US officials capped this week off with some cut and dry rules regarding virtual currencies.After two days of public hearings in New York discussing the impending regulatory framework for Bitcoin and other digital currencies, the Financial Crimes Enforcement Network or FinCEN, a bureau of the US Treasury Department that oversees financial crimes such as money laundering, published two new rulings.
Bitcoin enthusiasts assemble a homemade mining rig. Image: Flickr/Brendan Lim
Though it’s always been assumed that mining Bitcoin for yourself or trading Bitcoin just as an investment were fair game, the rules clarified the government’s position, stating that doing so would not qualify either an individual or a company as a money transmitter (any entity acting as a money transmitter would require state licensing). According to a release from FinCEN:The first ruling states that, to the extent a user creates or “mines” a convertible virtual currency solely for a user’s own purposes, the user is not a money transmitter under the BSA. The second states that a company purchasing and selling convertible virtual currency as an investment exclusively for the company’s benefit is not a money transmitter.The new rules, which follow guidance released last March, will be a welcome relief for Bitcoin enthusiasts.The clarification should also be reassuring for skeptics of regulation. From the Senate hearings last November to the recent public hearings in New York, US regulators have emphasized the need for smart rules that mitigate the potential for criminal activity while providing the necessary platform for technological innovation.Accordingly, this latest development was in line with general expectations.The arrest of well-loved Bitcoin entrepreneur and early adopter Charlie Shrem as well as the shuttering of the Silk Road last fall also signalled the effectiveness of existing regulation in tackling crime, no matter how futuristic the platform.Of course, the truly difficult work lies ahead, as lawmakers dive head first into unprecedented territory, trying to appease both ardent believers and crypto-critics.For now, miners and investors can play with their digital money in peace, if they weren’t already.@sfnuop