Recently, U.S. officials have teamed up with a worldwide coalition of tax enforcement agencies to look into crimes involving cryptocurrencies. Where does this leave companies whose main source of revenue is cryptocurrency, considering that there has previously been little governmental monitoring of cryptocurrencies?

The market for cryptocurrencies has expanded dramatically during the last ten years. There are a lot of exchanges where cryptocurrency is traded these days. As a result, it is now harder to police these markets, which has led to an increase in risk factors such as financial crimes and money laundering.

The number of cryptocurrency businesses, which are often divided into the following sectors: exchanges, wallets, payments, and mining, has significantly increased, according to regulators. The market for cryptocurrency is expanding rapidly, with prices reaching hundreds of billions of dollars. Recently, there has been an increase in the popularity of initial coin offers (ICOs), which are used to acquire capital for startups through the issuance of tokens or coins.

There is disagreement among international regulators on how to proceed as demand for cryptocurrencies rises. Since cryptocurrencies are not supported by a single national government, laws and regulations vary from one nation to the next. Additionally, the market continues to face scepticism from international regulators due to severe price fluctuations, apparent anonymity, and a lack of security against hackers.

US Regulatory Monitoring

According to Cryptocompare, the United States is the country that handles the second-highest volume of Bitcoin—roughly 26%. Authorities are keeping a close eye on "cryptocurrency money transmitters." In an effort to combat crimes made possible by cryptocurrencies, the Internal Revenue Service (IRS) of the United States and tax enforcement agencies from four other nations have formed an international task group. The new alliance, known as "The Joint Chiefs of Global Tax Enforcement," or "J5", is made up of tax enforcement organisations from five different nations: the United States, Canada, the Netherlands, Australia, and the United Kingdom.

Cryptocurrency exchangers and administrators have been subject to the Bank Secrecy Act’s (BSA) money transmitter requirements since 2011.

[1] In 2013, the Financial Crimes Enforcement Network (FinCEN) clarified this by issuing guidance that virtual currency exchangers and administrators are money transmitters and must comply with the BSA and its implementing regulations.

[2] Furthermore, investor notifications have been released by the Securities and Exchange Commission (SEC) to alert investors to possible fraudulent investment schemes. The SEC has made it clear that it sees cryptocurrencies as securities and has increased its level of scrutiny, indicating that it intends to apply securities rules to businesses that provide digital asset storage, or wallets, as well as cryptocurrency exchanges.

[3] The majority of states have not yet considered passing cryptocurrency laws, but some do want a money transmitters licence. The amount of new legislation that is being sought to address cryptocurrency technology will only rise as it develops. The basis for bitcoin regulation is the states that put these laws into effect.

In summary

Money transmitters using cryptocurrencies need to embrace compliance and put in place sensible measures that match state and federal regulatory standards. Professionals in law and compliance can assist with the constantly evolving licencing and compliance requirements of cryptocurrency money transmitters.