Earlier this week, a Bitcoin user in Pennsylvania reportedly received a letter from his bank, Firstrust Bank, asking him to stop sending money to Coinbase, a popular wallet for storing the virtual currency.

"We respectfully request that you no longer perform transactions with this company or other companies of this kind," the letter says. "If there should be a reoccurrence of this type of activity, we will regretfully be forced to close your account."

Bitcoin is not illegal. It’s been praised for its many legal uses by the people in the FBI, Treasury Department, and Congress. Investors have plunged millions into startups providing Bitcoin services. So why would Firstrust be worried about one of its customers using a Bitcoin wallet?

In fact, banks around the country from MasterCard to the Internet Credit Union are still wary of the virtual currency. Even Bank of America’s analysts, who believe Bitcoin could become a "major means of payment," are worried about a crackdown. That's because many Bitcoin companies that should be registered with the federal government or state money transmitter authorities, aren't. And because of legal ambiguities, many banks would rather be safe than sorry.

Banks are still wary of the virtual currency

In the US, the virtual currency is subject to money transmitter laws at the federal level and in 47 states. The rules are not always clear, however, because they are written for money transmission services, not virtual currencies. The regulations are also in flux. New York is considering a special "BitLicense" for virtual currency firms, for example.

As a result, many Bitcoin companies have not registered at either the state or federal level.

Only 35 Bitcoin companies have registered with the Financial Crimes Enforcement Network (FinCEN), the bureau of the US Treasury Department that has taken the lead on Bitcoin regulation, and the agency has reached out to several dozen more that it believes need to register.

At the state level, regulators are getting many inquiries but not many registrations, according to the commissioner of banks in Massachusetts.

"There are plenty of companies for whom the regulatory burdens are just too onerous to get licensed, and plenty of companies out there simply not getting licenses," says Marco Santori, who monitors regulatory affairs for the nonprofit Bitcoin Foundation, the currency’s semi-official trade organization. "It's a risk-tolerance decision for them."

"There are ... plenty of companies out there simply not getting licenses."

FinCEN issued guidance back in March that defines the types of Bitcoin businesses that must register as money transmitters with the federal government.

On top of that federal requirement, 47 states require businesses that transmit Bitcoin to get licensed as money transmitters. The exceptions are Montana, New Mexico, and South Carolina, but Bitcoin businesses can’t simply move there — they must be registered in every state in which they do business.

Bitcoin companies are starting to feel the weight of these rules. The federal registration requires companies to maintain due diligence on their customers, assign a compliance officer, and a few other things that take a few hours a week and are basically free says Charlie Shrem, founder of BitInstant, a company that speeds up Bitcoin transfers. "State law is where it gets sticky," he says.

Becoming compliant in the whole country costs between $5 million and $10 million and takes a year, he estimates. "Operating a money transmission company is a criminal offense without a license, therefore jail time," he says. "It's only recently where Bitcoin companies are starting to realize they can't fly under the radar anymore."

Enforcement of anti-money laundering laws against Bitcoin companies is unheard of

Shrem and others, especially the new crop of venture-backed Bitcoin startups, have invested the time and money into compliance. Well-known companies such as BitInstant, Coinbase, and the Tokyo-based exchange Mt. Gox are all registered with FinCEN, for example. ItBit, a Bitcoin-trading platform based in Singapore, hopes to get licensed in the US sometime next year. "We find that it's so valuable that we're willing to make that investment," says CEO Richmond Teo.

So far, enforcement of anti-money laundering laws against Bitcoin companies is unheard of. But more cautious companies are waiting to enter the US, and some are even leaving the country due to the perceived threat of regulation. "It's not the current on-the-books regulation in the US that suppresses the technology," says Erik Voorhees, whose company Coinapult, which lets users send Bitcoin by email and SMS, moved from the US to Panama. "Rather, it's the uncertainty regarding how the US government will treat Bitcoin tomorrow."