Last week, it was reported that a New York man was charged with operating an unlawful money transmitting business for illegally selling bitcoin. According to the U.S. Attorney’s Office, the man allegedly conducted a sale of Bitcoin with an undercover federal agent late last year, and unlawfully operated a Bitcoin exchange, between August 2014 and December 2015, with net sales of approximately $200,000.
Simply stated, the government contends that he did not register as an MSB. Such a charge is relatively easy to prove and requires limited investigative resources. It’s low-hanging fruit for authorities. It continues to surprise many within both the compliance and regulatory community that there are still bitcoin companies failing to properly register.
Perhaps the biggest irony is that if you are an unregistered MSB, FinCEN still expects you to have executed on your compliance obligations from day one. For those in this situation, FinCEN could pursue penalties for unlawful money transmitting, as well as failure to implement an adequate AML program and failure to maintain adequate record-keeping, among other deficiencies.