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Overview of "Money Service Business" (MSB) regulations for businesses with US customers

By David Luhman on Thu, 10/30/2014 - 13:37

CoinTelegraph has a good article regarding Money Service Business (MSB) regulations for firms with US customers.

Highlights from the story :

If you're a Bitcoin payment processor or exchange with US customers, here's an overview of some of the regulations you'll need to contend with :

* Register with FinCEN (US Treasury) as a Money Service Business (MSB).

* Report CTR (Currency Transaction Reports) and SAR (Suspicious Activity Reports) to FinCEN as needed.

* 48 of the 50 US states require money transmitter licensing at the state level.

* State registration requires application fees of up to $5,000 per state, and surety bonds per state of up to $7 million.

* MSBs need internal controls to prevent money laundering etc.

* Foreign firms with US customers must register with the IRS as an FFI (Foreign Financial Institution) to be FATCA (Foreign Account Tax Compliant Act) compliant.

* FATCA seeks to ensure US taxpayers pay taxes, rather than looking at the FFI to pay taxes.

* According to interviewee Mike Gropp of Bitcoin Exchange BitPays, as far as the US and US customers are concerned, dealing purely with cryptocurrencies will not exempt you from regulation as an MSB. Further, being a MSB at any level invites regulation.

* "If anything I hope this interview abolishes the myth that avoiding fiat or enforcing daily thresholds exempts one from money transmitter licensing.” - Mike Gropp

* Comment from ZekeV : Simple advice for US persons and companies within reach of US jurisdiction: Don't hold bitcoin or dollars on behalf of customers. Sell only goods and services, not securities. Don't break the first rule unless you have $20 million to spend on legal costs, compliance hires, and bonding requirements. Don't break the second rule unless you are able to comply with an exemption from federal and state registration requirements.

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