one from the Times went to jail for that.
Some guy in Florida went to jail for not filling out paperwork on a BTC transaction of less then $1000.
The FBI wasted how many man hours taking down Silk Road? Instead of watching the Tsaernev brothers, whom FSB warned them about.
It's Big Brother BS. There is no security need at all ( MS in Homeland Security here)
It is probably somewhere in the middle. There are legitimate security concerns, and reasons for the government to prevent money laundering. At the same time, a lot of the regulations are too ridged, stifle growth, and punish otherwise individuals who were doing no real harm.
That's because the design of the regulations is not to protect the public.
We no longer stress going after the malefactor as an individual, but rather put the onus on the individual citizen to stay within bounds and make his private business public.
And a lot of this is based on the idiotic Drug War. We think that it is perfectly OK to violate privacy or kick in doors because somebody might be doing drugs. I'm going to stop going down that line because that is a long argument. FWIW, I'm not a drug user, butthe Drug Waris inefficient and liberty-destroying governance.
To simplify, I would say my point is that we shouldn't make laws where there is no actual harm. Money laundering at any serious level requires cooperation from a bank (ie HSBC). Trading in altcoin is small potatoes.
Laws can always be re-written. Politicians voted out. By their own definition accepting USD payments through a credit card payment processor then buying SBD and STEEM as an individual with your profit is totally fine so. Laws= stupid. Made for stupid people by stupider people.
I just put my service up on Peerhub, which accepts SBD now. I should have known that government is trying to get their greedy little paws on all the action!
Well, I guess the one loophole would be that if a business owner wants to accept digital currency, then they could have fine print that states it is a "recommended donation".
I understand that digital currency has the potential to fund illegal activities but I'm so tired of government overreach. sigh
Thanks, it's best that you DO share your findings as you said, because "ignorance of the law is no excuse".. I hope people won't get in trouble simply "for accepting" SBD (many places accept Bitcoin already) - but not reporting income is what gets people in trouble. Digital currency is still taxable when converted to USD I'm sure. And sales tax will always be an issue at the local lever as well.
Hopefully what happened in the 90's will happen here however. Throughout Bill Clinton's terms he advocated for a "moratorium on taxation" of internet purchases because it was such a new technology and it was better for the economy to let it develop unhindered. Today, we can only hope...
I agree that it is necessary to share this info...if nothing else it will help those going Galt know what to avoid.