On February 13, 2018, FinCEN issued a letter in response to an information request from the Senate Committee on Finance regarding regulatory oversight of virtual currency financial activities. In its letter, FinCEN indicated that it was working closely with the SEC and CFTC to monitor initial coin offerings of blockchain coins or tokens ("ICOs") and to determine when regulatory authorities of the agencies are implicated.
Whether FinCEN exercises regulatory authority over an entity engaging in an ICO "will depend on the nature of the financial activity involved" and whether such activity constitutes money transmission under the Bank Secrecy Act ("BSA"). Businesses contemplating an ICO, therefore, need to consider not only potential regulatory oversight from the SEC and CFTC, but also that they may be regulated by FinCEN as a virtual currency money service business.
A money service business must register with FinCEN, implement a risk-based anti-money laundering compliance program, file suspicious activity reports and currency transaction reports, obtain customer identification information, and comply with other recordkeeping requirements under the BSA. To date, FinCEN has brought a number of enforcement actions against exchangers, such as Ripple Labs and BTC-e, for violating BSA regulations governing money transmitters. Of note, FinCEN highlighted its efforts to enforce BSA law against "foreign-located money transmitters...when they violate U.S. law, as in the BTC-e matter."
FinCEN's history of pursuing foreign-located businesses suggests it may exercise its jurisdiction against foreign entities that "do business[,] in whole or in substantial part within the United States," associated with ICOs.
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