U.S. FinCEN confirms bitcoin escrow, cloud mining not money transmitters

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Last updated on October 13th, 2017 at 10:50 pm

The United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a public release Tuesday confirming that bitcoin escrow and cloud mining services are not classified as money transmitters. The statement was published soon after there were requests for definitive answers to certain FinCEN policies.

Bitcoin cloud mining is when an individual leases mining hardware features through a cloud-based service. These customers then pay the providers through agreed contracts that are on a per-month or annual basis.

Escrow services, meanwhile, are a two-party exchange that guarantees each party moves forward with the transaction, which also permits each individual or organization to remain anonymous. This is an important element to the bitcoin infrastructure.

Previous FinCEN rules indicated that virtual currency miners and investors can be regulated under money transmission laws.

“Renting of mining computer systems to third parties does not make the Company a money transmitter under BSA regulations. All virtual currency mined by the third party remains the third party’s property, and the Company has no access to the third party wallet, nor receives or pays virtual currency on the third party’s behalf,” FinCEN’s Jamal El-Hindi, associate director of policy division, in a statement.

“[Escrow company] needs to take possession of the funds and hold them in escrow until the pre-established conditions for the funds to be paid to the seller or returned to the buyer are met, then release those funds appropriately.”

In January, FinCEN officially recognized digital mining, but many were concerned because the government body did not classify what bitcoin mining would fall under. The statement also clarifies a previous announcement that required bitcoin businesses to take responsibility in complying with anti-money laundering laws.

Other Government & Bitcoin News

The Idaho Department of Finance issued an investor alert Wednesday warning about the risks and dangerous posed by investing in bitcoin. Gavin Gee, the department’s director, described what bitcoins are, how it is not backed by government and cited the various negative stories surrounding the virtual currency.

This was another state announcement identifying the common concerns related to bitcoin. We reported last week that Missouri Secretary of State Jason Kander released an investor alert warning residents about the risks that come with buying, selling or investing in the digital currency.

Maryland, California, Nevada and Tennessee have been some of the latest states to warn their residents about the cryptocurrency industry.

This news also comes as the state of Ohio issued a ban on bitcoins for alcohol sale transactions. The reason for the measure is because the agent-in-charge with the Ohio Investigative Unit of the Ohio Department of Public Safety in Columbus, Eric Wolf, does not view bitcoin as a legitimate currency and is more like a commodity.

At the time of this writing, bitcoin is trading at around $450.

Coinbuzz

CoinBuzz provides news and analysis on Bitcoin and other digital currencies. Founded in 2014, the site has quickly become a leading source of information on digital currency technologies, businesses, markets, and regulation.
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