Last week’s U.S. crackdown against virtual currency provider Liberty Reserve was specific to that one financial institution and one type of financial service, and the public should not view it as an illustration of a government crackdown on virtual currencies, Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network (FinCEN), said in a recent interview with American Banker
Indictments in the largest online money laundering scheme in history were unsealed May28, revealing that federal agents had seized the Web domain of libertyreserve.com, whose clientele included criminals of nearly every flavor, including fraudsters that targeted payments services and products.
Calvery as quoted by American Banker:
“… digital currencies are exciting because of the innovation around it. I think it shows the great innovation that’s going on in the financial services industry these days, whether it’s a digital currency or whether it’s using other types of technology to improve and extend financial services to those that are unbanked or to make things more efficient or to be able to do things in a different way that has a customer base. That innovation is a great thing. But the fact is that being a financial institution comes with certain responsibilities. …
“I would be hesitant ever to paint a broad brush because of one criminal action against an entire industry. I don’t think that’s fair to an industry in any situation, let alone this one.”
FinCEN is being careful in its effort to crack down hard on companies and services that could support criminal activities through the anonymous nature of their financial dealings, especially as they pertain to the activities of terrorists, pornographers, drug deals and other illicit operators, while at the same time letting the free market dictate the future of virtual currencies. As Calvery suggested in the interview, FinCEN sees value in currencies that can help a market sector, such as the unbanked, as long as they comply with U.S. anti-money-laundering regulations.
To FinCEN, convertible virtual currencies “either have an equivalent value in real currency or act as a substitute for real currency.” Though not mentioning bitcoins specifically, FinCEN’s new guidelines, announced in March, say anyone who exchanges decentralized virtual currency for real currency must register as a money services business and follow existing FinCEN regulations covering registration requirements and compliance with anti-money laundering, recordkeeping and reporting responsibilities. Consumers who obtain convertible virtual currency and use it to purchase real or virtual goods or services are not a money-services business, so they are not affected by the FinCEN regulations.
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