The very recent publicity surrounding the U.S. Department of Homeland Security actions against the Bitcoin exchange Mt. Gox resulting in the shutdown of its operations has caused a great jolt in the virtual currency world. Without judging the merits of the operations of Bitcoin in this virtual currency marketplace, I find it very difficult to believe that it has placed itself in such jeopardy.
In recent years, FinCEN has issued a flurry of rulings and guidance that define the various types of financial institutions that qualify as Money Services Businesses. They culminate in FinCEN’s March 18th guidance that lays out the responsibilities of users, administrators and exchangers of those virtual currencies. Entering into this particular type of financial market, it would have been prudent to consult with the experts. Knowing that there is an international regulatory framework focused on money laundering and terrorist financing, alarm bells should have sounded long ago that, sooner or later, some sort of adverse action would occur. [Read more...]