The U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities.
he move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. WU 0.00% They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000.[...]
The arm of the Treasury Department that fights money laundering said Monday that the standard federal banking rules aimed at suspicious dollar transfers also apply to firms that issue or exchange money that isn't linked to any government and exists only online.
One of the fastest-growing alternative cash products is Bitcoin, an online currency launched in 2009 that isn't backed by a central bank or controlled by a central administrator. Currency units, known as "bitcoins" and consisting of a series of numbers, are created automatically on a set schedule and traded anonymously between digital addresses or "wallets." Certain exchange firms buy or sell bitcoins for legal tender at a rate that fluctuates with the market[...]law enforcement, regulators and financial institution have expressed worries about the hard-to-trace attributes of virtual currencies, helping trigger this week's move from the Treasury's Financial Crimes Enforcement Network, or FinCen.
Creating clear-cut rules for virtual currencies is difficult. A FinCen official said that anti-money-laundering rules would apply depending on the "factors and circumstances" of each business. The rules don't apply to individuals who simply use virtual currencies to purchase real or virtual goods.
The new guidance "clarifies definitions and expectations to ensure that businesses…are aware of their regulatory responsibilities," said Jennifer Shasky Calvery, FinCen director.
(ht Dale Fitz)