FinCEN: Sellers of Tokens are MSBs and Must Comply with AML Requirements

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A recent letter from FinCEN asserted their authority to regulate individuals and companies that sell convertible virtual currencies, when structured in certain ways. This includes token launches and token sales structured as ICOs. The letter, written by the Assistant Secretary for Legislative Affairs, Drew Maloney, was in response to questions on the regulatory oversight of FinCEN over virtual currencies.

Under certain ICO or token structures, the developers may be classified as “money transmitters.” This means that they are a type of MSB and are subject to AML and CFT requirements under the Bank Secrecy Act, and will need to register with FinCEN as such. In 2013 and again in this letter, FinCEN defines “convertible virtual currency” as something that substitutes for real currency or has an equivalent value in real currency. In addition, anyone who is engaged in the business of issuing or withdrawing virtual currency from circulation is a money transmitter.

Requirements for money transmitters include registering with FinCEN as a MSB, preparing a written AML compliance program that is designed to mitigate risks associated with their specific business, filing suspicious activity and currency transaction reports (SARs and CTRs), and keeping sufficient “know your customer” (KYC) data.  

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Original Letter from FinCEN Assistant Secretary for Legislative Affairs