On May 9, 2019, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury (FinCEN) issued “interpretive guidance” addressing how FinCEN’s money services business (MSB) regulations apply to a variety of business models that use convertible virtual currency (CVC) (2019 FinCEN Guidance). This is the first significant guidance FinCEN has issued regarding the regulatory treatment of virtual currency under the Bank Secrecy Act (BSA) of 1970, as amended, and FinCEN’s implementing regulations thereunder, since its landmark 2013 virtual currency guidance. In that 2013 guidance, FinCEN grouped persons creating, obtaining, distributing, exchanging, accepting, or transmitting virtual currencies as “users,” “administrators,” or “exchangers,” and concluded (i) a “user” of virtual currency is not an MSB under FinCEN’s regulations and therefore not subject to MSB registration, reporting, and recordkeeping regulations, but (ii) an “administrator” or “exchanger” is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition of MSB applies to the person.

Although the virtual currency space has evolved significantly over the last six years, the 30 pages of interpretive guidance essentially affirms the core of the 2013 FinCEN Guidance, incorporates the conclusions of several FinCEN letter rulings and other interpretations released by FinCEN since the 2013 guidance, and analyzes over a dozen business models that use CVCs in their day-to-day activities to assess whether each business model triggers FinCEN MSB regulation.

Concurrent with the issuance of the CVC interpretive guidance, FinCEN published an Advisory on Illicit Activity Involving Convertible Virtual Currency to assist financial institutions in identifying and reporting suspicious activity concerning how criminals and other bad actors exploit convertible CVCs for money laundering, sanctions evasion, and other illicit financing purposes, particularly involving darknet marketplaces, peer-to-peer (P2P) exchangers, foreign-located MSBs, and CVC kiosks/ATMs.

Click here to read the full GT Alert for a comprehensive analysis of the 2019 FinCEN Guidance.

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Photo of Jonathan R. Cyprys Jonathan R. Cyprys

Jonathan R. Cyprys is a dedicated and trusted advisor and litigator who prides himself on using a practical approach and tactical strategies. Jon’s practice focuses on Securities and Exchange Commission (SEC) and Department of Justice (DOJ) government enforcement investigations, internal corporate investigations, securities…

Jonathan R. Cyprys is a dedicated and trusted advisor and litigator who prides himself on using a practical approach and tactical strategies. Jon’s practice focuses on Securities and Exchange Commission (SEC) and Department of Justice (DOJ) government enforcement investigations, internal corporate investigations, securities and commodities fraud, white collar criminal defense, and broker-dealer arbitration and regulatory matters.

Jon represents various investment and commercial banks, broker-dealers, registered representatives, individuals and publicly and closely-held companies in numerous investigations surrounding allegations of insider trading, anti-trust violations, micro-cap stock transactions, anti-money laundering, supervision, market manipulation, suitability, misrepresentation and reporting issues among others.

Photo of Marina Olman-Pal Marina Olman-Pal

Marina Olman-Pal, Co-Chair of the firm’s Financial, Regulatory & Compliance Practice, advises foreign and U.S. financial institutions on a broad range of regulatory matters including licensing, acquisitions, divestitures, compliance with Bank Secrecy Act (BSA)/anti-money laundering (AML) laws and regulations, and compliance with Office…

Marina Olman-Pal, Co-Chair of the firm’s Financial, Regulatory & Compliance Practice, advises foreign and U.S. financial institutions on a broad range of regulatory matters including licensing, acquisitions, divestitures, compliance with Bank Secrecy Act (BSA)/anti-money laundering (AML) laws and regulations, and compliance with Office of Foreign Assets Control (OFAC) sanctions programs. Marina counsels a wide range of companies in the financial services sector including, domestic and foreign banks, gaming companies, money services businesses including money transmitters, cryptocurrency businesses, Fintech companies and digital payment companies. Throughout her career, Marina has represented clients before U.S. regulators such as the Federal Reserve, OCC, FDIC, FinCEN, OFAC, the Florida Office of Financial Regulation and other state supervisory authorities. Marina also regularly develops anti-money laundering programs for a wide range of financial services businesses and non-financial services businesses including, U.S. and foreign companies active in industries such as real estate, hospitality, automotive and artificial intelligence, among many others.

Photo of William Mack William Mack

William B. Mack is a co-chair of the Financial Regulatory and Compliance Practice. He is experienced in advising companies on regulatory and compliance matters relating to the Securities and Exchange Commission regulations, the Exchange Act, Anti-Money Laundering laws and Financial Industry Regulatory Authority

William B. Mack is a co-chair of the Financial Regulatory and Compliance Practice. He is experienced in advising companies on regulatory and compliance matters relating to the Securities and Exchange Commission regulations, the Exchange Act, Anti-Money Laundering laws and Financial Industry Regulatory Authority (FINRA) rules.

William’s practice involves all aspects of broker-dealer regulation, including Self-Regulatory Organization (SRO) membership, supervision, employment, research, soft dollar arrangements, chaperoning of foreign broker-dealers, social media, use of foreign finders, anti-money laundering rules, alternative trading systems (ATS), exchanges, and market making issues. He also provides regulatory guidance to investment banking clients in connection with securities offerings and related trading issues.