What does FinCEN do in crypto?

FinCEN is the part of the US government that decides how anti-money laundering rules apply to crypto businesses. It does not regulate whether a token is a security, which is the SEC's role, or oversee futures markets, which is the CFTC's. Its focus is on who moves money for others and whether they keep records, know their customers and report suspicious activity. The map of agencies is in who regulates crypto in the US.

What is FinCEN's role in crypto?

FinCEN administers the Bank Secrecy Act. Its website lists ransomware, alerts and advisories, and Bank Secrecy Act filing among its main areas of work. For crypto, that means setting out which businesses count as "financial institutions" under the act and what they must do. Those duties include running an anti-money laundering program, verifying customers, as described in what KYC is, filing suspicious activity reports, and following the travel rule on transfers.

Do crypto exchanges have to register with FinCEN?

Generally yes. In guidance issued on May 9, 2019, FinCEN pulled together its earlier rulings on what it calls convertible virtual currency, defined as value that substitutes for currency. Jones Day noted that the guidance created no new requirements but confirmed that exchangers and administrators of such currency are generally money transmitters. Money transmitters must register with FinCEN as money services businesses.

The guidance also covers peer-to-peer traders. A person who buys and sells crypto as a business is a money transmitter and must register, while someone who trades infrequently and not for profit is exempt.

Does FinCEN regulate unhosted wallets?

FinCEN's 2019 guidance draws a line between hosted and unhosted wallets. A hosted wallet provider receives, stores and transfers crypto for account holders, so the provider is the money transmitter. An unhosted wallet is software that lets a person hold and send crypto without a third party, and a person using one to buy goods or services for themselves is not a money transmitter. The difference is explained in custodial vs non-custodial wallets.

How does FinCEN enforce crypto rules?

FinCEN can bring civil enforcement actions against businesses that break the Bank Secrecy Act. Jones Day pointed to an April 2019 settlement with a peer-to-peer exchanger who had not registered, had no effective anti-money laundering program, and had not filed suspicious activity or currency transaction reports. FinCEN also sets the $3,000 threshold for the travel rule on funds transfers, which its 2019 guidance applied to crypto, according to Elliptic.

Rules change often. Check FinCEN or a qualified professional for your own situation.