For bitcoin entrepreneurs - FinCEN regulations


As I weigh my own bitcoin-based startup plan, I’m trying to wrap my head around the new (U.S.) FinCEN directives. Specifically, I’m interested in the tip-bot problem. That is, any person or business who accepts virtual or real currency, holds it for any amount of time, and later disburses it to another user is considered a “Money Transmitter” and required to do all the federal and state registration and licensing. The product that I am considering building performs a similar function, and if I have to get state-licensed, I’m just going to abandon the idea altogether.

What I’m curious about is if I can use the API of someone like Coinbase or CoinX, who is already state-licensed, to effectively hand off the FinCEN responsibilities, while I build and operate the customer-facing service.

I’d love for some knowledgeable folks to comment, since I can’t be the only one facing problems like this. Money transmitter regulations are going to put a huge damper on any virtual currency business development, and at least for the US, put us at a large disadvantage to other countries.


So, if my employer pays me wages and I use that money to pay my rent, I’m a bank?


Yes, congratulations! How does it feel to be rich?


More like: if your employer gives you a stack of money to hold on to for a while, and then later tells you to pay the other workers with it, you’re a bank.


Gotta love living in Spain and working out of Gibraltar. :slight_smile:


Umm… why am I getting notifications of follow ups in the thread that I can read in email, but when I log in, I can’t see past reply #5?


check the announcements section.


Back on topic (transmitting in the blind, I guess).
@recon_eric - Yeah, none of those three roles really fit someone operating a bitcoin-to-goods/services marketplace. There was an article on coindesk (I think) containing a link to a letter that was issued from FinCEN as a clarification response. I think it elaborated more on “money transmitter” as what I wrote in the OP.


This would make a lot more sense.


Strange, my replies in this thread are gone?


Temporarily astray, because @cyberdexter likes to push forum buttons that break things. :smile:


Actually, this is not correct. The concept of an MSB or money transmitter is that you are a “disinterested third party,” and you are facilitating the transfer of monetary value between two other parties you have no relationship with or to.

So technically, if I create an app that allows two parties to exchange some monetary unit of value between themselves, using my application, then yes, it could be classified as an MSB or money transmitter of sorts. I think the area is highly grey though. Look at Apple Pay. They are not an MSB or money transmitter, yet their app exists out in the wild. They are an aggregation of existing money transmitting companies (credit card companies). They themselves are no transferring anything, as they are creating a platform through which you use other payment systems in one convenient application. This is how you should view your own application.

The way I would approach it, is to create the application as an integrator of all of the other exchanges or online wallets. Call it “Lemon Pay” or something… LOL :wink: :lemon:


That helps, thanks. In my case, I would be a “disinterested” third party that facilitates the exchange of currency for goods via contest. That is, I allow a user to create a contest (i.e. guess a number). That user deposits the reward. I hold it until the contest is over and then release it to the winner.
Crud… This makes it sound like escrow.


Yes, I am not sure that an escrow is considered a money transmitter though. If you are doing it for a flat rated fee, an escrow only fills a fiduciary role. Many attorneys can act as escrows, without being considered money transmitters.


Eric, I pulled a “HT special” earlier on when rolling out a forum update for some extension and one of them decided to mess up the entire board. It’s gone now but it has re-written some of the theme etc.

My apologies for the data loss which shouldn’t have happened. The forum backup was maybe 30 minutes old and we’re missing a couple of posts that were from before the backup time.