UPDATED 23:23 EST . 06 MARCH 2018 The Financial Crimes Enforcement Network, a bureau within the U.S. Department of the Treasury, published a letter Tuesday warning that initial coin offerings need to register as a money transmitter and also comply with anti-money-laundering statutes and know-your-customer rules.
The letter, written by FinCEN’s assistant secretary for legislative affairs to Senator Ron Wyden, confirms that existing laws apply to ICOs. But this is the first time that FinCEN has taken a public stance in regard to them.
“A developer that sells convertible virtual currency, including in the form of ICO coins or tokens, in exchange for another type of value that substitutes for currency is a money transmitter and must comply with AML/CFT requirements that apply to this type of [money services business],” the letter reads. “An exchange that sells ICO coins or tokens, or exchanges them for other virtual currency, fiat currency, or other value that subsitutes for currency, would typically also be a money transmitter.” Coincenter, the first site to publish the letter, noted that it essentially means that any group or individual developer that both sold newly created tokens to buyers involving U.S. residents and failed to register with FinCEN as a money transmitter — and perform the associated compliance obligations — can be charged under a federal felony criminal statute with unlicensed money transmission.
Where that statute becomes deeply disturbing, at least in terms of anyone who has run an ICO and sold tokens to U.S. residents and has not registered as a money transmitter — basically the vast majority of ICOs — is that the penalty is up to five years in prison. Why FINcen has decided to intervene in the ICO space is not clear given that the Securities and Exchange Commission has taken the lead in regulation and, at times, prosecution of dubious ICOs to date.
The positive side, at least for ICO operators, is that there’s no record of FINcen taking action against ICOs to date. But given the letter, that may not be far off. Read more from siliconangle.com…
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