Earlier this month, the US government seized the account of Bitcoin exchange Mt. Gox, prompting Kim Dotcom to wonder if the feds were trying to destroy the virtual currency.
That remains to be seen, write attorneys at Fuerst Ittleman. But the government’s actions should be a surprise to no one:
“Let’s start with the regulatory background. Between the time of its birth and this past March, Bitcoin existed in an area of the law where there was no law. That is not to say that Bitcoin issuers and users were not subject to the money laundering provisions of federal law if they used Bitcoin for unlawful purposes, but up until March of this year the federal government had not decided how to regulate Bitcoin as a thing. Then, on March 18, the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury issued its Guidance entitled, ‘Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies.’ This was a watershed moment for the regulation of Bitcoin, but sadly it seems that Mt. Gox either never knew about it or chose to disregard it…
So, before March, whether FinCEN would ever regulate Bitcoin – and if so, how – was a mystery. However, after March 18, things became much more clear: if an entity is in the business of exchanging Bitcoin for ‘real currency’ or vice versa, or accepts Bitcoin from one person and transmits the real currency equivalent to another person, that entity is a money transmitter and will be regulated as such in the United States, and will be subject to the criminal provisions of 18 USC 1960 for failing to register with the federal government as a money transmitter or being licensed in any state that would require a money transmitting license.”
Read the full update, Bitcoin Regulatory Update: Understanding the Federal Government’s Attack on Mt. Gox - Fuerst Ittleman David & Joseph, PL»