For the first time, FinCEN – the Financial Crimes Enforcement Network – has fined a peer-to-peer Bitcoin trader for failure to register as a money services business. MSBs fall under FinCEN’s regulation, and according to FinCEN, Eric Powers, reportedly a resident of California, willfully violated registration requirements. He’s also accused of looking the other way when knowingly doing business with Silk Road vendors.
$5 Million in Crypto Trades Net Bitcoin Trader a $35,000 Fine
FinCEN says that Powers admitted to buying over $5 million in cryptocurrencies throughout 160 transactions, doing many of the trades in public places. It doesn’t mention what platform he used but does say he used a “Bitcoin forum” and also worked with people through the dark web a few times.
“Mr. Powers advertised his intent to purchase and sell bitcoin on the internet. He completed transactions by either physically delivering or receiving currency in person, sending or receiving currency through the mail, or coordinating transactions by wire through a depository institution. Mr. Powers processed numerous suspicious transactions without ever filing a SAR, including doing business related to the illicit darknet marketplace ‘Silk Road,’ as well as servicing customers through The Onion Router (TOR) without taking steps to determine customer identity and whether funds were derived from illegal activity.”
The case highlights the crypto policies of presidential candidate Andrew Yang, in that FinCEN is one of several agencies which claim jurisdiction over Bitcoin markets.
8/ Here, it looks like FinCEN wanted to settle two debates once and for all. It believes:
1) Mere two-party exchange is “money transmission”
2) Individuals can be money transmitters
(2) should be obvious. (1) is deeply problematic.
— Marco Santori (@msantoriESQ) April 19, 2019
Andrew Yang argues that the conflicting and unclear guidelines surrounding cryptocurrency are stifling innovation and that significant economic growth could be had for the United States if people had a “clear” understanding of the rules and regulations.
‘Onerous’ Regulations At Their Finest
FinCEN director Kenneth Blanco said as part of a press release:
“It should not come as a surprise that we will take enforcement action based on what we have publicly stated since our March 2013 Guidance—that exchangers of convertible virtual currency, such as Mr. Powers, are money transmitters and must register as MSBs. In fact, there were indications that Mr. Powers specifically was aware of these obligations, but willfully failed to honor them. Such failures put our financial system and national security at risk and jeopardize the safety and well-being of our people, as well as undercut responsible innovation in the financial services space.”
To date, authorities seem most focused on people who provide cash for cryptocurrencies and fail to take the necessary steps to register as money exchange businesses. The days of merely passing your friend a few BTC and him dropping you a money order in the mail are long gone, it would seem.
If you want to sell crypto with a clear conscience, you’ve got to use a regulated exchange and keep records. There’s some evidence that even these steps may not adequately insure you against legal recourse, though, due to the ever-changing nature of crypto regulations in the United States.