Crypto Compliance: Everything You Need to Know About Doing Business In The U.S.

October 14, 2019
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Though there are countries around the world that are more friendly to cryptocurrency businesses, a lot of companies have their sights set on the United States. If you can get established in the U.S., you gain access to many more potential customers and can grow significantly.

However, meeting the standards for cryptocurrency regulation in the U.S. can be very challenging. Some companies struggle because they simply don’t know what to do. Others are familiar with federal cryptocurrency regulation in the United States but are surprised when they also have to meet state requirements as well. Here’s what you need to know about doing business in the U.S. by following crypto compliance.

Step One: Register With FinCEN

The U.S. Department of the Treasury has a bureau known as FinCEN which helps safeguard the financial system from illicit use, money laundering, and criminal activity.

In March of 2013, FinCEN released guidelines that required persons administrating or exchanging virtual currencies to register as a Money Service Business (MSB). Those designated as MSBs must comply with FinCEN regulatory requirements.

Regulatory requirements include creating an anti-money laundering (AML) program, filling out specific government filings, and keeping appropriate records as required.

Do I Have to Register With FinCEN?

Many companies look at the federal requirements and wonder if there’s a way around registering. If you’re hoping for a way around this requirement, there’s not a lot we can help you with for one simple reason.

FinCEN has made it clear that almost every cryptocurrency business is considered a money transmitter or MSB. To be absolutely certain, you can schedule a free consultation with our compliance experts, but for 99% of businesses, this requirement will apply, as FinCEN has been fairly unambiguous about the status of crypto businesses.

But there is good news! Registering is easy. It can be done online in less than an hour and requires simple information like your business name and address.

Step Two: Check State Government Regulations

In addition to complying with federal regulations, each cryptocurrency business needs to meet the standards set by the state(s) where they do business. Cryptocurrency regulation by state varies, so it’s essential to know the details wherever you intend to operate.

For instance, setting up a cryptocurrency ATM in New York means that you have to meet New York’s BitLicense requirements. A BitLicense is the business license the New York State Department of Financial Services issues for those engaging in virtual currency activities.

BitLicencse requirements are challenging to meet. There is a 30-page application as well as a $5,000 application fee, and many companies invest significant time and resources collecting all of the information required. To pass, you must provide detailed information about your company, have appropriate written compliance programs in place, and have a qualified Chief Information Security officer.

Meeting one standard is challenging enough, but New York is only one among 50 U.S. states. Each state has the authority to set its own rules and enforce their own licensing and compliance laws.

Fortunately, the goal of each state is the same: consumer protection. This means making sure companies comply with AML standards, Know Your Customer (KYC) best practices, and data security. If you do those things well, you’re off to a great start no matter what state(s) you choose.

How Do I Find Out My State’s Requirements?

Do not, (repeat: DO NOT) rely on information you’ve seen or heard secondhand. Instead, call the state’s financial regulatory authority directly and ask them what’s required and under what circumstances.

State regulators are pretty open to these conversations and should reply in a relatively short amount of time. Document the conversation in your AML program, and include who you spoke to, when, and what was discussed.

Be sure to get decisions and promises in writing. You need to not only ensure that you meet relevant standards but also protect your business from sudden changes in state leadership or compliance requirements.

To get help working with both federal and state compliance requirements, you need an expert by your side. We’re here to help.

Step Three: Have A Strong AML Program From Day One

Crypto Compliance Day 1 - BitAML BlogAs you’ve noticed, money laundering and other illegal activity is the primary concern behind cryptocurrency compliance. Without cryptocurrency regulation or oversight, the anonymous nature of virtual currencies makes them perfect for those who want to use them for criminal purposes.

To help law enforcement monitor and apprehend these individuals, you need a strong AML compliance program. An effective AML program has five pillars, which include a designated compliance officer, internal controls specific to your business model, AML training for all employees, independent testing of your AML system, and customer due diligence.

Taking these steps not only helps you meet state and federal requirements, but it also helps build and legitimize the cryptocurrency industry. Customers will feel safer doing business with you when you have these strong standards in place.

Most importantly, it will help you avoid accidentally being a portal to fund terrorism or other illegal activities.

It can be challenging to create an appropriate AML system for your business on your own, especially if you are also focused on running and growing your cryptocurrency business.

Fortunately, there are cryptocurrency compliance experts that are here to help. Working with these professionals can make all the difference as you establish and build your business.

Key Takeaways For Crypto Businesses

Doing businesses in the U.S. as a cryptocurrency company can be extremely rewarding and help your company reach new heights. However, it’s vital to understand and comply with the federal and state regulations you will encounter.

You’ll start by establishing a strong crypto AML policy from day one in your business. From there, you’ll register with FinCEN and discover what compliance standards exist in the state(s) you’re working within.

Regulatory trends are moving toward ever-tighter oversight. Rather than fighting it, prepare your business to meet the regulations as they come. If you focus on strong AML standards and data security, you’ll be off to a strong start.

Of course, managing this compliance is very difficult on your own. Instead of risking expensive mistakes, contact us for a free compliance consultation today. Our experts can help you stay on the right path from the moment you are established in the U.S.

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