How FinCEN Treats The Peer-to-Peer Exchangers


The last couple of months saw that FinCEN has started to issue some more definitive guidance in the way it intends to treat business operating in the Cryptocurrency trading and exchange space. Thus, this is all about how FinCEN intends to treat the peer-to-peer (P2P) exchangers. Now, before we jump straight into how FinCEN treats the P2P exchangers, it is mandatory to know what exactly the FinCEN Guidance means.

Lately, two documents have been issued by FinCEN of which the first document is a guidance document that aims in the clarification of the “application of FinCEN’s Regulations to Certain Business Models”. Simplifying the same, the document explains how exactly FinCEN will categorize the various types of crypto businesses in the bid to work out which legal instruments apply to them. The guidance documents also state that if you are purchasing or selling Cryptocurrencies online all by yourself, then you are considered to be the “money service business” by FinCEN; that implies you are subject to particular requirements by the law. The requirements include registering as an MSB with FinCEN; conducting anti-money laundering (AML) checks on your clients, and as well as certain recordkeeping obligations.

The second thing or document that came from FinCEN is an advisory on “illicit activity involving convertible virtual currency.” This document makes a clear link between the P2P exchangers who are unregistered to MSB and criminal activities. It points out to a couple of different cases from Rochester, NY, and Arizona, where P2P exchangers had knowingly made trades enabling the criminal activities. This generally means that if you are in the P2P exchanger businesses and simultaneously not registered as an MSB, then you are likely in trouble. The advisory note also provides several examples of ways that the financial institutions could spot or track a P2P exchanger through the various transaction or customer data patterns.

For the first time, FinCEN took action against a P2P crypto exchanger back in April this year. P2P Cryptocurrency exchanger Eric Powers was found to have willfully violated the requirements of the Bank Secrecy Act. The company had been trading Cryptocurrency on the dark web in order to avoid detection. He was asked to provide $35k fine and barred from the ever practising as an MSB in the future.

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