Bitcoin miners do not have to register as money transfer services: ruling

Bitcoin miner Milly Bitcoin has done a little citizen letter-writing, and the results should make virtual currency miners breathe a sigh of relief. Milly Bitcoin’s mining company Atlantic City Bitcoin last June wrote to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) requesting an official administrative ruling on whether ACB must register as a money transfer service. FinCEN has now replied, and the answer is no.

ACB requested the ruling because there has been much confusion as to whether mining — and spending the proceeds — constituted a money transfer service. This may seem a ridiculous question to virtual currency aficionados, but the confusion arose because some businesses dealing in virtual currencies do indeed operate as money transfer services. Mining and spending virtual currency, however, is not a transfer service. Such was the ruling by FinCEN.

Some companies, such as the prominent Japan-based Bitcoin exchange Mt. Gox, do engage in currency transfer. This became an issue when it failed to report to a U.S.-based bank that it transfers money for customers as a service. When the U.S. government found out about this, it seized $2.9 million from Mt. Gox.

Registering as a money transfer service is intended as an anti-money-laundering measure by various governments. Virtual currency mining is a production service. Miners invest hardware, electricity, and the resulting processing power into performing calculations that verify virtual currency transactions. Miners are typically rewarded with units of the currency as payment for services rendered.

The official FinCEN ruling applies to all virtual currency miners whether they deal in Bitcoin, Litecoin, Dogecoin, or any of the other contenders. The ruling will be published on the FinCEN website sometime in the next two weeks.

SOURCE: CoinText