Over the past few years, investor money has been flooding into cryptocurrency transmission businesses. Entrepreneurs and investors have been moving quickly to capture market share in this potentially massive market.
However, it looks like some of those businesses—perhaps most—have moved a little too quickly.
In short, businesses built platforms focused on the efficient transmission of cryptocurrency that appear to lack an effective means to comply with what banks commonly refer to as the Funds Travel Rule. This misstep has the potential to shake up the industry and create new market leaders. In the short run, it may also result in a few enforcement actions.
If the problem is not addressed quickly and effectively, it may have a substantial impact on the future of cryptocurrency as a regulated industry in the United States.
FinCEN Regulations Apply
Businesses that provide money transmission services denominated in convertible virtual currency (CVC) must register with the Financial Crimes Enforcement Network (FinCEN) as money services businesses (MSBs) and comply with the Bank Secrecy Act (BSA) and FinCEN’s implementing regulations, including the Funds Travel Rule.
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